Are Estonians fundamentally lazy?

17.08.2012, 10:30

Tartu University professor Raul Eamets writes in Äripäev that as Estonians, we like to think of ourselves as people who work hard and are diligent, in short a nation that should be an example to the rest of Europe.

However, as the recent spat between economist Paul Krugman and Estonian president Toomas Hendrik Ilves proved, Estonia tends to have a whole different image in the world.

The situation is especially embarrassing if one looks at the international studies on labour productivity which say that we are two to three times below European Union average, depending on the sector.

Are we really three times lazier than Finns?
Our mistake is that for Estonians often equal hard work with productivity. In economics, this is not the case.

Productivity has many different aspects, such as capital productivity, general productivity of production factors, etc.

Labour productivity has three simple components: number of employees, manufactured quantity (eg, created added value) and sales price. In other words, quantity is multiplied with price and divided by number of employees.

This means that we have three options to increase labour productivity: first, hire fewer people and increase automation. Secondly, manufacture goods in huge quantities. Third, sell our products at the highest possible price. Since the first option is limited and second is unlikely, there is really only one option – third - left for Estonia.

The problem of selling at a high price
Estonia’s problem is that we export goods that are cheap and that have low added value.

No-one in the world is ready to pay highly for milk powder or processed timber.

When we look at our employment structure, it shows that very many Estonians work in labour-intensive sectors that create little added value for the economy.

Yes, we assembly electronics, but it is mainly subcontracting which means that the product will be finalised somewhere else, often in Scandinavia, and also the real profit will be earned outside Estonia.

In other words, many problems that are plaguing the Estonian economy start with our employment structure.

Of course, added value and price are not often in correlation. If you are able to sell a cheap product for a high price, it will increase productivity. However, more expensive products require better materials, technologies, etc which makes them also more expensive to manufacture.

What are our flagships?
Well, the timber industry, for instance. Of course, we are making progress and if we managed to stop exporting timber and start exporting timber houses, it would have a huge impact on the sector’s productivity.

At present Estonian exports relatively many semi-finished products such as sawn timber, laminated timber, etc.

As for food industry, instead of exporting milk we need to start exporting dairy products. One challenge is to convince the European consumer that dairy products that include Hellus bacteria that was developed in Estonia is healthy and start exporting it.

Why not start making jackets that have a GPS device embedded in the sleeve so that people who have gone to the woods and got lost can always be found out.
These are not cheap or simply solutions, but they are possibilities for sectors in which Estonians have traditions and experience. Until it happens, we need to admit that the bus driver in Helsinki is three times more productive than his colleague in Tallinn. Good thing, then, that many bus drivers in Helsinki are actually from Tallinn.