The free movement of workers is an established fundamental right of EU citizens (Art. 39 EC Treaty). Labour mobility is also an integral part of the European Employment Strategy.

Since the beginning of 2000 until mid-2008 unemployment rates declined steadily in Estonia; in these years the country experienced a fast economic growth. Accordingly, employment and participation rates grew since the beginning of 2000s, almost reaching the Lisbon target in 2008 (69.5%).

Following the financial crisis of 2008 the economic growth in Estonia stopped. Consequently, in April 2009 the unemployment rate reached 7.1% compared to the 2.7% during the same period in 2008.

Before the crisis, general labour shortages were perceived as the main factor hindering the production growth in 10-20% of all Estonian companies. At the beginning of 2009 only few new employers identified labour shortage as a barrier or a problem.

The initiative for change came from the need to react more flexibly to the fluctuations of demand in the commodities market.

On the one hand, the amendments protected the Estonian labour market avoiding the entrance of low-skilled workers, while on the other hand it allowed hiring high skilled workforce not available in Estonia.

In the first quarter of 2008 the Parliament introduced changes to the Aliens Act. The changes aimed at simplifying the procedures that would enable bringing qualified labour to Estonia and clarify hiring conditions of third country nationals.

The general intention was to reduce the time consuming and administrative burdensome process for hiring employees from non-EU countries and the introduction of a criterion to guarantee that immigrants entering the domestic labour market were highly skilled.

Three immigration schemes were subject to reform. The registered short-term working scheme for work up to six months in one given year, the temporary residence permit for employment scheme, and the work permit for a foreigner who already had a residence permit. The former two schemes were subject to major modifications, while the last experienced only minor changes.

Actions implemented to simplify administrative procedures aimed at reducing the time needed to process applications. The processing time of the CMB for the residence of permit was cut from six to two months, the obligatory minimum duration of search for local employee before hiring an immigrant from a third country was shortened from two months to three weeks and the approval of work or residence permits was speed up.

In addition, to effectively limit immigration flows to highly qualified workers and to enhance hiring conditions, a salary criterion was introduced. This criterion required that immigrant workers from third country could be employed by an employer in Estonia only if they were paid at least 1.24 times the average wage (or the average wage of the sector, but not less than the general average wage, for short term migration up to 6 months). The wage was supposed to minimize possible displacement of domestic labour demand by cheaper low skilled labour from abroad. Another criterion used to assess the worker’s qualification were the documents certifying immigrant’s qualifications.

• The CMB made 288 inquiries to monitoring fulfilment of the wage criterion, 123 were found non-compliant (i.e. the 43% of the inquiries).

Preliminary conclusion of the policy measure can be summarised as follows:

• In total, 625 applicants were approved to work in Estonia from 14^th of June 2008 (entry into force of the new regulation) until the 5^th of May 2009 (analysis conducted for the peer review).

A survey among employers was carried out in spring 2009. According to the survey:

• More than 50% of the employers agreed that shortening the time required for administrative proceedings helped employers to recruit workers they need. In addition the speed of hiring immigrant labour increased.
• Only one firm out of three perceived the new process simpler than the past.
• Almost 50% of the employers were convinced that the established salary threshold made it harder for companies to recruit migrant workers.