Improving employment and social inclusion for vulnerable groups in Estonia

Estonia has one of the highest employment rates in the European Union (EU). However, vulnerable groups continue to face persistent barriers to labour market integration, reflected in an unemployment rate of 7.6% in 2024 (1.7 percentage points above the EU average) and large shares of people working only intermittently, on precarious contracts or at very low wages. Furthermore, the number of jobseekers with severe employment obstacles is growing among registered unemployed. The Estonian Unemployment Insurance Fund (EUIF, the public employment service in Estonia) has significantly strengthened its active labour market policies over the years. In addition, the recent Work Ability Reform, the expansion of municipal social services and the redesign of rehabilitation programmes have improved services to support employment and social integration. Yet, insufficient coordination across employment, health care and social services, fragmented services and the absence of a systematic contracting framework continue to limit outcomes for vulnerable groups. A thorough assessment of the current system is needed to develop effective new solutions.

Starting in September 2025 and for a period of two years, the OECD, in cooperation with SG REFORM, will work with Estonian authorities to strengthen labour market integration for vulnerable groups. The project will focus on developing improved service delivery and contracting models to ensure that individuals facing severe or multiple barriers to employment receive more comprehensive and coordinated support. By identifying gaps and overlaps in the current service provision, assessing the capacity of the EUIF, and introducing a model for contracting-out specific services, the project aims to equip the EUIF and partner institutions with practical tools to enhance labour market integration and job retention for vulnerable groups.

In the short to medium term, the project will strengthen the capacity of Estonian authorities to provide more effective employment services for vulnerable groups. As the outcomes of the project, Estonia will be able to provide more targeted, less fragmented and outcome-driven ALMPs for both employed and unemployed people in Estonia, as well as implement a new financing model for outsourced services. In the long term, the project is expected to contribute to improved labour market outcomes for vulnerable groups (such as (people with disabilities, youth, older workers, etc), increasing their labour market participation and employment, and decreasing unemployment.

This type of support could be relevant for other countries seeking to improve labour market integration of vulnerable groups and to complement publicly provided employment services with contracted provision. Lessons from Estonia will highlight design and implementation features of outcome-based contracting, coordination between employment, health care and social services, and strategies to reach individuals weakly attached to the labour market. Projects such as this one are designed to examine these aspects in a country-specific institutional and labour market context, while generating insights of broader relevance across the European Union and the OECD.

• Improving the Provision of Active Labour Market Policies in Estonia
• Innovative approaches to tackle long-term unemployment
• Building inclusive labour markets: Active labour market policies for the most vulnerable groups
• Personalised Public Services for People in Vulnerable Situations in Lithuania
• Raising the bar: Designing and implementing innovative contracted-out employment services in OECD countries
• Paying for results: Contracting out employment services through outcome-based payment schemes in OECD countries
• Reforming the Swedish Public Employment Service
• Improving job matching and career progression of MIS beneficiaries through digital solutions and AI
• The Role of Public Employment Services in Promoting an Inclusive Nordic Common Labour Market
• Modernising Latvia’s Public Employment Service through Digitalisation
• Strengthening Active Labour Market Policies in Korea, Connecting People with Jobs