New in-work benefit for low-income workers in Estonia

The ESPN Flash Reports are produced by the European Social Policy Network (ESPN) established in 2014 to provide the European Commission with independent information, analysis and expertise on social policies. The topics presented in the Flash Reports are identified by ESPN experts in the light of significant developments in their countries, or in some cases suggested by the Commission.

The ESPN is managed by LISER and APPLICA, with the support of OSE - European Social Observatory. For more information, please visit this website.
On 15th June 2015, the Estonian Parliament adopted legislative changes that implement an annual in-work benefit for low-income workers. The first submission of applications and the pay-out of benefits will be made in spring 2017. This new in-work benefit aims to raise living standards of low-paid workers while encouraging people to take up and declare a full time regular job. It also creates high marginal effective tax rates for low-paid workers and therefore, as a lump sum annual benefit omitting part-time workers, may not be the most cost-effective way to target in-work poverty.

Authors: Andres Võrk and Cenely Leppik

• Primary Source