The proposal of the Chamber of Commerce to reduce the costs of the state budget: reduce the number of employees in public sector organizations

In addition to increasing tax revenues, the government of the Republic, the Ministries and their subordinate agencies are also looking for various ways to reduce the costs of the state budget in the following years. The Chamber of Commerce proposed one additional solution, which will help save costs worth tens of millions of euros next year, and even more thereafter.

The Chamber proposed to reduce the number of employees in those public sector organizations that deal with policy formulation, administration, management, distribution of subsidies and supervision. In particular, the Chamber referred to organizations under the central government, such as Ministries, various agencies and inspectorates, organizations dealing with the distribution of subsidies, and social security funds.

According to the Chamber's proposal, the number of employees working in the public sector organizations described above could be reduced by 10 percent in 2024 and by 10 percent in 2025. As an exception, the number of employees should not be reduced in organizations involved in ensuring internal and external security. The proposal also does not concern, for example, medical or educational sectors, i.e., organizations providing public services.

According to the Chamber of Commerce's preliminary assessment, at least 11,000 persons work in the public sector organizations described and mentioned above. Therefore, if in 2024 and 2025 the number of employees of these organizations is reduced by 10 percent, the number of employees would decrease by at least 1,100 people in the first year and by at least 1,000 in the following year. If it is assumed that the average salary of these employees is at least equal to the average salary in Estonia, which according to this summers’ economic forecast of the Ministry of Finance is 1,950 euros per month in 2024 and 2,053 euros in 2025, then if the proposal is implemented, the state's labour costs would decrease by more than 30 million euros next year, and in 2025 by approx. 70 million euros. If the salary of these employees is higher than the Estonian average, the retrenchment will be even bigger. When the proposal is implemented, in addition to labour costs, other costs related to the laid-off jobs would probably also decrease.

The implementation of the proposal creates good conditions for increasing the efficiency of public sector organizations engaged in policy making. As the number of employees decreases, organizations must consider more carefully which activities to continue and which not. Thus, reducing the number of employees motivates public sector organizations to deal only with the most important tasks and to give up dealing with lower priority issues. Therefore, the Chamber of Commerce expects that the reduction in the number of employees will also be accompanied by the optimization of work processes and better management. In addition, it can be accompanied by less bureaucracy in public sector organizations, as a result of which, in the end, bureaucracy can also be reduced for companies, which in turn creates the prerequisites for faster business development. In addition, the reduction in the number of employees in the policy-making sector will help improve the private sector's ability to find suitable employees.