Client: Ministry of Social Affairs
Period: 2024-2026
The methodology used in Estonia to calculate the subsistence minimum has so far been based on a consumer basket defined almost two decades ago. The cost of the basket has been updated using the Consumer Price Index (CPI), but the basket’s content has not been reviewed as a whole. As a result, the current methodology does not sufficiently reflect changes in consumption needs, living conditions, or societal expectations regarding the satisfaction of basic needs.
The aim of the study was to develop an up-to-date, transparent, and regularly updateable methodology for calculating the subsistence minimum in Estonia. To this end, the study analysed international practice, Estonian household expenditures, approaches to calculating equivalence scales, options for compiling and pricing the food basket, and principles for accounting for housing and other non-food expenditures.
The updated methodology relies primarily on Household Budget Survey (HBS) data, supplemented with expert knowledge and input from population focus groups. In compiling the food basket, the sample menu used in the existing minimum food-basket methodology was updated in line with the latest National Institute for Health Development dietary guidelines, and it is recommended that the basket be priced using median food prices paid by all households. For housing and other non-food expenditures, the study recommends using the actual expenditures of households in the lower expenditure deciles and applying one common list of goods and services to all households.
The study recommends applying a single nationwide subsistence minimum and using equivalence scales of 1:0.4:0.4 for multi-person households. Under the updated methodology, the subsistence minimum for the first household member amounts to 443.5 euros per 30-day period at 2024 prices. The study also assessed the impact of the changes on the subsistence benefit and absolute poverty indicators, and provided recommendations for regularly updating the methodology.