During the years 1989-1997 in Estonia, employment has decreased; unemployment and inactivity have increased. Females have tended to move to inactivity while males have become unemployed. The wage patterns are very flat relative to those in market economies. Estonia has opted for very low levels of unemployment benefits, pensions, and a low minimum wage. Public sector employment has decreased drastically. The largest share of private sector employees are involved in the service sector. There is a substantial regional and occupational mismatch of vacancies and unemployed people. Participation rates have dropped for all age groups, with the largest decline among older people. The labor demand for younger members of the labor force has increased dramatically. Since most unemployment is structural, the only possible conclusion is that vocational secondary education and job training have not been flexible enough to satisfy labor market needs. Studying at vocational education and training institutions is the second-best choice for young people; school leavers prefer academic higher education. No formal training system exists for adults who face changes in job functions or dismissal. Labor policy is very restrictive and passive. (Appendixes include: data tables; labor force surveys; ethnic composition of population; legal regulation of the labor market; and education system. Contains 22 references.) (YLB)