Estonia's e-resident program is its answer to a shrinking workforce

Currently many countries in Europe are facing a dire crisis, with fertility rates falling drastically and increasing government costs as a result. An older population requires more space in elderly homes, more to be spent on healthcare and an increase in registered nurses to care for the aging sector of the population.

Between 2010-2015, 83 countries had below-replacement fertility levels, accounting for 46 percent of the world’s population. These countries included China, the USA, Brazil, Russia, Japan, Germany and the UK. Even worse is the predicted global fertility rate, which is expected to fall from the current 2.5 births per woman to 2.2 in 2045-2050 and 2.0 in 2095 to 2100, according to projections.

Put simply, women don’t want to have as many children as they once did. Due to financial and personal costs, uncertainty over reliable jobs and social issues, people are less interested in bringing new life into the world and understandably so. According to the United Nations Population Division, the amount of children a woman has in her lifetime has fallen by more than 0.73 since 1990.

Globally estimated children born per woman

Estonia is in a tricky situation because if emigration continues at the rate it is now and if birth rates remain low, the population will drop below 800,000 by the end of the 21st century. To maintain and grow the population size, the birth rate must increase but an influx of immigrants is also necessary, leading the country to come up with a digital solution.

In an attempt to fix this issue, Estonia introduced a e-resident program in 2014 that resulted in the number of virtual residents in the country growing faster than the native-born population. These digital nomads are granted government-issued ID, can open bank accounts and access payment services, and can optionally be physically present in the country. It’s not a citizenship though, and residents are still required to pay their normal taxes in the country they physically reside in.

Estonia’s government is completely paperless — everything from tax claims, digital ID cards, voting and healthcare records is stored in a decentralized computer system with backups in Luxemburg. Having everything digitized makes running a government much easier, explains the country’s Chief Information Officer, Siim Sikkut, to the International Monetary Fund.

Number of e-residents in Estonia since launch

With the launch of the e-resident program, Estonian CIO Taavi Kotka announced an ambitious goal of having 10 million digital residents by 2025, and the numbers are showing that this is possible. With a simple application process and background check, applicants can then pick up their digital ID card at one of 38 Estonian embassies around the world, giving them the ability to digitally sign, authenticate and encrypt documents for a period of three years.

Japan, Russia and Ukraine are the biggest places where applications for the e-residency program come in, giving applicants access to the EU’s single market, a 0 percent corporate tax rate if they invest or keep the money in their business and paperless administration abilities.

The one thing that is certain is that, once again, Estonia is at the epicentre of a digital revolution. The government backs investment in countrywide internet access and students begin learning to code in elementary school.

There’s around 45,000 people enrolled in the program and though resident’s don’t pay tax there, they bring business to the country and eventually have the power to add jobs to the economy.

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