Growth in wages will be restrained in future by the weak position of the economy
Economist at Eesti Pank
The average gross monthly wage was 12.4% higher in the second quarter of 2023 than it was a year earlier at 1873 euros.
Wage growth accelerated in the public sector as new collective agreements for health care workers came into force in the second quarter. The wages of education staff had risen in the first quarter, boosting public sector wage growth for the year as a whole.
Wages also rose in the private sector, but the rate of growth slowed from 12.7% in the first quarter to 10.9% in the second. Such a rate of growth may be considered fast given that the economy remains in the doldrums. Sales and exports fell for companies in manufacturing, which is the main exporting branch of the Estonian economy, by more than 10% in the second quarter. This is partly because demand from Estonia’s trading partners was weak, but it may also have been partly because of wages previously rising fast. That may have made Estonian companies less competitive, which in turn means that the future recovery in the economy may be more of a struggle.
Survey data show that the interest of companies in hiring new staff has been low for some time. The number of jobs has fallen in several branches of industry, and also in some branches of the service sector. This all suggests that growth in wages will slow. The real income of employees has been reduced by inflation, but there is a little less chance of them now being able to move to a job with a higher wage than there was before. The chances of employees receiving a pay rise in their current job are also consequently lower than before as well.
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