Wage growth accelerated to 8.1% in the third quarter and the purchasing power of the average wage increased further. Sectors where wages rose at a faster rate included those that had been affected most by the recession, such as construction and manufacturing. The faster growth in wages will probably prove temporary, since there remains more than average slack in the labour market, and public sector wages are expected to rise more slowly next year. The labour force survey from Statistics Estonia found that unemployment is lower than it was at the start of the year and employment is higher, but no increase has yet been seen in the register data on employment contracts and on the number of people receiving wage income. Employers will at first be able to increase production as the economy recovers without taking on new staff, and so it will take some time before unemployment falls noticeably.

Although the economy remains weak, the growth in wages increased to 8.1% in the third quarter from 7.2% in the second. The growth was boosted by wages in central government organisations and at foreign-owned private companies. In the public sector the average growth increased in public administration, where it had lagged behind the average in the whole economy, and in education. In the private sector, wage growth increased in manufacturing, transportation and storage, and construction, which are the sectors that were affected most during the past two years of recession. Employment in those sectors is no longer falling as quickly as it was, and that, together with faster growth in wages, indicates that the demand for labour is stabilising. Wages also rose more slowly in retail, where data from the Tax and Customs Board show the number receiving a wage falling.

Unemployment was at 7.4% in the third quarter and has been falling since the start of the year. This is because more people are in employment, and more are working for a wage. The number registered as unemployed in the data of Töötukassa is also falling slowly, and it has not been lifted considerably during the autumn by large numbers of redundancies. The register data still show the number of people declared as receiving wage income and the number of employment contracts to be lower than a year earlier, which means that demand for labour is declining more slowly now, but no clear growth is yet apparent in it.

The recession abating has meant that the labour market indicators have become more stable during this year. It is probable that as the economy recovers, employers will at first be able to increase production without taking on new staff to match, as they cut jobs less during the recession than they did in earlier crises. This equally means that it will take time for unemployment to fall significantly. The faster growth in wages in the third quarter was probably temporary, as there remains a lot of labour available in the labour market. It is also expected that public sector wages will rise more slowly next year, while the rise in the minimum wage of 8% next year will be smaller than the rise of 13.1% this year. If wages should continue to rise fast persistently though, it may indicate that there are structural problems in the labour market and a poor match between jobseekers and the jobs available.

Additional information:
Hanna Jürgenson
Eesti Pank
Communications Specialist
Tel: 5692 0930
Press enquiries: [email protected]