Data from Statistics Estonia show that the growth in the average wage slowed to 4.5% in the fourth quarter of last year from 5.9% in the third quarter. This is largely because December was an exception with wage growth of only 1.5% after the growth in the average wage over the year had accelerated to 6.3% in October and November.

Two factors relating to changes in the income tax system explained why the growth was low at the end of the year. The first factor is the reference base from December of the previous year, as wage payments from the start of 2025 were brought forward to the end of 2024 in anticipation of a rise in the income tax rate. The second was that some wages and annual bonuses in 2025 were pushed back to the beginning of 2026, as the tax-free threshold for income no longer depends on the size of wages from the start of this year. Data from the Tax and Customs Board confirm this, as they show that wage growth in early 2026 was 6.9%.

Leaving aside the exceptional month of December shows that wages in manufacturing and construction were growing faster than the economy on average throughout the year, and the growth accelerated even further in those sectors at the end of the year. Those are sectors where employment is no longer falling and the expectations of employers for employment are now more optimistic than their historical average. The statistics from Töötukassa on vacancies show that there were around 10% more vacancies in construction and manufacturing in 2025 than there were a year earlier. The average wage grew more in the private sector than in the public sector in October and November, as it had in the third quarter. Wage growth in services in the private sector was slower than that in industry.

The weakness of the recovery in the economy last year also held back the growth in demand for labour. Various sources show that the number of waged employees fell by a little less than 1%. The labour force survey of Statistics Estonia put unemployment in the final quarter of the year at only 6.4%, but this was because labour force participation was exceptionally low. This meant that a smaller share than usual of people out of work were actively looking for a job, or a larger share than usual were not ready to start work within two weeks. It probably also arose partly because of statistical fluctuations in the sample used for the survey, and the numbers moving forward may be expected to be closer to the trend. Growth in the economy should be given a boost this year by the fiscal stimulus, and that should then strengthen demand for labour as well.

Additional information:
Viljar Rääsk
Head of Communications
Eesti Pank
6680 745, 5275 055
Email: [email protected]
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