A new record has been set in the labour market

Rasmus Kattai
Economist at Eesti Pank

Each quarter this year, some seven per cent of employees have left their current employer at their own request and started to work for someone else. In a broad sense this means that over a year, one employee in four moves to look for better opportunities, which is the highest rate of staff churn within the country since independence was regained.

The economic environment has been favourable in recent years. Demand for goods and services has been growing at home and abroad, and so companies have in general had to employ additional staff to benefit from that growth and to increase sales. As there are very few people unemployed, companies have had to tempt those who are already in work by offering them higher pay. In consequence the rate of churn of labour is currently higher in Estonia than at any time previously.

Even during the last boom, when there were stories of builders being sought from the check-out queues in home improvement stores, people were not changing job as readily as they are now. It can only be imagined how much worse the situation would be if labour shortages were not being eased by immigration for work, which is much larger now than it was during the last boom.

It is evident that those companies that survive in such circumstances will be those that can offer better working conditions, primarily higher pay. This means it is no surprise that survey data indicate that the loudest complaints of labour shortages come from companies with low productivity figures, and consequently low wages. Some of them will unfortunately be unable to cope with the changing landscape, as there is a harsh struggle for survival in the world of business.

The migration of people to better-paid jobs is also one reason why the average wage has risen so fast. Even the new income tax system that was introduced at the start of the year and that was expected to slow the rise in labour costs has not restrained wage growth. In short the struggle to find employees continues apace.

For further information:
Eva Vahur
Public Relations Office
Tel: 668 0965, 533 00619
Email: eva.vahur [at] eestipank.ee