Real wages fell because inflation was high

Autori Orsolya Soosaar pilt

Orsolya Soosaar

Economist at Eesti Pank



Data released today by Statistics Estonia show that the average wage was up by 7.3% in the fourth quarter of last year. Real wages fell at the same time though because inflation was 9.3%. Wage growth was boosted by increased bonuses, which reflected the improvement in corporate results after the crisis of the Covid-19 pandemic.

The upwards pressure on wages was increased by growth in labour shortages at the end of the year. Although there are still some 8000 more people registered with Töötukassa than immediately before the pandemic, the number registered as unemployed fell rapidly throughout last year. Data from the Tax and Customs Board show that there were as many people receiving declared wages in the fourth quarter as there were in 2019.

Further wage growth will be affected by several factors. The most important will be the general performance of the economy, as the sanctions on Russia and the counter-sanctions imposed by Russia will harm the Estonian economy. Greater uncertainty and higher energy prices will probably make businesses less keen to hire employees at the same rate, and this in turn will reduce wage pressure. The Russian invasion of Ukraine may affect the Estonian labour market in various ways, with some workers who come from Ukraine returning home to defend their country, while Estonia receives large numbers of refugees, to whom the Estonian labour market has been opened. Wage pressures will be increased by the rise of 12% in the minimum wage.

Additional information:
Ingrid Schmuul
Communications Specialist
Eesti Pank
Tel: 668 0965, 5697 9146
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