Data from Statistics Estonia show that yearly growth in wages in the third quarter was 5.9%, which was the same as in the second quarter. Stripping out seasonal fluctuations means that wage growth actually accelerated quarter on quarter. The purchasing power of the average wage was still less than a year earlier as consumer price inflation rose to 5.6% in the third quarter, while the rise in income tax to 22% has eaten into the growth in net wages this year. The growth over the year has been faster in lower wages, and the median wage has increased by 6.3%. There is consequently slightly less wage inequality than there was last year.

It is notable when looking across sectors that the average wage in manufacturing, where output volumes are only recovering from their quite steep drop in recent years, has grown faster than the national average for several quarters in a row, and it will probably increase by the same amount again this year as it did last year. Expectations of employers in manufacturing for developments in employment returned back to their usual levels some time ago now. Data from the Tax and Customs Board on recipients of declared wages indicate that wages in manufacturing have stabilised this year. Labour shortages are not yet felt to be biting as widely as usual, but the strong growth in wages could still be a sign that it will become harder to hire employees with the skills needed. Wages in construction also increased by more than the average in the third quarter, like those in manufacturing. The growth in wages in private sector services was around the national average, while that in the public sector was below the average.

The economy has recovered slowly this year, and this has had an impact on the labour market. The labour market survey run by Statistics Estonia shows a fall in unemployment from quarter to quarter, which is in line with the long-term downward trend in the number of people registered as unemployed. The survey also finds that employment has increased this year. Register data from the Tax and Customs Board, which uses a different methodology and covers everyone declared as earning a wage, indicate meanwhile that employment is declining at a slowing rate. It is to be expected moving forwards that fiscal policy will boost growth in the economy and that this will encourage the recovery in the labour market. Eesti Pank estimates that the non-accelerating wage rate of unemployment, or the equilibrium level where labour shortages do not cause pressure on wages, is around 6.5%, which is about a percentage point below where the unemployment rate is now.

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