The growth in the average wage slowed to 6.1% in the first quarter of this year. Wages were expected to grow more slowly because although the economic climate has improved, it still remains weak, and there is more slack in the labour market. Wages rose more slowly in both the public and private sectors. Survey data from the labour force survey run by Statistics Estonia show that unemployment rose sharply to 8.6% in the first quarter.

Growth in the average wage slowed to 6.1% at the start of the year from 8.3% in the previous quarter. Wage growth was boosted in the final quarter of last year by one-off factors like the rise in income tax rates, which led some private companies to bring payments of wages, bonuses and holiday pay forward so they would be taxed at the lower rate. This effect disappeared in the first quarter, but some wages for January may have been smaller in certain cases because of the payments made in advance. Wages also rose more slowly in the public sector in the first quarter, and that trend may be expected to continue in the coming quarters under the impact of more modest collective wage agreements in education and healthcare. Wages were expected to grow more slowly at the start of the year because the economic climate remains weak, and the amount of labour available in the labour market is above average.

The labour force survey from Statistics Estonia showed a somewhat unexpected rise in unemployment in the first quarter of the year to 8.6%, which was above even the level reached during the pandemic. Unemployment was last so high in 2013, when the Estonian labour market was recovering from the global financial crisis. Unemployment rose because employment fell. Register data from the Tax and Customs Board show the number of people receiving a wage continued to fall. The labour force survey earlier showed a more positive picture of employment than the register did, but this has been reversed now, as the register data, unlike the survey data, show the number receiving a wage falling at a slowing pace, except in January when tax changes had an impact. The number of people registered as unemployed has been falling for a long time now. It is not however required in Estonia for people without work to register with Töötukassa, and they may become less motivated to do so once they lose the right to keep receiving unemployment benefit. The registered unemployment rate may consequently give a slightly rosier impression of the labour market.

It may be expected that the economy recovering will help slow the fall in employment, and will improve labour productivity. There has already been good news in the first quarter of this year in several sectors of the economy such as foreign trade, manufacturing, retail and construction. The Estonian economy is forecast to continue growing despite the blows from the trade war.

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