Revised data from Statistics Estonia show that the growth in wages slowed in the second quarter to 5.9%. The growth in the average wage slowed most in the public sector, with wages in healthcare and education rising more slowly than before.

Wage rises in healthcare were affected by the entry into force of a new collective agreement that increased hourly wages by less than the agreements in recent years. Pay rises for teachers were only modest this time. The average wage has risen by about the same amount in the private and public sectors since the second quarter of 2021, as it has increased by 44% in the state sector overall, 42% in local government administration, 45% at Estonian-owned private companies, and 44% at foreign-owned private companies. Wages in public administration have risen by 40% at the same time, and so are in the middle of the government sector. Taking a slightly longer trend shows that slower growth in wages is in line with the Estonian economy spending a long time in recession and subsequently recovering sluggishly, while there have been more jobseekers than the average in the labour market. Wage income increased during the recession as a share of the total income earned in the economy. Growth in the Estonian economy may be expected to exceed that in wages as the economy recovers, and corporate profits should rebound.

The labour market has been below its average strength while the economy remains weak, as unemployment reached 7.8% in the second quarter and employment fell further. The unexpectedly high peak of 8.6% that the unemployment rate hit in the first quarter of this year was only a temporary spike however, and it may have been affected by random statistical variance within the estimate. Signs of the labour market stabilising have been apparent in the data for some time now, as there is a steady downwards trend in the number of people registered as unemployed, and the employment rate has stopped falling, while expectations by companies for future developments in employment have improved in manufacturing and construction. Employment is forecast to grow slowly moving forwards and unemployment to decline slowly because companies avoided making redundancies at the same rate that output was shrinking during the recession. This means that they will at first have the capacity to increase production without hiring additional staff.

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