Wage growth slowed in the third quarter



  • The average wage stood at 1119 euros in the third quarter and its growth rate slowed
  • The latest data show labour costs continued to increase faster than productivity

Data from Statistics Estonia show that yearly growth in average gross monthly wages slowed in the third quarter of 2016 from 7.8% to 7.1%. The average wage stood at 1119 euros in the third quarter, which is around 45 euros less than in the second quarter unadjusted for seasonal factors. As more holiday pay is paid out in the second quarter, this drop is quite usual. Seasonally adjusted, the average wage was higher in the third quarter than in the second, though the rate of growth slowed.

The latest data show labour costs continued to increase faster than productivity, but the gap between the growth rates narrowed. The average wage in mining has fallen and wage growth in the electricity sector has been substantially smaller than the average for the whole economy and has been decelerating for some time, indicating that companies are able to postpone wage rises in the event of a negative economic shock. A part may be being played in the development of wages in mining and electricity by the location of companies in those industries in Ida-Virumaa, where there is more labour available than elsewhere in Estonia. Service sectors that are doing well and where companies are looking to expand are seeing wage pressure caused by labour shortages and the lacked of skilled labour.

Slower wage growth is also indicated by data from the Tax and Customs Board on the average declared wage paid out, which was up 6.2% in the second quarter but only 5.5% in the third. Tax and Customs Board data do not convert payments to part-time employees into full-time equivalents, as the calculation of the average wage does. The number of part-time workers probably rose faster than the number of full-time workers, which is why the average wage paid out has grown more slowly than the full-time equivalent monthly wage. The median wage1 paid out grew faster than the average in both government institutions and in companies listed in the commercial register, increasing by 6.7% over the year overall. This nudges the median wage steadily closer to the average wage.

1 The median wage is the wage which half of employees earn more than and half earn less than.

Eesti Pank observes and comments on wage developments as labour costs have a direct impact on the price of goods and services produced in Estonia and wage growth is an important indicator of price stability.

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