Wages are growing faster in the public sector than in the private sector

Orsolya Soosaar
Economist at Eesti Pank

Statistics Estonia finds that the average gross wage in the first quarter of this year was 1341 euros a month, which is up 7.9% on a year earlier. The average wage has been rising faster in the public sector than in the private sector since 2017 and this is raising expectations for those working in the private sector. However, wage growth will probably to slow in future for companies to be able to adapt to weaker demand without reducing their staff.

Alongside the rapid public sector wage rises, several other factors are driving wages upwards in 2019, such as the acceleration in the rise in the minimum wage from 6.4% to 8%. Ever more workers are earning wages at a level where a rise in wages reduces their tax-free minimum threshold. The wages of most of the employees from outside the European Union are linked to the Estonian average wage of the previous year and so they also rise together with the average gross wage.

Although the expectations of companies for the future are more pessimistic than they were, the labour market still looks very good for employees. Wage growth was a little slower in the first quarter than in the fourth quarter of last year, but it was still fast. Rapid wage growth continues to reflect strong demand for labour and indicates that there are labour shortages. Recently released data show that growth in employment was also faster at they start of the year, while the unemployment rate of 4.7% was extraordinarily low.

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Public Relations Office
Eesti Pank
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