Wages are rising more slowly
Economist at Eesti Pank
Data from Statistics Estonia show the average gross wage in the second quarter of the year was 1419 euros, which was 7.4% more than a year earlier. The rate of growth was a little slower than in 2018. The growth in wages continues to be led by the public sector. The cooling in export markets will lead wages to rise even more slowly in future.
The rapid rise in average wages has for some time been driven by the public sector. Wages rose faster in state and local government employment than in the private sector in the second quarter too. Wages were up in public administration, education as well as healthcare. Jobs in the public sector mostly demand very good knowledge of the Estonian language, and so employers mostly find new staff from within the local labour force. In consequence the shortage of local labour gives public sector employers more power in wage negotiations than workers in parts of the private sector where employers are also able to find employees from abroad.
The performance of Estonian companies will in future be affected by the cooling of the economies in Estonia’s main export markets. The sentiment survey of the Estonian Institute of Economic Research shows the employment expectations of businesses are more pessimistic, and there are slightly fewer companies than before in construction and manufacturing that consider the labour supply to be the main factor restricting expansion. This suggests that there will be less upward pressure on wages in future and so wages will rise more slowly.
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