With the economy weak and inflation falling, growth in wages continued to slow in the second quarter, though real wages still rose meaning that people’s purchasing power improved. Unemployment was about a percentage point higher in the second quarter than a year previously, but so was employment. This was possible because a record percentage of people were active in the labour market. Higher employment was entirely a consequence of a rise in the number of people engaging in enterprise, while the number of waged employees fell.

Growth in wages slowed to 7.2% in the second quarter, with the economy weak and inflation falling. The rise of 7.4% in public sector wages was a little above the average and was driven by healthcare and education, while private sector wages rose by 6.9%. Growth in wages weakened in all areas of activity in both the public and private sectors, but the decline in growth was notably sharper in the public sector than in the private sector. The mean wage passed the 2000 euro mark for the first time as it reached 2007 euros. Lower wages rose faster than higher wages, largely because of the rise in the minimum wage, and so wage inequality narrowed slightly. Real wages still rose despite the economic woes and the slower growth in wages, as wages rose at a faster rate than inflation.

Unemployment reached 7.6% in the second quarter and was about a percentage point higher than a year earlier as a consequence of the recession. Employment was also higher than it was a year earlier, meaning that the rise in unemployment was caused by the exceptional level of activity in the labour market. A note of caution in the assessment of the labour market is sounded by a fall in the number of people employed who are employees receiving a wage, as there were some 9000 fewer of them in the second quarter than there were a year earlier. Data from the Tax and Customs Board also show a fall in the number of people declared as receiving wage income. The change may reflect an increase in entrepreneurship, which is positive but may also indicate greater uncertainty around people’s incomes.

The labour market has remained in better shape than expected given the extent of the recession in recent years. As the recession has eased, so the labour market indicators have become more stable. Unemployment has for example fallen a little from where it was at the start of the year, while the number of employees with a wage and the number of vacancies advertised by Töötukassa have remained essentially unchanged. The expectations of employers in manufacturing for employment are shown by surveys run by the Estonian Institute of Economic Research to have become more optimistic. It is probable though that it will take time for unemployment to fall as the economy starts to grow again because a lot of employers have kept their staff in place even as demand has been weak, so if orders pick up, there will be no immediate need for them to hire new employees to the same extent.

Additional information:
Hanna Jürgenson
Eesti Pank
Communications Specialist
Tel: 56920 930
Press enquiries: [email protected]