Labour Market Review 1/2020
The labour market review by experts from Eesti Pank covers developments in the supply and demand of labour in Estonia, and the cost of it in wages. The central bank observes the labour market for two reasons. Firstly, labour is an important production input, as a change in the supply or activity of labour can directly affect potential growth. Secondly, events in the labour market can have a major impact on inflation.
As the euro area monetary policy targets price stability, and the Estonian economy is very open, the economy adjusts to changes principally through the prices and volumes of production inputs. For this reason it is important for the labour market to be flexible and for wage rises to correspond to productivity growth, as otherwise the increase in production costs could lead to excessive inflation.
This review compares developments in Estonia with those in other European countries. It uses two types of figure for international comparison dividing countries into regional groupings for a long-term view and using unweighted averages. The exception is the EU15, for which a weighted average like that published by Eurostat is used. The Southern Europe group contains newer member states of the European Union: Croatia, Romania, Bulgaria, Malta, Cyprus and Slovenia. The Southern European countries Italy, Greece, Spain and Portugal are in the EU15 group. The Central and Eastern European countries in the CEE4 are Czechia, Hungary, Poland and Slovakia. In figures showing a single year, countries are shown in the colour representing the group that they are in.
Review by Katri Urke, Mari Rell, Orsolya Soosaar