Wage growth slowed in the second quarter

Data from Statistics Estonia show that the average gross monthly wage was up 4.8% in the second quarter of 2014, and the gross hourly wage by 8.8%. The sizeable difference between the growth rates of monthly and hourly wages indicates that less was paid in bonuses and benefits, which can be seen as the flexible part of wages. Quarterly growth in average wages continued to slow in seasonally adjusted terms, reflecting an adjustment to the weak economic environment and productivity.

Average wage growth was also slowed by increased declaration of wages in sectors where wages are below average, such as catering and accommodation services, and agriculture, where Statistics Estonia reports that employment was more than 10% higher than last year. The effect of employers anticipating the upcoming registration of employees could already be felt in the second quarter.

Wage growth has also slowed in sectors that are exposed to risks from the external environment. Average wages in manufacturing rose by 4.9%, and those in transportation and storage by 2.4%. Exporting companies are less able to increase their labour costs than companies serving domestic demand are, as external competition makes it harder for them to pass higher costs into product prices.

The impact of large collective wage agreements passing out of the comparison base and increased uncertainty will together mean that wage growth is more likely to slow in the near future. The Eesti Pank June forecast expects that if external demand recovers, wage growth in the coming years will be 6-7%. This is in line with Estonia’s potential for economic growth of 3-4%.

Source: Bank of Estonia

Author: Orsolya Soosaar, Economist at Eesti Pank

Average monthly gross wages exceeded 1,000 euros

According to Statistics Estonia, in the 2nd quarter of 2014, the average monthly gross wages and salaries were 1,023 euros and increased 4.8% compared to the 2nd quarter of the previous year.

Compared to the same quarter of the previous year, the increase in average monthly gross wages and salaries in the 2nd quarter of 2014 was slower than in the 1st quarter. The average monthly gross wages and salaries without irregular bonuses and premiums increased 5.0% in the 2nd quarter. Compared to the 2nd quarter of 2013, irregular bonuses and premiums decreased 1.8% per employee and reduced the rise in average monthly gross wages by 0.2 percentage points.

Real wages, which take into account the influence of the change in the consumer price index, also increased 4.8% in the 2nd quarter of 2014. Compared to the same quarter of the previous year, real wages increased for the twelfth quarter in succession.

According to the Wages and Salaries Statistics Survey, the number of employees as at the end of June was 4.7% higher than at the same time in 2013. There was a slightly more than a 10% increase in the number of employees in four economic activities: 1) agriculture, forestry and fishing; 2) wholesale and retail trade; 3) accommodation and food service activities; and 4) administrative and support service activities.

In the 2nd quarter of 2014, the average hourly gross wages and salaries were 6.21 euros and increased 8.8% compared to the 2nd quarter of 2013.

In the 2nd quarter of 2014 compared to the 2nd quarter of 2013, the average monthly and hourly gross wages and salaries increased the most in financial and insurance activities (by 9.3% and 12.2%, respectively).

Compared to the 2nd quarter of 2013, the average monthly and hourly gross wages and salaries increased the least in mining and quarrying (by 0.4% and 4.8%, respectively).

The average gross wages and salaries were 996 euros in April, 1,002 euros in May and 1,065 euros in June.

In the 2nd quarter of 2014, the employer’s average monthly labour costs per employee were 1,379 euros and the average hourly labour costs were 9.29 euros. Compared to the 2nd quarter of 2013, the average monthly labour costs per employee increased by 4.5% and the average hourly labour costs by 7.3%

Compared to the 2nd quarter of 2013, the average monthly labour costs per employee increased the most in electricity, gas, steam and air conditioning supply (8.9%) and the average hourly labour costs increased the most in financial and insurance activities (11.2%)

Compared to the 2nd quarter of 2013, the average monthly labour costs per employee decreased only in mining and quarrying (0.8%) and the average hourly labour costs increased the least in information and communication (3.0%).

Statistics Estonia conducts the Wages and Salaries Statistics Survey on the basis of an international methodology since 1992. In 2014 the sample includes 11,920 enterprises, institutions and organisations. The average monthly gross wages and salaries have been given in full time units to enable a comparison of different wages and salaries, irrespective of the length of working time. Calculations of the monthly gross wages and salaries are based on payments for actually worked time and remuneration for time not worked. The hourly gross wages and salaries do not include remuneration for time not worked (holiday leave pay, benefits, etc.). In short-term statistics, the average gross wages and salaries are measured as a component of labour costs. Labour costs include gross wages and salaries, employer’s contributions and employer’s imputed social contributions to employees

Average monthly gross wages and salaries, 1st quarter 2010 – 2nd quarter 2014 (euros)
Year 1st quarter 2nd quarter 3rd quarter 4th quarter
2010 792 758 822 759 814
2011 839 792 857 809 865
2012 887 847 900 855 916
2013 949 900 976 930 986
2014 966 1 023

Average monthly gross wages and salaries and monthly labour costs per employee,
2nd quarter 2014

Diagram: Average monthly gross wages and salaries and monthly labour costs per employee, 2nd quarter 2014

Average hourly gross wages and salaries and hourly labour costs, 2nd quarter 2014

Diagram: Average hourly gross wages and salaries and hourly labour costs, 2nd quarter 2014

 

Read more from Statistics Estonia

Wage growth decelerates in the 2Q

Monthly wage growth decelerated for the third quarter in a row. In the 2Q monthly wages increased by 4.8% YoY in nominal terms (7.3% in 1Q) and reached above 1000 euros for the first time (1023 EUR). Real wages, which previously accelerated seven quarters in a row, decelerated to 4.8% as well. Deceleration of wage growth was expected.

Monthly wage growth decelerated in most economic activities, except energy, finance, real estate, accommodation and food services and administrative and support service activities. At the same time, the growth of average hourly gross wages accelerated to 8.8%. The impact from the remuneration to employees for the time not worked, which is one component to explain the difference between monthly and hourly wages, was relatively small in 2Q. The reason comes from the increased share of employees with lower salaries compared to a year ago. The employment increased faster in the activities with lower wages than average, e.g. agriculture and forestry, domestic trade, accommodation and food services and administrative and support service activities. Although the number of employees has increased, hours worked per employee has diminished.

Wage growth responds to the change of economic growth with a certain delay. On the one hand, shortage of labour force and decreased unemployment press wages upwards, on the other hand the share of labour costs in enterprises’ turnover has increased and profitability decreased. Although, the number of employees increased in 2Q, total wage and labour cost has decreased. Deceleration of the wage growth refers to the better adjustment of enterprises and labour market to the weaker economic growth. Swedbank industrial survey published this spring indicated that enterprises planned less growth of wages this year.

According to our recent forecast (Swedbank Economic Outlook), nominal wage growth decelerates to around 6% this and the next year (7.8% in 2013). However, escalation and protraction of the geopolitical tensions can worsen economic sentiment and decelerate wage growth even further. Although nominal wage growth decelerates this year, real wage growth accelerates as inflation rate is low. Growth of real wages will slow down together with the inflation picking up next year.

Source: Swedbank

Every fifth child has a parent working abroad

According to one batch of data from an international children’s well-being survey conducted from January to June, 22 percent of Estonian sixth-grade students said one or both of their parents worked abroad.

University of Tartu researcher Kairi Talves, who analyzed the data, told Eesti Päevaleht daily that the children viewed their long-term plans and coping more negatively, and that their general well-being was also lower.

Of the 230 children (1,000 were sampled) most said one parent worked abroad. In the case of 189 children, it was the father. In the case of 13, both parents worked abroad, and most of these were raised by their grandparents.

The study of children’s well-being in Estonia is part of an international project in 13 countries, funded by the Jacobs Foundation in Switzerland.

Source: ERR News

20 pct cut in unemployment insurance premium proposed

The Unemployment Insurance Fund board has approached the Cabinet with a proposal to lower the unemployment insurance premium from 3 percent to 2.4 percent.

Currently employees pay 2 percent and employers 1 percent. Under the new proposal, the split would be 1.6 percent and 0.8 percent.

The fund’s board, which is currently chaired by the head of the country’s unions, Peep Peterson, said Monday’s offer was a compromise.

“The new premium rate would allow us to cover the needs of the work ability reform and to continue amassing reserves at a reasonable rate,” said Peterson, as reported by uudised.err.ee. “The board reviewed the potential crisis scenarios before making the decisions and we can be sure that we can get by with the with the insurance resources we have even in complicated times.”

Read more from ERR News

Labour force is declining

In the second quarter of 2014, employment declined by 1.2%, compared with the second quarter last year. The number of employed shrank by 8,000 persons in a year as a result of negative net migration and increased number of economically inactive (i.e. persons aged 15-74 not working or looking for a job).

In 2013, Estonia’s population declined by 2600 persons due to negative net migration, and additional 1700 persons as the number of deaths exceeded the number of births. In addition to quite large number of emigrants, around 25 000 persons are working outside Estonia (around 4% of the total employed).

The unemployment rate decreased to 6.9% as the number of unemployed declined but also because the number of economically inactive rose. The number of economically inactive grew mostly because the number of people not working due to health reasons increased.

Employment decreased the most in small service sectors as well as in agriculture and finance. The number of employed increased in construction, transportation and health sectors. Most of the construction workers are employed in the construction of buildings, where construction volumes are increasing, while the construction of civil engineering objects (and overall construction volumes) are declining. The same goes for transportation, where more labour-intensive branches of the sector are doing relatively better.

Estonian enterprises face strong wage growth pressure. In the first quarter of this year, personnel expenses of enterprises increased by 7.7%, when turnover decreased by 2.3%. Personnel expenses grew in most of the sectors, although sales performance was mixed. Preliminary figures show that labour market imbalances have somewhat eased in the second quarter as wage growth has slowed and GDP growth accelerated.

In the second half of the year, we expect employment to decrease compared with last year. Official employment figures will probably improve due to the new employee registration obligation since July this year.

Source: Swedbank

Unemployment decreased in 2Q

According to Statistics Estonia, unemployed persons numbered 47,000 and the unemployment rate was 6.9% in the 2nd quarter of 2014. Employment increased compared to the 1st quarter, but decreased compared to the same quarter of the previous year. This shows that Estonia is gradually facing the consequences of declining labour force.

According to the data of the Labour Force Survey, the estimated number of unemployed persons was 47,000 in the 2nd quarter, which is 10,000 less than in the previous quarter and 8,000 less than in the 2nd quarter of 2013. The unemployment rate was lower than both in the 1st quarter of this year and the 2nd quarter of 2013 (when the unemployment rate was 8.5% and 8.0%, respectively).

Unemployment decreased mainly due to the declining number of the short-term unemployed (i.e. people who had been looking for a job for less than a year) (compared to the 1st quarter, their number was down by 8,000). The number of the short-term and long-term unemployed was equal in the 2nd quarter (both numbered around 23,000 in the 2nd quarter). The number of the long-term unemployed (i.e. people who had been looking for a job for one year or longer) has been stable for the last four quarters; the long-term unemployment rate was 3.4% in the 2nd quarter.

Compared to the 1st quarter, as expected, the unemployment of men declined more and the employment of men increased more than that of women, as male employment is more influenced by seasonal factors. The unemployment rate of men was 7.5% and that of women 6.4% in the 2nd quarter.

The unemployment rate of persons aged 15–24 was 18.4% in the 2nd quarter and youth unemployment remained relatively stable compared to the 1st quarter. The young unemployed numbered 10,000 in total and the number was roughly the same both in the 1st quarter and in the same quarter a year earlier. The youth unemployment rate of persons aged 15–24 is calculated as a share of only those young people who are economically active (i.e. employed or unemployed), but most members of this age group are still studying. As a result, the share of the unemployed among all young people aged 15–24 was only 6.7%.

The estimated number of employed persons was 624,000, which was 19,000 persons more than in the previous quarter, but 8,000 persons less than in the same quarter of the previous year. While the quarterly increase was fostered by seasonal jobs, the yearly decline was influenced by diminishing working-age population (caused by negative net migration) and the increasing number of economically inactive persons, but also by the high comparison base of the 2nd quarter of 2013. The employment rate of the population aged 15–74 was 63.0% in the 2nd quarter. This is 1.9 percentage points higher than in the 1st quarter of this year (61.1%) and 0.2 percentage points lower than in the 2nd quarter of 2013 (63.2%). Compared to the previous quarter, the number of the employed increased twice as much for males than it did for females. By age groups, the employment of employees aged 50 and over increased the most, compared to the 1st quarter.

The increase in employment was most of all influenced by an increase in the number of persons employed in manufacturing, construction, wholesale and retail trade, and information and communication.

Economically inactive persons (students, retired persons, homemakers, discouraged persons, etc.) made up 32% (320,000 persons) among persons aged 15–74 in the 2nd quarter. Their number decreased by 9,000 compared the 1st quarter, influenced by seasonal growth of employment. Therefore, among inactive persons aged 15–74, the decrease occurred mainly in the number of persons inactive due to health issues (as a general trend, their number has nevertheless increased). There was a small decline in the number of discouraged persons (i.e. persons who have stopped seeking a job), they numbered 6,000 in the 2nd quarter.

Persons aged 15–74 by labour status, 1st quarter 2005 – 2nd quarter 2014

Diagram: Persons aged 15–74 by labour status, 1st quarter 2005 – 2nd quarter 2014

Unemployment rate is the share of the unemployed in the labour force (the sum of employed and unemployed persons). The long-term unemployment rate is the share of people who have been unemployed for a year or longer among the total labour force. The employment rate is the share of the employed in the working-age population (aged 15–74). The estimates are based on the data of the Labour Force Survey.

Statistics Estonia has been conducting the Labour Force Survey since 1995 and every quarter 5,000 persons participate in the survey. The Labour Force Survey is carried out by statistical organisations in all the European Union Member States on the basis of a harmonised methodology.

 

Source: Statistics Estonia

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