Wage growth slowed in local government administration

  • The growth rate of gross monthly wages slowed a little, especially in local government administration
  • Given that productivity declined in the second quarter, growth in the average wage remained strong
  • The Structure of Earnings survey indicates that the wage level in Estonia was second behind that of Slovenia among the Central and East European countries in 2014

Data from Statistics Estonia show that the average gross monthly wage was up 7.6% in the second quarter of 2016. This is slightly slower than the yearly growth rate of 8.1% in the previous quarter.

Wage growth slowed most in state and local government administration, but the trend of accelerating wage growth was noticeable in Estonian-owned private companies. Data from the Tax and Customs Board showed similar developments. Growth in the average declared wage paid out in the second quarter was slightly slower than it was in the first quarter of 2016 or the second quarter of 2015. This was because of a deceleration in the rapid growth in wages paid out by government institutions.

The average wage is again rising notably faster than productivity. The flash estimate from Statistics Estonia puts GDP growth at 0.6% in the second quarter while the number of people in employment grew faster, meaning that productivity fell. The impact of rising wages on labour costs per unit of output has also increased significantly in manufacturing, which is Estonia’s main exporting sector. Over the long term, such a development will harm the competitiveness of manufacturing in foreign markets.

The results of the 2014 Structure of Earnings survey were released recently[1] and show wages by gender, education and occupation. Surveys using the same methodology are carried out in most European countries, meaning that Estonian data can be compared with those of other countries. The 2014 survey showed that the wage level in Estonia was second behind that of Slovenia among the Central and East European countries in that year. The average wage was about one third higher in Estonia than in Latvia or Lithuania, while wages in Finland and Sweden were about three times higher than those in Estonia in 2014.

Eesti Pank observes and comments on wage developments as labour costs have a direct impact on the price of goods and services produced in Estonia and wage growth is an important indicator of price stability.

See a better graph on Bank of Estonia website

Author: Orsolya Soosaar, Economist at Eesti Pank


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