Transferring public-sector jobs out of Tallinn

During the March 23rd Cabinet meeting, the government discussed a plan for moving 1 000 public sector jobs out of Tallinn, which would affect approximately 40 state authorities. Each ministry presented proposals for its own area of administration, which would coordinate the organizational activities for the transfer of jobs. The exact action plans will be submitted by the ministries, to the Government, in May.

“The Government’s objective is to increase the state’s presence all over Estonia and to make the labour market of the country’s regions more diverse. We have become accustomed to the fact that, outside Tallinn, there are state employees who provide direct services to residents. Developments in technology and e-services also allow so-called backroom officers to work and live in their preferred areas all over Estonia,” said Minister of State Administration, Mihhail Korb.

In the movement of jobs to county centres, the focus is particularly on central government authorities, of which about 55,000 people were employed as of last year; of these, 45 percent are in Tallinn. In particular, the jobs that can be moved to these regions involve day-to-day operations that do not depend on location. The plan isn’t to take the constitutional institutions and ministries, or the agencies providing services to residents and businesses of the capital and of nearby areas, out of the capital. An analysis, taking into account the broader plan, was carried out in 2016 within the framework of the preparation of the analysis of state tasks.

“The plan was drawn up taking into account three important points: the quality of public services must be maintained, restructuring costs should remain within reasonable limits, and particular areas should have the prerequisites needed in order to find the necessary employees,” said Mihhail Korb.

The job functionalities that are most likely to be moved to the various regions are those where a state authority is expanding a branch, or where an entire work unit can be moved, or a partial unit can be located in another city. An example of the branch expansion solution was the State Shared Service Centre, which in addition to Tallinn, has added offices in Tartu and Viljandi.

First, the State Real Estate Ltd (RKAS), together with every Ministry, will map and analyse the real estate opportunities in county centres and cities of particular regions, taking into consideration the necessary conditions for job creation. Then, the RKAS will make proposals for the placement of jobs in the regions in order to have as little impact on operations as possible, or while not inhibiting the activity of the authority at all. At the same time, methods will be used for the placement of various state authorities in one building in order to create synergies between the institutions and provide easier access to public services. After that, the authorities will be able to start preparing the job transfer processes, which are planned to be completed by 2019.

During the debate over moving jobs out of Tallinn, Cabinet members highlighted the need to analyse telework job creation opportunities. The Minister of Public Administration was assigned to analyse, in cooperation with other ministries, the existing practices of the organization of telework, and to provide proposals for opportunities for expanding telework.

The Ministry of Finance will further analyse, in cooperation with the relevant ministries, the options for moving state enterprises and foundations out of the capital. A relevant analysis will be presented to the Cabinet in the autumn of 2017.

Source: Estonian Ministry of Finance

Estonia’s average salary in 2016 was 1,146 euros

According to Statistics Estonia, in 2016, the average monthly gross wages and salaries were 1,146 euros; compared to 2015, the average monthly gross wages and salaries increased by 7.6%. The annual average monthly gross wages and salaries increased in all economic activities. The monthly gross wages and salaries were highest in the 4th quarter.

When in 2014 and 2015, the annual increase of the average monthly gross wages and salaries remained at around 6%, in 2016, the growth increased. Real wages, which take into account the influence of the change in the consumer price index, increased, compared to 2015, due to stable consumer prices by almost as much as the average monthly gross wages and salaries – 7.5%.

In 2016, compared to the previous year, irregular bonuses and premiums increased by 20.4% per employee. Irregular bonuses and premiums affected the year-over-year increase of average gross monthly wages and salaries by 0.4 percentage points.

In 2016, the average monthly gross wages and salaries continued to be highest in information and communication and financial and insurance activities. The year-over-year increase in average monthly gross wages and salaries was fastest in administrative and support service activities (16.4%) and real estate activities (14.3%). Above-average growth in wages and salaries was also recorded in agriculture, forestry and fishing (11.7%), information and communication (10.2%), accommodation and food service activities (9.5%), human health and social work activities (9.0%) and in education (7.7%).

The year-over-year growth of monthly gross wages and salaries was fastest in the Estonian private sector (8.9%) and slowest in state institutions (5.2%).

In 2016, by county, the average monthly gross wages and salaries continued to be highest in Harju (1,271 euros) and Tartu (1,149 euros) counties and lowest in Põlva (864 euros), Saare (880 euros) and Jõgeva (884 euros) counties. The year-over-year growth of monthly gross wages and salaries was fastest in Lääne and Tartu counties and slowest in Hiiu and Võru counties.

According to the Wages and Salaries Statistics Survey, the number of employees converted to full-time units decreased in 2016, compared to the previous year, by 1.2%. The biggest year-over-year decrease in the number of employees in full-time units, compared to 2015, occurred in other service activities, real estate activities and in mining and quarrying. The economic activities that saw an increase in the number of employees in 2016 include financial and insurance activities, human health and social work activities, professional, scientific and technical activities and information and communication activities.

In 2016, the average hourly gross wages and salaries were 6.90 euros; compared to 2015, the hourly gross wages and salaries increased by 6.0%.

In 2016, the average monthly labour costs per employee were 1,548 euros and the hourly labour costs were 10.28 euros. Compared to 2015, the average monthly labour costs per employee increased by 7.7%.

4th quarter of 2016The average monthly gross wages and salaries were highest in the 4th quarter – 1,182 euros, having increased, compared to the 4th quarter of 2015, by 7.0%, remaining on the same level with the year-over-year growth of the previous quarter. The average monthly gross wages and salaries were 1,140 euros in October, 1,158 euros in November and 1,248 euros in December. In the 4th quarter of 2016, the average hourly gross wages and salaries were 7.08 euros, having increased by 6.1% compared to the 4th quarter of 2015.

In the 4th quarter of 2016, the average monthly gross wages and salaries were also highest in information and communication and in financial and insurance activities. Compared to the 4th quarter of 2015, the average monthly gross wages and salaries increased in all economic activities. In the 4th quarter, the largest increase in average monthly gross wages and salaries occurred in administrative and support service activities (15.5%), education (9.5%) and in real estate activities (9.3%). The annual increase in average monthly gross wages and salaries was slowest in professional, scientific and technical activities and in construction.

In the 4th quarter of 2016, compared to the 4th quarter of 2015, irregular bonuses and premiums increased by 17% per employee. Irregular bonuses and premiums affected the year-over-year increase in average gross monthly wages and salaries of the 4th quarter by 0.5 percentage points. Without irregular bonuses and premiums, the average monthly gross wages and salaries increased, compared to the 4th quarter of 2015, by 6.4%.

Average monthly gross wages and salaries and their change by economic activity, 2015–2016

Statistics Estonia conducts the Wages and Salaries Statistics Survey on the basis of an international methodology since 1992. In 2016, the sample included 12,350 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 time actually worked 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.

The statistics are based on the questionnaire “Wages and salaries”, the deadline of which was 18 October 2016. Statistics Estonia published the quarterly summary in 26 working days. For the statistical activity “Wages and salaries”, the main representatives of public interest is the Ministry of Economic Affairs and Communications, commissioned by whom Statistics Estonia collects and analyses the data necessary for conducting the statistical activity.

Source: Statistics Estonia (see better graph here)

9,000 job vacancies in 4Q 2016

According to Statistics Estonia, there were nearly 9,000 job vacancies in the enterprises, institutions and organisations of Estonia in the 4th quarter of 2016. Compared to the 3rd quarter, when the number of job vacancies reached a 7-year high, in the 4th quarter, the number of job vacancies decreased by 18%. Compared to the 4th quarter of 2015, the number of job vacancies increased by 37%.

The share of vacant and occupied posts in the total number of posts continued to be highest in manufacturing (19%), wholesale and retail trade (16%) and education (10%).

The rate of job vacancies, i.e. the share of job vacancies in the total number of jobs, was 1.7% in the 4th quarter of 2016, which is 0.3 percentage points lower than in the 3rd quarter of 2016 and 0.4 percentage points higher than in the 4th quarter of 2015.

In the 4th quarter, the rate of job vacancies was highest in other service activities (4.0%), accommodation and food service activities (3.7%), information and communication (3.3%) and administrative and support service activities (3.0%). The rate of job vacancies was lowest in mining and quarrying (0.4%), construction (0.5%) and agriculture, forestry and fishing (0.7%).

Compared to the 4th quarter of 2015, the rate of job vacancies increased the most in other service activities and accommodation and food service activities. The rate of job vacancies decreased the most in financial and insurance activities.

Most of the vacant posts were in Harju county (72%), including Tallinn (63%), followed by Tartu county (8%) and Ida-Viru county (5%). The rate of job vacancies was highest in Harju county and lowest in Saare, Lääne-Viru and Viljandi counties.

Three quarters, or 75% of the vacant posts were in the private sector and every forth vacant post was in the public sector. In the 4th quarter of 2016, the rate of job vacancies continued to be highest in foreign private-sector enterprises (2.2%) and state organisations (2.1%). The rate of job vacancies was lowest in local government organisations (1.0%).Rate of job vacancies by economic activity, 4th quarter, 2015–2016

Rate of job vacancies, 1st quarter 2006 – 4th quarter 2016

The movement of labour is characterised by labour turnover (the total number of engaged employees and those who have left), which amounted to nearly 90,000 in the 3rd quarter of 2016, denoting a 4% decrease compared to the previous quarter and a 2% increase compared to the 3rd quarter of 2015. Compared to the 3rd quarter of 2015, the largest increase in labour turnover occurred in mining and quarrying (39.7%), water supply; sewerage, waste management and remediation activities (19.2%) and other service activities (19%), and the largest decrease in real estate activities (29.3%). In the 3rd quarter, both the number of employees hired and the number of employees who left their jobs were highest in wholesale and retail trade and manufacturing.

The data are based on the statistical activity “Job vacancies and labour turnover”, conducted by Statistics Estonia since 2005. In 2016, the sample included 12,603 enterprises, institutions and organisations; the data of randomly selected units are imputed to the total population separately in each stratum. As of the 2nd quarter of 2016, Statistics Estonia uses the data of the Employment Register of the Estonian Tax and Customs Board to pre-fill the survey questionnaires. The main representative of public interest for the statistical activity is the Ministry of Economic Affairs and Communications, commissioned by whom Statistics Estonia collects and analyses the data necessary for conducting the statistical activity.

The number of job vacancies is the total number of job vacancies on the 15th day of the second month of a quarter. A job vacancy is a paid post that is newly created, unoccupied or becomes vacant when an employee leaves, and for which the employer is actively trying to find a suitable candidate from outside the enterprise, institution or organisation concerned.

Labour costs are around 50 pct of GDP in Estonia

  • In a sign of improvement in the economy, labour costs grew slightly more slowly than GDP rather than faster than it for the first time in three years
  • For competitiveness to improve, wage rises will have to be more restrained than economic growth at current prices
  • Wage pressures will be increased in future by increased infrastructure investment and the presidency of the European Union

The average gross wage was 6.9% higher in the final quarter of 2016 than a year earlier, which is a smaller rise than in the first three quarters of the year. Statistics for the national accounts show payroll growth slowing and not increasing as a share of GDP for the first time in a long while. Wage growth slowing while economic growth speeds up is a move in the direction of sustainable development that has been referred to as a soft landing in economic forecasts.

Wage growth did not slow equally in all sectors and it was restrained particularly by slower growth in trade and agriculture, while wages rose more quickly in industry and the general government sector. Despite the faster growth in wages, GDP data show that the match between productivity and wages in manufacturing improved, strengthening the competitiveness of companies in foreign markets. Improved competitiveness among exporters is also indicated by a survey for the European Commission and the Estonian Institute of Economic Research.

Labour costs are still around 50% of GDP in Estonia, which is higher than the European Union average and similar to the level seen during  the crisis. The wages of Estonian workers have approached the level of the European Union faster than company profits have. This could be seen to mean that employers have had to raise wages for employees more than they have managed to raise the efficiency of production in their companies. Weak profitability may also deal a blow to workers, as it will make it less certain that jobs will be preserved. A soft landing needs wage rises to continue to be more restrained than economic growth at current prices

Several factors may boost wage growth again in future. Increased investment in infrastructure will probably mean more labour is needed in the construction sector, general government wages will come under pressure because of the upcoming presidency of the European Union and the coalition agreement to raise wages for employees working in education, and in January the minimum wage rose by a further 9.3%. Equally, wage pressure will be eased a little by the work ability reform, which will bring people into the labour market, and by the notably slower decline than previously in the number of people of working age in Estonia.


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.

Source: Bank of Estonia (Eesti Pank)

Author: Orsolya Soosaar, Economist at Eesti Pank

Estonian wage growth accelerated in 2016

• Average wages grew in all economic sectors.
• Swedbank expects the growth of average gross wages to slow from 7.6% in 2016 to around 5% in 2017.

The growth of average gross wage accelerated to 7.6% in 2016. Net average wages grew rapidly too, by 7.5%, in real terms. The average full-time monthly gross wage was 1,146 euros in Estonia.

The rapid growth in the average wage is supported by a lack of suitable labour, a 10% increase in the minimum wage, a political agreement to raise the wages of teachers and healthcare workers, and strong domestic consumption that lifts the sales of enterprises selling their products and services in the domestic market. Irregular bonuses lifted the average wage growth by 0.4 percentage point last year.

In 2016, average gross wages increased in all sectors, although growth rates varied substantially. Average wages and employment grew rapidly in the real estate and ICT sectors. Average wages also grew rapidly in agriculture, tourism, healthcare, and education, where employment grew little or even declined. Wage growth was modest in mining, which was hurt by low energy prices at the beginning of the year.

Too fast growth of labour costs could be dangerous in the longer term, as it reduces companies’ ability to export and invest. A rapid growth of labour costs could hamper the manufacturing sector the most as it is directly exposed to foreign competition. However, recent surveys suggest that, at least currently, the sentiment among the manufacturing sector is rather optimistic and entrepreneurs’ assessment of their export competitiveness has improved. As export orders and output prices are expected to increase this year, the profitability of the business sector, including the manufacturing industry, should improve in 2017.

In 2017, the growth of average wage is supported by another rise in the minimum wage (+9%). The government also plans to raise the wages of teachers, social workers and policemen. The growth of the average wage in real terms is expected to slow from above 7% in 2016 to around 2% in 2017, as nominal growth of wages will be somewhat slower and prices will rise. This, in turn, would limit households’ consumption. The substantially slower growth of wage-earners’ purchasing power will be smoothed by an increase in social transfers to pensioners, low-wage earners and children.

Source: Swedbank

Estonia’s share of the labour force in the working-age population is 70,4 pct

• Labour market remained tight in 2016.
• Employment is expected to marginally decline and the unemployment rate to grow in 2017.

In 2016, the labour force participation rate, the share of the labour force in the working-age population, increased by 1 percentage point to 70.4%. Within a year, 8,300 additional people entered the labour market, which mainly resulted from the decrease in the number of inactive persons. The number of inactive decreased due to an increase in the retirement age and the rearrangement of the social benefits system regarding people with disabilities; these people are now entitled to certain benefits only if they work or actively look for work.

Situation in the labour market did not change much in the fourth quarter compared to one year before. The number of inactive persons decreased by 0.5%, and the number of employed declined by 0.2%. Employment declined in the construction and public sector, while increased in other services. The unemployment rate increased by 0.2 percentage point to 6.6%. The number of unemployed amounted to 45,000 in the fourth quarter, while the number of vacancies exceeded 11,000 (latest data from the 3rd quarter).

At the end of January 2017, there were over 6,000 people with reduced working ability looking for a job through the Estonian Unemployment Insurance Fund. As a result of the reform, the Fund expects the number of registered unemployed to increase by one fourth this year.

In 2017, employment is expected to marginally decline. Surging labour costs motivate organisations to increase efficiency of their production processes. Employment in the public sector is expected to decrease as a result of the administrative reform where smaller municipalities merge into bigger administrative units. According to the Ministry of Finance, the number of local authorities is forecasted to drop from 213 to 75 by local government elections due in October. In addition to this, the government has decided to remove one administrative management level – all county government activities shall be terminated on 1 January 2018 and the tasks transferred to either local authorities or ministries. At the same time, the EU presidency in the second half of this year will increase employment somewhat in the ministries and conference/tourism services.

Source: Swedbank

The number of job vacancies reached a record high of 11,000

According to Statistics Estonia, there were about 11,000 job vacancies in the enterprises, institutions and organisations of Estonia in the 3rd quarter of 2016. The number of job vacancies reached a 7-year high, having increased by 16% compared to the previous quarter and by 25% compared to the 3rd quarter of 2015.

The rate of job vacancies, i.e. the share of job vacancies in the total number of jobs, was 2.0% in the 3rd quarter of 2016, being 0.3 percentage points higher than in the 2nd quarter of 2016 and 0.4 percentage points higher than in the 3rd quarter of 2015.

In the 3rd quarter, the rate of job vacancies was the highest in administrative and support service activities (4.3%), other service activities (3.1%), information and communication (3.0%) and financial and insurance activities (3.0%). The rate of job vacancies was the lowest in real estate activities, mining and quarrying, construction, and agriculture, forestry and fishing.

The total number of posts and vacant posts continued to be the highest in manufacturing and wholesale and retail trade. Both the total number of posts and the number of vacant posts were the lowest in water supply; sewerage, waste management and remediation activities, in mining and quarrying and electricity, gas, steam and air conditioning supply.

Compared to the 3rd quarter of 2015, the number of job vacancies grew the most in administrative and support service activities. An above-average year-over-year increase was recorded also in education, accommodation and food service activities and manufacturing. Compared to the period a year ago, the number of job vacancies fell the most in professional, scientific and technical activities.

More than a half of the vacant posts were available in Harju County (68%) (including 59% in Tallinn), followed by Tartu County (9%) and Ida-Viru County (6%). The rate of job vacancies was the highest in Harju County and the lowest in Saare and Viljandi counties.

The private sector accounted for around 7,800 job vacancies (70%). In the 3rd quarter of 2016, the rate of job vacancies continued to be the highest in foreign private-sector institutions (2.6%) and state organisations (2.4%). The rate of job vacancies was the lowest in Estonian private sector organisations.Diagram: Rate of job vacancies by economic activity, 3rd quarter, 2015–2016

The movement of labour is characterised by labour turnover (the total number of engaged employees and those who have left), which amounted to 94,000 in the 2nd quarter of 2016, meaning there was a 29% increase compared to the previous quarter and a 22% increase compared to the 2nd quarter of 2015. Compared to the 2nd quarter of 2015, the largest increase in labour turnover occurred in professional, scientific and technical activities and in agriculture, forestry and fishing. In the 2nd quarter, both the number of employees hired and the number of employees who left their job were the highest in wholesale and retail trade, manufacturing, and accommodation and food service activities.

See a better graph here