There were 9,500 job vacancies in Estonia in Q2

According to Statistics Estonia, there were about 9,500 job vacancies in the enterprises, institutions and organisations of Estonia in the 2nd quarter of 2016. The previous time when the number job vacancies exceeded 9,000 was in 2008. The number of job vacancies increased by 15% compared to the previous quarter and by 13% compared to the 2nd quarter of 2015.

The rate of job vacancies, i.e. the share of job vacancies in the total number of jobs, was 1.7% in the 2nd quarter of 2016, being 0.2 percentage points bigger than in the previous quarter and in the 2nd quarter of 2015.

The rate of job vacancies was the highest in accommodation and food service activities (3.7%), administrative and support service activities (3.5%) and information and communication (3.3%); and the lowest in agriculture, forestry and fishing (0.3%), water supply (0.7%), construction (0.8%) and real estate activities (0.8%).

The total number of posts and the number of vacant posts continued to be the highest in manufacturing and wholesale and retail trade. Compared to the 2nd quarter of 2015, the number of job vacancies grew the most in real estate activities, accommodation and food service activities and in electricity, gas, stream and air conditioning supply. Year-over-year, the number of job vacancies dropped the most in agriculture, forestry and fishing, mining and quarrying and other service activities.

70% of the vacant posts were in Harju county (including Tallinn), followed by Tartu county (9%) and Ida-Viru county (5%). The rate of job vacancies was still the highest in Harju county (2.1%) and the lowest in Viljandi (0.7%), Hiiu (0.8%) and Rapla counties (0.8%).

7,200 job vacancies (76%) were in the private sector and 2,300 (24%) in the public sector. In the 2nd quarter of 2016, the rate of job vacancies was the highest in foreign private sector institutions (2.5%) and state institutions (2.1%) and the lowest in Estonian private sector organisations (1.5%) and local governments (1.1%).Diagram: Rate of job vacancies by economic activity, 2nd quarter, 2015–2016

The movement of labour is characterised by labour turnover (the total of engaged employees and those who have left), which amounted to 73,000 in the 1st quarter of 2016, denoting an 8% increase compared to the previous quarter and a 19% increase compared to the 1st quarter of 2015. Compared to the 1st quarter of 2015, the largest increase in labour turnover occurred in mining and quarrying, water supply, agriculture, forestry and fishing, and information and communication.

The data are based on the job vacancies and labour turnover survey conducted by Statistics Estonia since 2005. In 2016, the sample includes 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 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.

Source: Statistics Estonia
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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

Estonian average salary is 1,163 euros or 6.91 euros per hour

According to Statistics Estonia, in the 2nd quarter of 2016, the average monthly gross wages and salaries were 1,163 euros and the average hourly gross wages and salaries were 6.91 euros. Compared to the 2nd quarter of 2015, the average monthly gross wages and salaries increased by 7.6% and the average hourly gross wages and salaries by 4.5%. In the 2nd quarter, the annual growth of average monthly gross wages and salaries was slightly slower than in the 1st quarter of 2016.

The average monthly gross wages and salaries were 1,141 euros in April, 1,129 euros in May and 1,220 euros in June. Higher monthly gross wages and salaries in June were mainly due to an increase in irregular bonuses and premiums and holiday leave pay.

Irregular bonuses and premiums decreased 8.3% per employee compared to the 1st quarter of 2016 but increased 15.6% per employee compared to the 2nd quarter of 2015. Irregular bonuses and premiums affected the increase in average gross monthly wages and salaries by 0.3 percentage points. Without irregular bonuses and premiums, the average monthly gross wages and salaries increased year-over-year by 7.3% in the 2nd quarter, with annual growth remaining on the same level as in the 1st quarter (7.2%).

Real wages, which take into account the influence of the change in the consumer price index, increased faster (8.3%) than the average monthly gross wages and salaries in the 2nd quarter of 2016 compared to the 2nd quarter of 2015 due to the continued decrease in consumer prices. Compared to the same quarter of the previous year, real wages have been increasing since the second half of 2011.

The average monthly gross wages and salaries were the highest in information and communication and financial and insurance activities. Compared to the 2nd quarter of 2015, the average gross monthly and hourly wages and salaries increased in almost all economic activities (except mining and quarrying). The largest increase of monthly and hourly wages and salaries occurred in real estate activities (23.5%). A higher than average annual growth was also recorded in administrative and support service activities (13.5%), accommodation and food service activities (12.6) and in information and communication (11.5%). The annual growth of monthly gross wages and salaries was the fastest in the Estonian private sector (9.4%) and the lowest in state institutions (5.5%).

In the 2nd quarter of 2016, by county, the average monthly gross wages and salaries were the highest in Harju, Tartu, Viljandi and Lääne counties and the lowest in Põlva, Ida-Viru and Valga counties. The annual growth of average monthly gross wages and salaries was the fastest in Tartu and Pärnu counties and the slowest in Ida-Viru county.

According to the Wages and Salaries Statistics Survey, the number of employees converted to full-time units decreased by 1.8% compared to the 1st quarter of 2016 and by 1.5% compared to the 2nd quarter of 2015. The bigger than average year-over-year decrease in the number of employees in full-time units occurred in mining and quarrying and in other service activities, while the largest year-over-year increase occurred in financial and insurance activities and in professional, scientific and technical activities.

In the 2nd quarter of 2016, the average monthly labour costs per employee were 1,568 euros and the hourly labour costs were 10.32 euros. Compared to the 2nd quarter of 2015, the average monthly labour costs per employee increased 7.5%.

Average monthly labour costs per employee and monthly gross wages and salaries and net wages and salaries, 1st quarter 2014 – 2nd quarter 2016 (euros)

Read more from Statistics Estonia

Thousands of new IT specialists needed in Estonia

The Estonian IT business sector suffers from a lack of qualified personnel, yet the number of applications for IT courses in higher education has remained more or less the same. To make matters worse, only half of those taking up IT studies complete their degree.

The Tallinn University of Technology even changed its conditions of application to more carefully select students actually able to finish. Where a year ago all those were admitted who met minimum requirements, the conditions are now a lot stricter, ETV’s “Aktuaalne Kaamera” newscast reported.

Read more from ERR News

Estonian labour market improved in the second quarter

  • Employment improved despite slow economic growth
  • Registered unemployment increased in Ida-Virumaa
  • The work ability reform is expected to boost registered unemployment and the labour force participation rate

Figures from Statistics Estonia show unemployment was 6.5% in the second quarter of 2016 and employment was 2.6% higher than a year earlier. Seasonally adjusted employment also grew quarter-on-quarter. As the number of 15-74-year-old people who participated in the labour market was almost 2% higher than a year ago, the labour force in the economy grew even though the population keeps declining at a slow but steady pace.

Not all data sources indicate an increase in employment, though. Compared to the figures from the labour force survey, data from the Tax and Customs Board on the number of people receiving wages were slightly more pessimistic, as this number fell by 0.4% in the second quarter of 2016 compared to the same time a year ago. This gap may stem from different definitions of the figures (e.g. the fact that data from the Tax and Customs Board do not include the shadow economy), but also indicate that the labour force survey overestimates employment growth.

According to the data published today, the survey-based number of unemployed, which covers both registered and unregistered unemployment, did not change compared to last year. However, data from Töötukassa, the Estonian unemployment insurance fund, show that the number of registered unemployed increased by 4.9%, year-on-year. Growth was the biggest in Ida-Virumaa, with 21% more registered unemployed in the second quarter than a year ago. This was probably caused by redundancies in the oil shale and energy sector, where the output fell as a result of low energy prices. 646 or 43% more redundancy benefits were paid out in the second quarter of 2016 compared to the same time in 2015.

The number of disabled people among the registered unemployed has been climbing for some time now. It can be expected that the work ability reform launched this July will lead to an increasing number of people with reduced capacity for work registering as unemployed. This means that the growth of registered unemployment will accelerate and the share of people active in the labour market will rise even further.

Source: Bank of Estonia

Author: Orsolya Soosaar. economist at Eesti Pank

Employment growth remained surprisingly strong

The number of inactive decreased by 19,000 people, over the year, in the second quarter of this year. In addition to tight labour market, inactivity declined due to state reforms – an increase in the retirement age and the rearrangement of the social benefits system of the people with disabilities, who are now entitled to certain benefits only if they work or actively look for work. At the end of June, there were 5,000 people with reduced working ability looking for a job through the Estonian Unemployment Insurance Fund.

Employment growth remained surprisingly strong (+2.6%, after +1.1% in the first quarter, year-on-year). Estonian enterprises have handled the combination of low export demand, falling output prices and a strong wage growth relatively well, at least so far. One of the reasons behind the still rapid employment growth is the labour intensive part of the economy, i.e., the services sector, where 2/3 of the employees work, and which has enjoyed strong sales growth due to a rapid growth in consumption. Employment decreased in the mining and energy sectors where output volumes have decreased substantially due to low output prices. Employment growth should continue in the second half of the year as enterprises plan to raise the number of employees in industry as well as in the services sector.

The number of unemployed stayed at the same level as last year and unemployment rate was 6.5% in the second quarter, the same as in the previous quarter and in the second quarter of 2015. Unemployment rate might have reached its bottom (excluding seasonal decline in the third quarter).

Source: Swedbank

Estonian wage pressures have not eased

  • An improved external environment and higher productivity are boosting economic growth
  • Rising food and energy prices will put an end in the second half of the year to the deflation that has been present for two years
  • Wage pressures have not eased, and growth in the average wage remaining close to 5% will force companies to make their production more efficient or exit the market

The Estonian economy will grow faster this year and in the next two as the external environment improves and productivity increases. Demand from trading partners has grown in the past six months at the rate that was forecast, and the data indicate that growth momentum will be maintained. In the short term growth will be boosted by increased productivity per employee, as the number of hours actually worked by the full-time employed has been temporarily reduced in expectation of improved demand to come. In the longer term it is only investment and employee development that can ensure higher productivity, and these should be supported by economic policies that favour growth and by increased competitiveness at both the state and company levels.

Increased investment alone is not enough to improve the growth capacity of the economy. The ratio of investment to GDP in Estonia is one of the highest in Europe, but the structure of investment should also be considered, and how efficiently the fixed assets acquired are used. The share of investment going into research and development in Estonia is one of the smallest in the European Union and so support for innovation is not strong. At the same time, the utilisation rate of production resources has been below the European Union average, which means that a relatively large part of the fixed assets acquired and the spending on them has been ineffective and has not supported growth.

The Estonian economy will become larger in the middle of this year than at its pre-crisis peak. The state of the economy is quite different from what it was during the boom some ten years ago, as corporate production capacity which is sustainable in the long-term is around 10% larger than the level of that time, and the economy is close to balance. Growth may still be forced slower by risks stemming from the external environment, the most important of which are the unsustainability of the growth in neighbouring countries that is founded on consumption; the migrant crisis, which is yet to be resolved; Brexit; volatility in commodities prices; complex geopolitical circumstances; and the bursting of a bubble in Swedish asset prices.

An accommodative monetary policy and access to funding aid growth in the economy, though the limited amount of labour available poses a problem. The central question for economic development is not how the supply of labour can be increased but how the actual available labour can be better used than before now. Sectors with low value added are particularly feeling the labour shortages, as their low average wages are hurting their competitiveness in the labour market.

Companies with low productivity and low wages exiting the market is a part of economic development. The movement of workers to jobs with higher productivity and higher wages will leave the structure of the economy more based on value added and will increase the incomes of residents. At the same time the changes in the structure of the economy should be in line with the redeployment of workers. Excessive pressure on companies with low productivity, one source of which could be steep rises in the minimum wage, could raise unemployment and harm the long-term outlook for growth.

Wage pressure has not eased and labour costs increased further at the start of this year at the expense of profits. Profits will stop declining when labour productivity increases. This will be aided by the flexible labour market, which has an institutional architecture that lets it adapt relatively easily compared to those in other countries. Collective agreements play only a small role beyond setting minimum wages and employers can decide directly about their wage costs. Even so it is possible that companies have been holding on to employees and raising wages because of overly optimistic expectations of growth in demand, and so wage growth could slow sharply.

Rising food and energy prices will put an end in the second half of the year to the deflation that has been present for two years, but for the year as a whole consumer prices will be at the same level as they were last year. Inflation will remain between 2% and 3% in the next two years and a large part of the rise in prices will come from tax rises, as excise increases on fuel, alcohol and tobacco. Higher inflation will restrain the rise in real household incomes, and that will then hold back growth in consumption over the next two years.

The financial situation of the Estonian general government is good and the budget has remained in surplus in recent years. However, the surplus has not been planned but has resulted from tax revenues being larger than expected or planned investment being postponed. Eesti Pank forecasts the budget position will be close to balance in the years ahead too, but there are major upside and downside risks. The structural balance rule in the State Budget Act ensures the long-term stability of state financing, but in order that companies and households not be faced with uncertainty about the future due to the government needing an unplanned additional source of funds, the government should set the target of keeping the budget in structural surplus or should allow more flexibility in its spending.

In the new budget strategy the government has put smoothing the economic cycle to the forefront and achieving nominal balance has been postponed. However, it will be harder in future to achieve balance. The budget was in surplus in recent years even though government wage costs increased rapidly and social benefit payouts increased strongly. This was possible because of a fall in capital expenditure and a tax-rich economic environment. Wage growth will slow in Estonia in the years to come and therefore the tax burden will decline, while the government is planning to increase investment, meaning pressure will increase to limit costs so the budget can stay in balance.

Source: Bank of Estonia