Estonian average salary was 1,221 euros in 2017

According to Statistics Estonia, in 2017, the average monthly gross wages and salaries were 1,221 euros; compared to 2016, the average monthly gross wages and salaries increased 6.5%. The annual average monthly gross wages and salaries increased in almost all economic activities. The average monthly gross wages and salaries were the highest in the 2nd and 4th quarters.

While in 2016, the annual increase in the average monthly gross wages and salaries was 7.6%, the growth slowed down in 2017, dropping close to the level of 2014 and 2015, when the annual increase remained at around 6%.

In 2017, the annual increase in the average monthly gross wages and salaries was the slowest in the 1st quarter, accelerating near the year-end.

Real wages, which take into account the influence of the change in the consumer price index, increased compared to 2016, due to growing consumer prices, slower than the average monthly gross wages and salaries. Compared to 2016, real wages rose by 3%. While in 2016, real wages increased almost as fast as the average monthly gross wages and salaries, the growth in real wages slowed down in 2017.

In 2017, compared to the previous year, irregular bonuses and premiums per employee remained relatively stable, increasing 1.7%. Without irregular bonuses and premiums, the average monthly gross wages and salaries increased 6.7%.

In 2017, the average monthly gross wages and salaries continued to be the highest in information and communication (2,094 euros) and in financial and insurance activities (1,996 euros), and the lowest in other service activities, where the average monthly gross wages and salaries were almost three times smaller.

The year-over-year increase in average monthly gross wages and salaries was the fastest in mining and quarrying (11.1%), information and communication (10.2%) and energy (9.1%). The average monthly gross wages and salaries increased in almost all economic activities, excluding agriculture, forestry and fishing, where the average monthly gross wages and salaries remained close to the level of 2016 (0.4%).

In the public sector, including state and municipal institutions and enterprises, the average monthly gross wages and salaries amounted to 1,265 euros (year-over-year growth 7.9%), and in the private sector, including enterprises owned by Estonian and foreign private entities, to 1,206 euros (year-over-year growth 6.1%).

In 2017, by county, the average monthly gross wages and salaries continued to be the highest in Harju (1,353 euros) and Tartu (1,215 euros) counties and the lowest in Hiiu (883 euros) and Saare (876 euros) counties. The year-over-year growth in monthly gross wages and salaries was the fastest in Rapla, Ida-Viru and Võru counties. The average monthly gross wages and salaries remained relatively constant compared to 2016 in Hiiu, Lääne and Saare counties.

According to the Wages and Salaries Statistics Survey, in 2017, compared to the previous year, the number of employees converted to full-time units increased 4%. The biggest year-over-year increase in the number of employees in full-time units occurred in real estate activities, administrative and support service activities, agriculture, forestry and fishing, and in information and communication. The economic activities that saw a decrease in the number of employees in 2017 include transportation and storage, professional, scientific and technical activities, and public administration and defence; compulsory social security. In 2017, compared to 2016, the number of employees converted to full-time units decreased in state institutions and enterprises (2%) and increased the most in enterprises owned by Estonian private entities (7%).

In 2017, the average hourly gross wages and salaries were 7.40 euros; compared to 2016, the hourly gross wages and salaries increased 7.2%.

In 2017, the average monthly labour costs per employee were 1,648 euros and the hourly labour costs 10.99 euros. Compared to 2016, the average monthly labour costs per employee increased 6.5%.

4th quarter of 2017

The average monthly gross wages and salaries were the highest in the 4th quarter – 1,271 euros, having increased 7.5% compared to the 4th quarter of 2016. The average monthly gross wages and salaries were 1,231 euros in October, 1,251 euros in November and 1,330 euros in December. In the 4th quarter of 2017, the average hourly gross wages and salaries were 7.67 euros, having increased 8.3% compared to the 4th quarter of 2016.

In the 4th quarter of 2017, compared to the 4th quarter of 2016, the average monthly gross wages and salaries increased the most in real estate activities (14.4%), financial and insurance activities (14%) and in public administration and defence; compulsory social security (13.4%). The annual increase in average monthly cross wages and salaries was the slowest in arts, entertainment and recreation (1.8%) and in transportation and storage (2.7%).

In the 4th quarter of 2017, compared to the 4th quarter of 2016, irregular bonuses and premiums increased 11.4% per employee. Irregular bonuses and premiums affected the year-over-year increase in average monthly gross wages and salaries of the 4th quarter by 0.2 percentage points. Without irregular bonuses and premiums, the average monthly gross wages and salaries increased 7.3% compared to the 4th quarter of 2016.Average monthly gross wages and salaries per employee and their change by economic activity, 2016–2017

Statistics Estonia conducts the Wages and Salaries Statistics Survey on the basis of an international methodology since 1992. In 2017, the sample included 12,349 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 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 January 2018. Statistics Estonia published the quarterly summary in 30 working days. For the statistical activity “Wages and salaries”, the main representative 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)
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The labour market would gain from removing the barriers

Given the exceptionally good position of the economy and the increasing demand for labour, the rise in the rate of wage growth to 7.5% can be seen as moderate. The ability to find suitable work and favourable pay conditions have increased the labour supply. Migration statistics show that workers have also been found from outside Estonia. Estimates by companies show though that they are able to offer jobs to substantially more people than are currently in work.

The state could ease the problem of labour shortages by supporting the supply of labour. Although many reforms have already been passed, and a very large share of people of working age are already in the labour market, the time is right to reduce barriers to labour market participation even further. Rules on retirement and pensions should be made flexible for workers more quickly, rather than in a couple of years. Child care options immediately after parental benefits end would help mothers return to the labour market faster. Help could also be given to make returning from abroad as simple and painless as possible. Increased return migration indicates that many of those who earlier moved abroad are thinking of returning to Estonia.

The rise in the average wage has also been driven by some temporary factors. Faster wage growth has been particularly noticeable in public administration and social insurance, which may have been due to bonuses paid for the end of the presidency of the European Union and benefits paid as part of the reform of the administration. These should not affect base wages in the general government sector and so more moderate wage growth may already be expected in the current quarter.

Source: Bank of Estonia

Author: Orsolya Soosaar, Economist at Eesti Pank

Estonian labour force participation rate is 72 pct

According to Statistics Estonia, in 2017, the unemployment rate was 5.8%, the employment rate 67.5% and the labour force participation rate 71.6%. In the 2nd quarter, unemployment increased temporarily, primarily due to an increased number of previously inactive persons entering the labour market. Employment and labour force participation remained high throughout 2017, reaching the highest levels in 20 years. In the 4th quarter, the youth (15–24-year-olds) unemployment rate was very low – 6.2%.

Labour market indicators improved throughout the most of 2017, and, in quarterly comparison, were mostly more positive than the respective indicators of the previous year. Although in Estonia, the total number of working-age persons (15–74-year-olds) is falling, the number of persons active in the labour market (the sum of employed and unemployed persons) increased by 7,000 persons, and was estimated at 699,000. The labour force participation rate increased by 1.2 and the employment rate by 1.9 percentage points. The unemployment rate decreased by 1 percentage point. The number of inactive persons continued to decline. The annual average number of inactive persons was 277,000, which is 13,500 persons less than in 2016. The number of employed persons has increased due to a fall in unemployment as well as an increase in the number of previously inactive persons entering the labour market.

In 2017, the estimated annual average number of unemployed persons was 40,000. The unemployment rate was 5.8%, which is 1 percentage point lower than in 2016. The number of unemployed persons decreased by 6,400, while 13,500 previously inactive persons entered the labour market. The unemployment rate in the 4th quarter was 5.3% and the estimated number of unemployed persons 37,000. This is respectively 1.3 percentage points and 8,000 unemployed persons less than in the 4th quarter of 2016. Based on the indicator for 2017, Estonia rather ranks among the European Union countries with lower unemployment.

The unemployed at the greatest risk of poverty are the long-term unemployed, i.e. those who have been seeking work for more than 12 months. In 2017, there were 1,300 fewer persons who had been unemployed for a long time. Also the number of persons who had been unemployed for a short time and the number of discouraged persons, i.e. persons who had lost hope of finding a job, were smaller.

In 2017, the number of inactive persons in the labour market (students, pensioners, homemakers, etc.) among the 15–74-year-olds amounted to 28%. The number of inactive persons decreased primarily due to an increase in the number of those who were inactive due to ongoing studies, pregnancy, maternity or parental leave, or retirement age. There were on average 1,000 fewer persons inactive due to illness or injury than in 2016. The labour force participation rate for older persons (50–74-year-olds) in 2017 was 60.5%, the employment rate 57% and the unemployment rate 5.2%.

The biggest change in the number of inactive persons occurred in the 2nd quarter of 2017, when the number of inactive persons fell by 17,000 persons compared to the preceding quarter. The number of inactive students in the labour market decreased by 7,200 persons and the number of persons inactive due to illness or injury by 5,700 persons. As a result, the unemployment rate increased temporarily by 1.4 percentage points.

Significant differences in labour market indicators by place of residence, sex and ethnic nationality still exist. In 2017, the highest employment rate was recorded in Harju county (74.2%). The difference with Ida-Viru county, where the lowest employment rate was recorded (53.9%), was over 20 percentage points. In addition to better job opportunities, different age structure also had an impact on the results. In 2017, compared to 2016, the employment rate for both men and women increased, but the rate for men remained 8 percentage points higher than that for women (71.6% and 63.6%, respectively). The unemployment rate for men (6.2%) exceeds the unemployment rate for women by 0.9 percentage points. In 2017, the unemployment rate for Estonians was 4.4% and for non-Estonians 8.8%.

The average number of young people (15–24-year-olds) seeking work in 2017 amounted to 7,000. The annual average labour force participation rate for the young was 45.2% and the unemployment rate 12.1% (in 2016, the respective figures were 42.4% and 13.4%). The unemployment rate is the share of the unemployed in the persons active in the labour market, i.e. in those who work or are seeking work. Compared to the 4th quarter of 2016, the number of unemployed young people and that of inactive persons fell at the end of the year. The decrease in the number of inactive persons is partly due to a decrease in the total number of youngsters. The youth unemployment rate dropped to 6.2%, which is an extremely low level for that age group (in the 4th quarter of 2016, it stood at 12.7%). This is the lowest youth unemployment rate in 20 years, i.e. even lower than in the 4th quarter of 2007.

The labour force participation rate for 20–64-year-olds – one of the indicators in the Europe 2020 strategy, according to which, the aim of Estonia is 76% – was 78.5% in 2017. The target level for Estonia was reached already in 2015.

Employment rate and unemployment rate by age group, 2008–2017

The unemployment rate is the share of the unemployed in the labour force (the sum of employed and unemployed persons). The employment rate is the share of the employed in the working-age population (aged 15–74). The labour force participation rate shows the share of the labour force in the population aged 15–74. The employment gap is the difference between employment rates in percentage points. 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. In Estonia, the main representative of public interest is the Ministry of Social Affairs, commissioned by whom Statistics Estonia collects and analyses the data necessary for conducting the statistical activity.

Source: Statistics Estonia

The labour market remains favourable for employees

  • The labour market favoured employees very much in the fourth quarter of 2017
  • The unemployment rate was 5.3%
  • Labour shortages have deepened for companies
  • Companies that cannot improve productivity or raise wages are losing competitiveness as employers

The Estonian labour force survey shows that the number of people in employment was 4.6% higher in the fourth quarter of 2017 than a year earlier and the number of employees was 4% higher. This is probably not due to any sharp acceleration in the growth in employment at the end of the year as the Tax and Customs Board reports that the number receiving a declared wage was up by 1.3% over the year in the same quarter. The Labour Force Survey estimates can be quite volatile from quarter to quarter. The full-year data in the Labour Force Survey found the number of waged employees grew 1.3%, which is about the same as in the data from the Tax and Customs Board, where it was 1.1%.

Last year was a good year for the labour market in Estonia. The participation of working age people in the labour market increased to 71.6%, while the unemployment rate fell to 5.8%. Unemployment was notably higher in the European Union on average at 7.7% than in Estonia. The share of people of working age participating in the labour market was smaller in the European Union at 65% than it was in Estonia.

Estonian employers are still concerned about labour shortages. The share of companies that consider labour shortages to be a factor impeding growth in production increased in the fourth quarter. At the same time companies were more optimistic about future increases in employment than they were in previous years. Labour shortages and higher consumer price inflation boosted the growth in wages in the second half of the year as the average wage declared to the Tax and Customs Board was up 8.5% in the fourth quarter.

Labour shortages are a consequence of the favourable position of the economic cycle, and this is amplified by the decline in the working age population. Employment has climbed in the decade since the major economic crisis and has added more than 90,000 people from its low point. If the external environment remains stable, the economy will probably adjust smoothly to the shortage of labour. Employees will leave jobs with low value added and low wages and it will not be possible to find new employees to replace them. Companies that cannot improve productivity or raise wages will disappear. This will be partly offset by Estonia becoming a more attractive destination for immigrants and returning emigrants, and by people’s health letting them remain longer in the labour market.

Author: Orsolya Soosaar, Economist at Eesti Pank

Source: Bank of Estonia

Employment rate at highest for 20 years

According to Statistics Estonia, in the 3rd quarter of 2017, the employment rate was 68.3%, the unemployment rate 5.2% and the labour force participation rate 72%. Compared to the 3rd quarter of 2016, the unemployment rate fell and the employment rate reached its highest level for 20 years.

In the 2nd quarter of 2017, the labour force participation rate was at its highest in recent years, mainly due to an increase in the number of unemployed persons. In the 3rd quarter, the labour force participation rate remained on the same level, but typically for summer, unemployment decreased and employment increased, resulting in the highest employment rate for 20 years. Compared to the 3rd quarter of 2016, the number of employed persons increased by 13,000 persons.

In the most active age group in the labour market, i.e. among the 25–54-year-olds, 90% of men and 79% of women were employed. Among the 55–64-year-olds, men and women were equally active in the labour market (labour force participation rate 72%), but the employment rate was higher among women. In this age group, 8% of men capable of working and willing to work were unemployed.

Compared to the 3rd quarter of 2016, the number of unemployed persons dropped by 16,000 persons and the unemployment rate by 2.3 percentage points. In the 3rd quarter of 2017, the unemployment rate for Estonians was 4.4% and for non-Estonians, 7%.

The number of inactive persons continues to decline. Compared to the 3rd quarter of 2016, there were less of those who were inactive due to parental leave or caring for children or other family members, but more of those who were inactive because of ongoing studies. Compared to the same period of the previous year, there were also more of those who were inactive due to illness or disability, but compared to the 2nd quarter of 2017, the number of persons inactive for this reason remained unchanged.Employment rate by sex and age group, 3rd quarter, 2013–2017

The employment rate is the share of the employed in the working-age population (aged 15–74) and the unemployment rate is the share of the unemployed in the labour force (the sum of employed and unemployed persons). The labour force participation rate shows the share of the labour force in the population aged 15–74.

The estimates are based on the data of the Estonian 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. In Estonia, the main representative of public interest is the Ministry of Social Affairs, commissioned by whom Statistics Estonia collects and analyses the data necessary for conducting the statistical activity.

Source: Statistics Estonia

Demand for labour remained strong in 2Q

  • The labour market indicators remained good in the second quarter
  • The employment expectations of companies improved and they felt labour shortages more sharply
  • The unemployment rate rose to 7%,
  • Growth in productivity accelerated

The Labour Force Survey shows a fall of 0.5% in the number of people employed in Estonia in the second quarter of 2017 and a rise of 0.5 percentage point in the unemployment rate to 7%. The change is not large compared to typical statistical variation, suggesting that conditions remained good in the labour market in the second quarter.

The share of people of working age who were in employment was 66.9%, and most data sources show strong demand for labour. Registry data from the Tax and Customs Board show an increase of 0.9% in the number of people declared as receiving a wage in the second quarter, driven by the private sector. The confidence survey of the Estonian Institute of Economic Research shows that companies have improved their employment expectations, and the share of the companies questioned considering labour shortages to be a factor limiting production increased. Employment expectations have particularly increased in the construction sector, where the restriction of labour shortages is also particularly felt. Households also became more optimistic and fears of increased unemployment have declined sharply during 2017.

Statistics Estonia puts the unemployment rate at 7%, which is 0.5 percentage point higher than in the second quarter of last year. Although health is keeping about the same number of people out of the labour market as a year ago, the rise in the unemployment rate probably reflects the effect of the work ability reform. Data from Eesti Töötukassa, the Estonian unemployment insurance fund, show that the number of registered unemployed with reduced ability to work approached 10,000 and a further rise in this number is expected. The data indicate that some 7% of people with reduced ability to work found work each month in 2017. The rate of finding jobs was, as expected, somewhat lower than the rate of 12% for those with full ability to work. Unfortunately around 7% of those registered with Töötukassa leave the register of their own volition or because they cannot meet its conditions. As this also means losing work ability benefit, the reasons behind this and how people are subsequently able to cope need to be analysed.

Labour productivity has now been growing for a year and the increase picked up even further in the second quarter according to data on industrial output and exports. More efficient organisation of work allows companies to improve their profitability even if wages continue to rise as quickly as they have been doing.

Source: Bank of Estonia

Author: Orsolya Soosaar, Economist at Eesti Pank

Corporate profit grew faster than wages in the second quarter

  • Growth in wages picked up and was close to the average rate of 2016
  • Real wages  grew more slowly because of inflation
  • Wage growth is being boosted by strong demand for labour

The average gross monthly wage was up 6.8% in the second quarter of 2017 on the same quarter of the previous year. The growth rate was faster than the 5.7% seen in the first quarter and was close to the average rate seen in 2016. Faster inflation has noticeably slowed the growth in real wages, meaning that the purchasing power of those earning the average wage is growing more slowly than previously.

Despite the rapid rise in wages, corporate profit also increased. Several factors have contributed to this, including increased foreign demand, a recovery in the oil shale sector affecting mainly mining and electrical energy production, and an increase in construction activities because of large investments in infrastructure. Wages are less volatile over the business cycle than profit is, and when the economy is strengthening profits increase faster than wages do to make up for earlier declines. For labour costs to approach the share of value added seen before the economic crisis or the European Union average, growth in profits would have to exceed that in wages for some time yet.

In future the growth in wages may be accelerated even further by strong demand for labour, which is normally seen when the economy is growing rapidly. Sentiment surveys by the Estonian Institute of Economic Research show that the share of companies expecting employment to increase has grown and a shortage of labour is being cited more frequently as a factor limiting production. The danger of overheating is particularly apparent in construction, where wage growth in the second quarter was still lower than the average for the economy as a whole. It has probably been restrained partly by the employment of labour from abroad.

Source: Bank of Estonia

Author: Orsolya Soosaar, Economist at Eesti Pank