In a commentary on the latest data from the Statistics Department on wages, Orsolya Soosaar, an economist at the Bank of Estonia, noted that against the backdrop of a weak economic environment and falling prices, wage growth slowed in the second quarter, but real wages still increased, meaning that the purchasing power of the population increased. /nginx/o/2023/05/03/15296071t1hc4a1.jpg)
Salary. Photo illustrative. Photo: Irina Shatilova/Shutterstock BNS August 26, 2024, 14:07
In a commentary on the latest data from the Statistics Department on wages, Orsolya Soosaar, an economist at the Bank of Estonia, noted that against the backdrop of a weak economic environment and falling prices, wage growth slowed in the second quarter, but real wages still increased, meaning that the purchasing power of the population increased.
The central bank's press service reported this to BNS. "The unemployment rate in the second quarter was about a percentage point higher than a year earlier, but employment was also higher. This was possible due to the record high level of activity in the labor market. The increase in employment was entirely due to the increase in the number of people employed in business, while the number of wage-earning employees decreased," the economist explained in a press release.
According to Statistics Estonia, the average monthly gross salary in the second quarter of 2024 was 2,007 euros, which is 7.2 percent more than in the same period last year. The median salary in the second quarter of this year was 1,641 euros, and in the same period in 2023 – 1,524 euros.
Soosaar noted that public sector wage growth was slightly above average at 7.4%, driven by health and education, while in the private sector it was 6.9%. Wage growth was weaker in most sectors, both private and public. However, the slowdown in wage growth in the public sector was much sharper than in the private sector.
"For the first time, the average wage exceeded the 2,000 euro mark, reaching a level of 2,007 euros. Largely due to the increase in the minimum wage, lower wages grew faster than higher wages, which helped to reduce wage inequality somewhat. However, despite the recession and the slowdown in wage growth, real wages still increased, as wage growth outpaced price growth," she added.
According to Soosaar, the unemployment rate was 7.6% in the second quarter of this year, up almost a percentage point from last year due to the impact of the recession. Since the employment rate was also higher than the year before, the increase in unemployment was due to people being exceptionally active in the labour market.
"A cautious assessment of the situation on the labour market is that the number of wage-earning employees has been decreasing over the last year, and in the second quarter the number of employed people decreased by almost 9,000 compared to the previous year. The data from the Tax and Customs Board also show a decrease in the number of declared employees. These changes may reflect an increase in entrepreneurship, which is positive, but they may also mean greater uncertainty about people's income," Soosaar believes.
However, given the scale of the economic downturn in recent years, the labour market situation has been better than expected, she said, with labour market indicators becoming more stable as the recession has slowed.
"For example, compared to the beginning of the year, the unemployment rate has decreased slightly, and the number of employees and vacancies indirectly provided by the Unemployment Insurance Fund has remained approximately the same. According to a survey by the Institute of Economic Research, employers in the manufacturing sector have become more optimistic about the future development of employment. However, it will most likely take some time for the unemployment rate to decrease, as many employers have retained their staff during periods of weak demand, and if orders increase, there will be no need to hire new employees in the same volume for now," the economist at the Bank of Estonia predicts.
