The document summarizes wage growth in Estonia in the first quarter of 2012. Average monthly gross wages increased 6.9% year-over-year, partially due to a 20% rise in irregular bonuses. Wage growth was strongest in the energy, construction, and manufacturing sectors. Real wage growth accelerated to 2.4% due to slower price growth. The chief economist expects real wages to grow 1.8% on average for the year, with productivity and cost control dampening wage growth but shortages in some sectors continuing to push wages up.

1. Flash comment: Estonia
Economic commentary by Economic Research Department May 25, 2012
Average real wage up for the third quarter in a row
Monthly gross wage According to data released by Statistics Estonia, average monthly
25% gross wage increased by 6.9% yoy in the first quarter. Wage
growth was partially impacted by 20% higher irregular bonuses and
20% premiums, which added 0.5pp to the overall growth.
15% The strongest wage growth was reported in the energy supply and
construction activities (both 13% yoy). These sectors were
10%
probably affected by growing employment as well as shortage of
5% qualified labour, which can push wage growth up, even above
productivity growth. Wage growth was also strong in the largest
0% employment sector, manufacturing, by 8.8% yoy. The only sector to
2006 2007 2008 2009 2010 2011 2012 see wages decline was transportation and storage (by -0.6%).
-5%
Real growth of gross wages accelerated to 2.4% yoy from 2.1%
-10%
seen in the fourth quarter, impacted also by slower price growth.
annual grow th annual real grow th
Historically the strongest growth rates have been reported in the
first quarter with slower growth in the following quarters; hence, we
expect real gross wage to grow 1.8% on average this year. The
negative impact to wage growth stems from slower growth of
productivity and companies’ wish to maintain cost effectiveness.
However, despite these dampening factors, wage growth will also
be impacted by the labour market situation – if there is a shortage
of workers with necessary skills, the wage growth in these sectors
tends to accelerate irrespective of the productivity growth. Which of
these factors will dominate the future wage developments, differs
among sectors. In our opinion the shortage of labour is
continuously a significant problem in the energy supply,
manufacturing of electronics, construction and ITC activities as well
as a growing problem in the health care services sector.
Annika Paabut
Chief Economist
+ 372 6 135 440
annika.paabut@swedbank.ee
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