Pay Raises Taking Larger Share of Profits Despite Weak Growth (4)

Ruta Arumäe, an economic analyst Photo: Postimees/Scanpix
9/3/2013 2:59 PM
Category: Economy

SEB analyst Ruta Arumäe says rapid salary increases are partly to blame for declining business profits.

She was commenting in light of a Statistics Estonia report released today that found that the total profits of Estonian businesses declined by 5 percent year-on-year in the second quarter.

At the same time, it was reported on Friday that salaries had increased by 8.5 percent, to 976 euros before taxes. The contrast comes amid stagnating productivity and meager economic growth, of just barely over 1 percent in the first half of the year.

It was the third quarter in a row that growth of profits and growth of added value slowed down, Arumäe told uudised.err.ee.

"Private investments have decreased and that shows that in the near future there is significantly less planned expansion; the same goes for job creation,“ Arumäe said.

"At the same time, the salary fund has continued at the same pace, 9 percent. The next logical step is the reduction of the growth of the salary fund, either through tightening salary growth or reducing employment," she said.

Employers offering better salaries, study finds

In one salary poll, conducted by the job seeking website CV Keskus, the average salary offer in the second quarter was 963 euros, a full 24 percent higher than the year before, reported uudised.err.ee.

"Both the significant rise in gross salaries in the second quarter and the nearly tripled rate of growth in the average job offer clearly show that a serious pay rally is under way,“ said Paavo Heil, who runs the website.

"Indeed, in the last half of a year, we have noticed that much more is being invested in finding employees and making the company more attractive than previously,“ he said.


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