Data from Statistics Estonia released on Friday showed, in the second quarter of 2021, the average monthly gross wages and salaries were €1,538, which is 7.3 percent higher than the year before.

"The increase in working hours per employee contributed to the acceleration of wage growth and wages grew faster in private companies than in the public sector. Taking into account seasonal factors, the average salary increased by 0.5 percent compared to the previous quarter," Soosaar said .

She said salary growth would have been even faster if the share of employees by different fields of activity had remained the same as last year. "The recovery in the number of jobs in lower-than-average-wage activities, such as accommodation and food service activities, is somewhat holding back the increase in average wages," she said.

"Economic growth has accelerated this year, but companies have recruited fewer employees than expected for this. Thus, labor productivity has increased, which provides an opportunity to raise wages," the economist said.

"Although restrictions to stop the spread of the virus were still in place in the second quarter, companies had become more optimistic about further employment growth in anticipation of the lifting of restrictions and the summer virus low. The share of companies that perceive labor shortages as a significant problem also increased," she added.

Despite the larger number of jobseekers in the labor market, the perception of labor shortage increases wage pressure, Soosaar said.

Swedbank: Wage growth in Estonia fueled by labor shortages

Swedbank senior economist Liis Elmik said a shortage of specialists is the reason behind accelerated wage growth in the second quarter.

"The increase in the average salary corresponded exactly to Swedbank's forecast. Wage growth accelerated from 5 percent in the first quarter to 7 percent in the second quarter. Wage growth picked up, as a year ago the average wage rose by only 1 percent, and without the wage compensation of the Unemployment Insurance Fund, the wage level would have fallen," Elmik said.

Elmik said the average gross salary has increased by 8 percent in two years. While wages and salaries in accommodation, catering and trade were still 1-2 percent lower in the second quarter than two years ago, then 15-16 percent more was earned in IT and medicine than two years ago.

"About 30 percent of entrepreneurs see labor shortages as their biggest obstacle to development. According to entrepreneurs, labor shortages are at pre-crisis levels in industry, services and construction. According to surveys, the fear of unemployment among employees has also decreased and reached the pre-crisis level," the economist said.

Although unemployment is still relatively high, Elmik said that it is difficult for employers to find suitable specialists. "Left without work during the coronavirus crisis were many tourism and transport sector employees who cannot immediately become programmers, doctors or teachers," she added.

Swedbank estimates that the average gross salary will increase by 6 percent this year. Next year, the average gross salary will rise slightly less, by more than 5 percent.

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