Fall in unemployment to pre-crisis levels leads to general wage rally

Sokos Hotel Viru
Sokos Hotel Viru Source: Merilin Pärli/ERR

The unemployment rate fell to 5.7 percent in the third quarter 2021 (Q3 2021), the lowest level this year. The last time the figure was so low was before the start of the coronavirus pandemic, when the unemployment rate was 5.1 percent. This is, however, creating overall wage pressure, as it has proven difficult to find staff in most sectors.

The pandemic period brought in more than twenty thousand unemployed, but recent quarters show a steady, successive decline. Thus, the number of unemployed decreased by 7,400 to 39,900 in the past three months.

There is still some room to achieve the pre-pandemic level, where the unemployment rate fluctuated between 4 and 5 percent.
There are most unemployed people in tourism and energy.

"When we usually complain about life being worse everywhere outside of Tallinn, then now the employment rate in South Estonia has actually reached a better level than it was before the crisis. It's even lower in North Estonia due to the problems of the mining industry in Estonia," SEB bank analyst Mihkel Nestor said.

He predicts that pre-pandemic unemployment will recover next year.

"Next year will definitely be quite difficult in the labor market from the point of view of employers. Today, this demand is very high and people want to be recruited in all sectors.

Wage growth is expected in all sectors. Aggressive recruitment campaigns to win over employees from other companies can already be seen, especially in lower-wage service sectors.

Viru Hotel would immediately employ more than ten people, but the tourism sector is currently unattractive to employees, as possible new restrictions could leave them unemployed again.

"Spring 2021 was basically a lockdown situation in our field, we only had the main team at work and now that demand started to grow a bit in the summer, we gradually hired people and in the autumn we had a very good forecast of how demand would recover and then we were struggling to find employees," Sari Sopanen, CEO of Sokos Hotel Viru said.

The tourism sector mainly competes with trade, where the salaries are similar.

"I think our salaries are a little bit higher than theirs, except maybe now those who have entered the market and are making great promises. I'm just wondering if they will keep their promise to pay the average salary in Estonia, which seems a bit unrealistic," Sopanen said, referring to Lidl.

The economic restructuring and greater automation predicted at the beginning of the pandemic have not taken place in Estonia, especially in the industrial sector as expected.


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Editor: Roberta Vaino

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