Rapid wage growth over recent years has put placed exporting companies in an especially difficult situation, Luminor's chief economist Lenno Uusküla believes.
Data from Statistics Estonia the average gross monthly salary was €1,812 in the third quarter of 2023, while the median salary was €1,500 euros.
The average salary increased by 10.4 percent per year and the median salary by 11.2 percent.
"Businesses have never paid such high wages, and exporters are clearly feeling the pressure. Wage growth has not been so high in our trading partners, which means that our costs are rising faster, our ability to compete on price is declining very rapidly," said Uusküla.
However, wage growth has also slowed over the last few months.
"We are indeed seeing year-on-year wage growth of over 10 percent. If we look at how this increase has been spread over the year, most of it happened almost a year ago. In the last quarter, that wage increase was quite small," Uusküla said.
Entrepreneurs can also feel the slowdown, said Mait Palts, head of the Estonian Chamber of Commerce and Industry.
"This has been heard from various sectors throughout this year. Companies in the IT sector today, for example, are also saying that the situation has normalized, that there are no more twice-yearly pay rises and rallies as there have been in recent years," he said.
Heiki Einpaul, head of Hekotek, which produces woodworking equipment, confirmed the trend.
"Estonians are coming home [from Finland] and it is clear that unemployment is rising. That is a perfectly clear argument and sensible workers can understand that argument. Those who cannot can be shown the argument and the wage pressure today is, yes, rather decreasing," he said.
At the same time, the wage rally of recent years has still been below inflation.
"The purchasing power of wages is the same as it was four years ago. From its peak in 2021, the purchasing power of wages has now fallen by 6 percent, while in the meantime it was worse. It is now recovering a little, but still not the purchasing power it was a while ago. So the pressure on businesses to pay higher wages is still very strong," said Uusküla.
Editor: Barbara Oja, Helen Wright
Source: Aktuaalne kaamera