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Nordea: Wage pressure in Estonia remains extensive

Nordea Estonia chief economist Tõnu Palm.
Nordea Estonia chief economist Tõnu Palm. Source: (Postimees/Scanpix)

Tõnu Palm, chief economist at Nordea Estonia, said that the Estonian labor market remains strong with the support of a growing economy and the improved outlook of export orders while wage pressure will remain extensive in the next few years.

"In the future, we will compete for workforce more and more not only between domestic sectors of the economy, but competition today is expanding across state borders," Palm told BNS.

The need for labor in the eurozone is at a stable increase. Palm said that indicators of the Estonian labor market in the first quarter showed first and foremost that labor demand has become more broad-based. "The increase in employment was stronger than expected, but here we need to look at a longer trend as opposed to the quarter," Palm noted. According to the workforce survey, the average yearly increase in employment over the last two quarters reached nearly one percent. The speed of the increase in the framework of the aging of the population will decrease if foreign workforce is not utilized more actively.

"The growth of labor demand indicators has accelerated in the past few months both in domestic market and exporting sectors," Palm said. "On the positive side, I would highlight the growth outlook of the manufacturing industry in Europe. With the addition of new orders, the need for investments will increase, which will reach the labor market in the future."

The labor force participation rate remains on the rise in Estonia and is influenced, in addition to the improved economic environment, by the addition of working-age people with reduced capacity for work to the labor market as well. Palm said that the reform under the leadership of the Estonian Unemployment Insurance Fund (EUIF) is accelerating significantly. "Nearly 2,000 of the registered unemployed with reduced capacity for work have found work within the first four months of this year," he highlighted.

"Success definitely doesn't come easy in this sector," he noted. "The supply of qualified workforce in growing exporting sectors is the Achilles' heel of the economy."

Editor: Aili Vahtla

Source: BNS

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