Estonian private sector unhappy with public sector wage hikes

  • 2007-10-03
  • Staff and wire reports
TALLINN - An Estonian employers union lashed out at the steep rise in public servants' salaries that has been written into the 2008 budget, saying it was a breach of the ruling coalition's agreement and that high-salaried state jobs were putting the squeeze on the private sector.
The extended board of the Confederation of Estonian Employers found that that the pay rise reflected in next year's budget bill was unjustifiably high in some spheres, and as a result small and medium size companies would suffer, a spokesman for the confederation said.

"The document [2008 budget] forecasts an average pay raise of 20 percent for public servants… which is double the gains in private sector productivity," said Enn Veskimagi, the confederation's chairman.
The confederation said it supported the government's plan to raise the salaries of teachers and rescue workers since they have been at the bottom of the social ladder for years, but a mass pay hike for public servants is unjustified.
Veskimagi said that although the ruling coalition's agreement unambiguously stated that the government would increase public sector wages only in line with gains in productivity in the private sector, the budget bill for next year runs directly counter to that.
The confederation has proposed that the state cut the planned salary increase for public servants by at least 50 percent.

Curiously, the Statistics Office announced Sept. 28 that average wages in the private sector for the first time exceeded those in the public sector since Estonia's re-established independence.
In 2006 gross wages rose by 17.9 percent to 9,430 kroons (602.5 euros) in the private sector compared with the previous year, while those in the public sector climbed 12.8 percent to 9,345 kroons. The Statistical Office said that there had been years when growth in wages had been higher in the private sector but last year was the first time when average wages in the private sector were higher. 

To be sure, official data does not factor in the gray economy, or off-the-books envelope salaries, a practice that has thrived in the private sector for years as employers strive to minimize social taxes.
The office said that many economically inactive people returned to work in 2006, reducing the level of unemployment to its lowest ever level. However, the office said that the demographic situation was so dire that if the economy would continue to create as many new jobs as last year, then there were no considerable domestic reserves to meet the demand.