Estonians press for pay increases

TALLINN - In a fresh economic analysis of Eastern Europe, the Scandinavian bank SEB said that Estonians are increasingly demanding pay raises, especially in the public sector, and estimates wages will grow by 7-8 percent on average next year.
Raises in the public sector, as well as pressure from rapidly growing inflation, will also impact the private sector, SEB said in its Eastern European Outlook. Pay raises are feasible, the analysis found, because businesses’ profitability has increased significantly this year.

At the same time, growth of productivity has dropped to nearly zero. Although joblessness has dropped greatly, the rate was still at 10.2 percent in the second quarter. And it is not going to abate any time soon, according to SEB analysts, as the labor force market faces a shortage in some areas and a surplus in others.
“This creates a situation where pay will increase significantly despite the high unemployment rate,” SEB said.
The bank is predicting GDP growth of 2.5 percent in Estonia this year, compared with the central bank’s 2.6 percent and the Finance Ministry’s 2.2 percent.