The Central Bank of Estonia published an assessment of wage and labour market developments showing wage growth remained rapid at 8.3% in the fourth quarter of 2024. It highlighted that wage growth slowed in the public sector but was faster than expected in the private sector, an outcome that could signal a mismatch between job seekers and the skills businesses need rather than broad-based strengthening in labour demand. Despite a weak economic climate and elevated job searching that would normally dampen wage pressures, private sector wage growth accelerated in the third and fourth quarters of 2024. The central bank pointed to possible one-off factors, including payment timing effects linked to the income tax rise, increased hours worked as the economy recovered, and wage demands ahead of a forthcoming VAT increase. Unemployment was 7.4% in Q4 2024, unchanged from Q3, while Tax and Customs Board data showed the number of people receiving a wage continued to fall, with public sector growth stalling and private sector declines easing; manufacturing saw a small late-year increase in wage recipients and improved employer expectations. Although the recession ended in early 2024 and GDP was up 1.2% year on year in Q4 2024, the central bank noted labour demand has not yet shown a decisive recovery and that labour market adjustments can lag changes in economic activity.
Central Bank of Estonia 2025-03-06
Central Bank of Estonia notes 8.3% wage growth in Q4 2024 and points to possible labour market mismatch driving private sector pay
The Central Bank of Estonia reported an 8.3% wage growth in Q4 2024, with private sector wages rising faster than expected despite a weak economic climate. Factors such as payment timing effects due to tax changes and increased working hours contributed to this trend. Unemployment remained at 7.4%, with labour demand yet to show a decisive recovery despite GDP growth.