Average monthly gross salaries and wages of full-time and part-time employees in enterprises, institutions and organizations amounted to EUR 976 in Q2/13, which made a 8.5% y/y increase, data by Statistics Estonia shows. To compare, average gross monthly salary increased by 10% y/y in 2010, by 5.9% y/y in 2011, and by 5.7% y/y in 2012. Average hourly gross wage increased by 8.1% y/y to EUR 5.71 in Q2.

Real wages increased in Q2 by 4.9% y/y, posting y/y increase for the eighth consecutive quarter. Average labour cost per employee in Q2 was EUR 1,320 and average hourly labour cost was EUR 8.66, increasing by 8.4% and 8.2% y/y, respectively.

In absolute terms the average monthly gross wage was the highest in financial and insurance activities and in information and communication (EUR 1,591 and EUR 1,579, respectively), while the lowest in accommodation and catering (EUR 538).

Until the end of 2012 the growth in wages and salaries was slowing down. The data for Q1/13 showed a slight increase in the growth rate: average monthly gross salary EUR 900 in Q1/13, which made a 6.3% y/y increase.

It was also previously reported with the Q1/13 GDP data that labor productivity per employee decreased in Q1/13 by 1% y/y, while unit labor costs increased by 7% y/y. Salaries’ growth continuing to accelerate in Q2/13 without productivity gains might be alarming.

Previously on numerous occasions the Bank of Estonia was alarmed over disproportional wage growth, urging the businesses to avoid high wage expectations and wage claims in an uncertain economic environment. Also when commenting on the Q2 wage growth data the CB believes that 7%-8% y/y growth is too fast, given that productivity metrics did not change significantly since last year.

The central bank believes that economic slowdown seen in H1/13 did not yet feed through to the labour market, which usually reacts with a one to two quarters lag.