Estonia's unemployment falls to pre-pandemic level, but labour shortage keeps pushing wages up

Unemployment in Estonia has returned to the levels seen before the Covid-19 pandemic. The labour market still lacks skilled workers, however, so pressure on wages is expected to continue this year and next.

According to the Statistics Estonia agency, registered unemployment in the country is now very low. In September it was 13% lower than a year earlier.

Unemployment down in most counties

Raul Eamets, chief economist at the Estonian lender Bigbank, told the broadcast "Aktuaalne kaamera" that unemployment has fallen in most counties. The exception is Põlvamaa, where the number of registered jobless rose slightly. Eamets said the rate may be the lowest in the past six years.

Kirsti Melesk, head of the employment department at the Ministry of Economic Affairs, explained that the economy is growing again, so more jobs are being created and people are changing jobs more actively. Current forecasts suggest the overall unemployment rate will stay roughly where it is now, while declining gradually.

Wage growth

Experts stress that Estonia still lacks skilled workers. With low unemployment and continued economic growth, pressure on pay is increasing. Eamets said companies are starting to poach employees from one another, which pushes wages up. Forecasts for this year point to wage growth of about 6–7%, and he expects next year to be similar.

Hotels and services

Compared with two or three years ago, people are again more willing to work in hotels and the service sector. Employment among young people, who often start their careers in this field, nevertheless remains low.

Ain Käpp, a board member of the Estonian Hotel and Restaurant Association, names a new law as one reason: it requires employers to pay minors at least 20% more than the minimum wage. He hopes more young people will join in the coming period and expects wages in his sector to rise by 4–5%, in line with the Estonian average.