Gross monthly wages in Estonia, which has the European Union's second-fastest pace of economic growth, rose an annual 17.5% in the three months to the end of December.
The average monthly gross pay in the period was 10,212 krooni ($857), compared with 8,690 krooni at the same point last year, the statistics office in the Estonian capital Tallinn said on its Web site today. „On the open labor market, an evening-out of wages is inconceivable and continued rapid wage growth can be expected this year,” the Finance Ministry in Tallinn said in an e-mail today. „Therefore it's important to turn attention to having a more productive use of labor and for companies to employ modern technology.” Estonian workers have more leverage when demanding pay after unemployment fell to 5.4% in the Q3, the lowest this decade, shrinking the pool of available labor. That's left Estonia losing its advantage as a low-cost place for companies to invest to countries like India and China. The statistics office releases Q4 jobless data tomorrow.
Rising wages are boosting people's faith in their ability to take on debt. AS Hansapank, the biggest Baltic lender, said on February 16 its Estonian loan portfolio grew an annual 50% in the Q4 to €6 billion. The prospect of even higher wages has been used in slogans by the leading government parties ahead of the March 4 general election. The Reform Party of Premier Andrus Ansip is promising „A Better Wage for All” while the Center Party has pledged to raise state salaries by an average 23% annually over the next four years. Stronger consumer spending power is also helping drive inflation above levels where Estonia can adopt the euro. The government, which wants the currency as a way of closing the wealth gap with western Europe, had first to set back a target date for the switchover by a year, to January 1, 2008. On November 30 that was dropped altogether in favor of joining the euro zone „as soon as possible.” Countries wanting to make the currency switch must keep inflation within 1.5 percentage points of the 12-month average rate of the three EU nations with the slowest consumer-price growth. (Bloomberg)