Estonian economist: Avg wage requirement for short-term workers not sensible

Foreign workers help to alleviate tensions on the Estonian labor market and imposing excessive restrictions on hiring foreigners for short-term employment with the requirement to pay them at least the national average wage is not sensible, Swedbank chief economist Tonu Mertsina said LETA/BNS.

Mertsina said in a press release that while a uniform requirement to pay foreign workers at least the national average wage or two times the national average wage makes dealing with foreign labor simpler, it artificially increases labor costs in many fields of activity and in most counties and unnecessarily undermines their competitiveness in the worst case.

In accordance with the Aliens Act, employers in Estonia must pay short-term employees from third countries at least the Estonian national average wage of 1,310 euros a month, and at least two times the national average wage to top specialists.

According to Mertsina, the average wage requirement applied to foreign workers is comparable with restrictions on import.

He said that this year, foreigners registered for short-term employment with a fixed-term residence permit make up an estimated 5 percent of resident employment in Estonia.

“At least for now this has no significant systemic impact on wage levels in Estonia. While foreigners arriving in Estonia from third countries for the purpose of short-term employment help to alleviate tensions on the labor market, they have not been able to curb our rapid wage increase yet,” Mertsina said.

In a period of five years, average wages in Estonia have risen 39 percent and the labor costs of companies 47%.

“While the strong demand of recent years has enabled rapid wage growth, shortage of labor has had a more significant effect still,” Mertsina said.

According to Mertsina, too high labor costs may cause a stronger setback for businesses in the event of an economic shock, as when turnover decreases, labor costs, meaning the number of and/or the wage level of employees — could see a bigger reduction.

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