[Estonia] Trade Unions Chief: Forecast Will Clarify Minimum Wage Safety

01 JUN 2020

The head of the Confederation of Estonian Trade Unions says that although the minimum wage in Estonia is unlikely to fall in the coming months through the fallout from the novel coronavirus crisis, average wages may fall making a drop at least theoretically possible in the coming months, ERR reports.

Peep Peterson - head of the Confederation of Estonian Trade Unions (Eesti Ametiühingute Keskliit) - reportedly made the comment during his May 26 appearance on ETV politics discussion show "Esimene stuudio". He added that a clearer picture will emerge through summer and autumn.

Mr Peterson said the unions now eagerly await the Bank of Estonia's average salary forecast, which is likely to impact the minimum wage level.

"We don't expect average salaries to rise much, so the minimum wage is unlikely to rise much next year [either]. ... I would not venture to predict that the average pay packet will fall, but if it does, it will be a pretty tense situation for us to digest, and to see how we will come out of it," he said.

Estonia’s minimum wage has never fallen before. It is currently €584 per month.

A fall is theoretically possible, according to Mr Peterson, but he believes it unlikely. "This has never happened, and I do not see any reason to predict a decline in the average wage in June," he said.

He reportedly noted that interest in the government's wage support package - channelled via the Unemployment Insurance Fund (Töötukassa) of which Mr Peterson is also chair - which was announced in response to the coronavirus pandemic, had come from some interesting quarters.

One example of this was applications from law firms, which he found difficult to fully explain.

"It is very interesting for me to know what happened (during the crisis) with law firms. There were no negotiations during the crisis situation, no legal agreements, no disputes. My impression is that this is a growth area during crisis situations, so it is definitely very interesting."

The general two-year minimum wage agreement reached by the unions with employers was calculated with a formula linked to the average wage in Estonia. 

The effect of the recent economic crisis will be very little if any rise in the average wage and a decline is not yet out of the question.

The government's wage subsidy program was extended to June after initially been set for a two-month period to cover April and May. The subsidy was intended for companies whose business suffered directly from the impact of the COVID-19 pandemic, it provides up to 70 per cent (or a maximum of €1,000) for each employee.

Mr Peterson said he thought there would be no further extension beyond June. He added that the overall unemployment fund was under considerable pressure as a result of the pandemic.

"The wage subsidy program was intended to be temporary. The overall social net was perhaps for six months of assistance. We can offer three plus one [months of support] as of now, but in June, the unemployment fund's ability to provide such a service will run out.

"At the moment, the Unemployment Insurance Fund is no longer putting money into the [wage subsidy] reserve; we have to keep the money in order to pay unemployment insurance benefits."

Source: ERR