According to the Ministry of Finance, the average wage in the public sector will grow by about 8-9 percent next year. This is more than the average of recent years.
Martin Kulp, the head of public administration at the Ministry of Finance, said that the 2026 state budget includes additional funds for increasing the wages of internal security, teachers, and cultural workers.
Public sector wages have recently risen by about 5 percent annually. In the private sector, it has been about 6 percent. Now, the situation is turning in favor of the public sector.
Kulp said that wages will also rise in other public sector areas, although no additional funds have been specifically allocated for them. The wage increase is related to inflation and the need to keep up with it.
Orsolya Soosaar, an economist at the Bank of Estonia, said that the Bank of Estonia's forecast differs from that of the Ministry. According to their estimate, public sector wages will grow by about 6-7 percent next year.
Soosaar added that in the private sector, wage growth will be a couple of percent lower next year than in the public sector. This year, wages grew faster in the private sector.
She emphasized, for example, that the wage increases for teachers and healthcare workers were very small this year. In the public sector, periods of rapid and slow wage growth alternate.
Soosaar recommends consistent wage growth rather than large abrupt changes. For example, in 2023, teachers' wages rose by over 20 percent, which also caused a shock in the private sector.
The public sector wage increase may also affect the private sector, as both sectors compete for the same workers. Along with tax cuts, this could accelerate inflation.
Soosaar said that tax cuts increase people's incomes. This boosts demand for goods and services, which could affect prices.
The Bank of Estonia predicts an acceleration of economic growth next year. However, the state budget deficit and public debt are increasing, which will cause problems in the longer term.