Wages and inflation 's Latvia's economic vicious circle

  • 2007-10-03
  • By Talis Saule Archdeacon

Teaching a lesson… Latvia's president has called for a nationwide wage freeze to stifle inflation, yet teachers and doctors are threatening to strike for higher salaries.

RIGA - The Latvian government is stuck between a rock and a hard place. On one hand, it has the Union of Doctors and Medical Workers and the Educators and Science Workers Union demanding higher wages. And on the other, inflation and government spending are spiraling out of control.
The government is trying to stall negotiations and play the situation out for as long as possible, but teachers and doctors are at their wits' end. They are fed up with struggling to earn livable wages and being constantly put off with promises of money to come.

"What we are fighting for is the quality, price and availability of medical services. If we would like to have good medical services, we need people who are ready to work, and we need to have good salaries for them. This was the conclusion from negotiations at the EU level, and this is what we need to see here," the doctors' and medical workers' union head, Valdis Keris, told The Baltic Times.
Keris said the union is prepared to take drastic action if their salaries are not raised in concurrence with previous agreements with the government.
"We have several government documents from 2005 and 2006 which contain certain guarantees about pay increases. The problem is that the government is not going to implement those in real life… we could take them to court over the documents, and this could eventually lead to a strike," he said.
The teachers and science workers union is also preparing to bring the fight for higher wages straight to the government's door.

"Teachers are not responsible for inflation. Why are we the victims of it? We are victimized because of the bad work of the government," said Ilze Trapenciere, a prominent member of the union. "When a student doesn't do their work they receive one less mark, but when the government doesn't do their work, we are the ones that get marked down."
The union organized a massive protest on Sept. 25 that drew more than 1,200 disgruntled teachers. Trapenciere said that the protest helped send a signal to both the government and the teachers themselves that they are unified in their demands for more pay.
The government has narrowly avoided a number of teachers' strikes in the past with promises of higher wages in the near future. They have not, however, yet followed through with those promises to the satisfaction of the union.

Trapenciere explained that most recently the teachers were promised a 60 lat pay-raise at the start of next year. During negotiations with the Ministry of Education, however, it became clear that would not be possible. They then agreed on a compromise of a 60 lat pay-raise in early September of next year, along with an 80 lat increase for the extra hours of work that go unrecognized.
During the protest, Kalvitis then said that he was happy to announce that wages would increase by 40 lats next September. The teachers were outraged.
The government is trying to resolve the issue by calling for wage freezes in an attempt to cool down the economy

Andris Vilks, macroeconomic analyst for SEB bank, said the government's talks surrounding wage freezes only concern the overall budget and are aimed at enforcing fiscal discipline in the ministries 's ideally freeing up money to satiate the teachers and doctors demands.
He said that government institutions need to be more transparent about the use of funds allocated for wages, and that a freeze could add 20 's 30 million sorely needed lats to next year's budget.
Meanwhile, President Valdis Zatlers has called for a voluntary wage freeze in all sectors, public and private. "The pace at which we're moving forward is too fast," Zatlers said in an interview during an official visit to Sweden. "If we're talking about freezing wages, they must be frozen in all sectors, not selectively."
"We have come to the point where the population needs to understand that it's the responsibility of each person, each family, each company and each ministry," the president said.

According to the figures of the Central Statistics Office, the average monthly gross salary in Latvia in the second quarter of this year reached 388.6 lats (553 euros), growing 33.4 percent 's or 97.2 lats 's from the same period in 2006. The average monthly net wage, meanwhile, grew 33.7 percent 's or 70.3 lats 's year-on-year to 278.93 lats in the second quarter of 2007.