RIGA - Prime Minister Aigars Kalvitis met with heads of Latvia's state-owned corporations to find a common solution to the problem of skyrocketing wages, which is slowly eroding the Baltic state's competitiveness.
But an independent study by a leading daily has pointed to the government as a leading culprit in the wage-inflation spiral, as wages of ministerial workers have been rising considerably faster than those in the private sector.
Kalvitis called the meeting with the heads of Latvenergo, Latvijas Dzelzcels (Latvian Railways) and Latvijas Valsts Mezi (Latvian State Forests) in order to convince them of the need to rein in wage and salary hikes. He later told journalists that the government's requirement was that companies compensate only for the rise in inflation "and nothing more."
The meeting followed a decision by the government on Sept. 25 to freeze the salary fund for state-employees. The move came at a time when more public sector workers, particularly doctors and teachers, are threatening to strike.
Inflation in Latvia reached 10.1 percent annual as of August, while wages and salaries soared 33.4 percent in the second quarter of the year compared with April to June 2006.
The chiefs of the state-owned corporations agreed with the prime minister's concerns, stressing that they were paying close attention to wage increases. Ugis Magone, board chairman of Latvian Railways, said that company salaries rose by 20 percent and management would make further pay-raises within inflation.
Roberts Stripnieks, head of Latvian State Forests, said that currently it is extremely challenging not to raise salaries as the company struggles to remain competitive and attract new workers, let alone keep existing personnel.
Karlis Mikelsons, chairman of Latvenergo, told journalists that "the situation at present is very serious," and the state-owned utility was prepared to support the government's conditions on reducing the salary spiral.
In September Kalvitis met with economists to discuss ways to slow the pace of salary increases. One option would be to link salary hikes with gains in productivity. Another would be to peg raises to the level of inflation.
Data from the Statistics Office show that the average pre-tax monthly salary in Latvia reached 388.7 lats (553 euros) in the second quarter, while the average monthly net salary was 278.9 lats.