Latvia sees highest wage growth in Q2

  • 2008-09-03
  • By Talis Saule Archdeacon
RIGA - A survey of wages in the Baltic states has found that Latvia saw the largest year-on-year average wage growth of the three countries, with a 23.6 percent hike.
Average wages in the second quarter of 2008 in Latvia reached 679 euros, up from 549 euros in the second quarter of 2007. The growth barely outpaced that in Lithuania, which saw wages increase from 529 euros in Q2 2007 to 648 euros in the same time period of this year 's a total increase of 22.5 percent.
Though Estonia had the lowest level of year-on-year wage growth in Q2 2008 at only 15.2 percent, the country still sees the highest average wages by a large margin. In Q2 2008, the average wage was 850 euros, up from 738 in Q2 2007.

"Among the Baltic states the highest gross wages and salaries in the second quarter of this year, just like in all quarters of previous year, were in Estonia… Compared to the second quarter of 2007, Latvia witnessed the highest increase," said Ervins Rekke, who prepared the report of behalf of the Latvian Central Statistics Bureau.

Wages are still rapidly increasing in the Baltic states despite an economic crash that has most analysts forecasting a recession and a hard landing in both Estonia and Latvia (see story above).
The wage growth trend is most pronounced in Latvia. However, when compared to Latvia's high inflation rate 's which currently stands at the highest in the EU 's the real wage growth in the country was much lower. "Considering the consumer price growth that constituted 17.7 percent, the real increase of the wages and salaries comprised 6.7 percent," Rekke said.

The average Latvian wage increased to 477 lats in the second quarter, an increase of about 5.3 percent in only three months.
Wage growth in the private sector, which totaled 23.9 percent year-on-year, narrowly outpaced the public sector, where wages grew by a still-remarkable 22.5 percent.

However, public sector wages still remain significantly higher than those in the private sector. The average public sector wage in Q2 2008 hit 568 lats, up by 104 lats over the same period last year. The average private sector wage, meanwhile, totaled only 434 lats, up by 84 lats over the same period last year. 
Within the private sector, the education industry saw the largest increase at 28.8 percent, up to 465 lats from 361 lats the previous year. The hotel and restaurant business closely followed with an increase of 27 percent, growing from 233 to 296 lats per month.

As of July 2008, the minimum subsistence level in Latvia was 161 lats. Rapid wage growth after the first quarter of this year led many analysts to fear that Baltic economies would lose their competitiveness and would be unable to boost exports. With wage growth still on the rise despite a much worse general economic outlook, those fears have only become deeper.
However, Latvian wage growth has still marginally slowed from last year. Year-end figures for 2007 released by the Central Bureau of Statistics show that public sector wages increased by 36 percent. Private sector wage growth was marginally lower at 30 percent.

Salaries increased most rapidly in the fishing sector. Though starting from a low base, monthly wage packets for fishermen and people in related industries rose from 189 to 284 lats 's an increase of more than 50 percent.