Flash comment: Latvia - June 1, 2012: Real average net wage up by 0.3% in 1Q 2012 from a year ago

1. Flash comment: Latvia
Economic commentary by Economic Research Department June 1, 2012
Real average net wage up by 0.3% in 1Q 2012 from a year ago
Average monthly wage, Average gross monthly wage grew by 3.7% in the first quarter of
% annual growth 2012. Employees in the private sector received by 4.2% more, in
35% the public sector – by 3.1% more. Real average net wage rose by
30% 0.3%, but only employees in the private sector enjoyed an increase
25% in purchasing power (about 1%), while real wage growth in the
20%
15% public sector was still negative.
10%
5%
The strongest gross wage increases were observed in services
0% sectors (including export-related activities) – financial
-5% intermediation, transport, tourism, and trade (5-7% in annual
-10% terms). Wage growth in manufacturing was a bit slower, at 4.4%.
-15%
1Q 1Q 1Q 1Q 1Q 1Q 1Q First quarter data confirm that businesses are still very cautious in
06 07 08 09 10 11 12 raising wages, especially taking into account uncertainty about
Gross wage
Real net wage Source: CSBL political and economic developments in the euro zone. Therefore,
wages are increased only for key persons or bonuses are allocated
Annual growth of average gross for good results. Wage and productivity growth is going hand in
monthly wage in selected industries hand (average labour productivity rose by about 4% in the first
10% quarter), and businesses are able to retain earlier competitiveness
gains.
5%
Outlook
0%
As consumer price growth retreats, we expect real net wage to
increase by about 1% in 2012. Wage pressures in the public
-5%
sectors are rising, while budget situation is good. It is thus likely
that wage growth in the public sector will accelerate somewhat in
-10%
1Q 09 1Q 10 1Q 11 1Q 12
the second half of the year.
Manufacturing Dom. trade
Seeing that businesses still employ “wait and see” approach with
Transport Construction
Source: CSBL respect to wage increases, it seems that loud announcements
about acute deficit of qualified workforce in some areas are a bit
overestimated, at least for now. However, the situation can change
very quickly, and risks of labour market overheating are still
present. Planned reduction of labour taxes in the coming years will
somewhat cool down the labour market, but it will not solve
problems of skill mismatches or regional imbalances.
Lija Strašuna
Senior Economist
+ 371 6 744 5875
lija.strasuna@swedbank.lv
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reliable sources and methods in the preparation of the analyses reported in this publication.
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