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Rapid wage increase observed in Baltics; highest increase noted in Estonia

In Q2 2017, all Baltic States had experienced a moderately rapid rise of average wages. The highest increase was noted in Estonia, followed by Latvia and Lithuania, according to data from Baltic statistical bureaus.

Average gross wage was EUR 1,242 in Estonia in Q2 2017. In Latvia, average gross wage exceeded EUR 900 for the first time and was EUR 927.

It is 8.7% more than it was in the same period of 2016 and 4.8% more than it was in Q1 2017. Average wage grew 8.7% in Lithuania in comparison with last year’s Q2, reaching EUR 838.7 a month. Compared with Q1 2017, it is 2.3% higher.

«The labour market continues warming up. This will continue in future years. This is good for households because it means they can afford to spend more money. Businesses have to understand that wage rise that is not covered by productivity affects their ability to earn, invest and overcome crises. With that, wage rise is a good thing, but a too rapid wage rise is a risk, and 9% wage rise is too rapid. Unfortunately, this pressure will remain. We see this in examples of Estonia and Lithuania, where the business cycle is more mature,» Swedbank chief economist Martins Kazaks comments the latest macroeconomic outlook.

Citadele economist Martins Abolins comments on future trends: ‘The lack of labour force in Latvia is not as big as it was in the pre-crisis period. Still, the trend does not promise anything good for the near future. Business surveys point toward growing difficulties with finding employees, especially in construction sector. This is not the only problem in Latvia.’

He continues: «Businessmen complain about labour force availability in Lithuania, Estonia, Poland, Czech Republic, Hungary and other Eastern European member states that realize the next cycle of EU funds. As a result, rapid wage rise is observed in the entire region – in Hungary alone it has reached 15%. This means it is likely wage rise will remain relatively rapid in coming years.»

At the same time, data of Baltic States shows that situations in better-paid sectors differ. While in Latvia and Lithuania the largest wages are paid to finance and insurance sector (EUR 1,989 and EUR 1,543) in Q2 2017, the largest wages in Estonia are paid in the ICT sector (EUR 2,135 average gross monthly wage). In Latvia, workers of this sector were paid EUR 1,446 on average in Q2 (EUR 1,456 in Lithuania). Wages in Estonia’s financial sector are on the second place, workers in this sector were paid EUR 2,052 on average in Q2.

Among the better-earning industries in Baltic States are energy, state administration and defence, professional, scientific and technical services, as well as mining and quarrying sector.

Wages are the lowest in accommodation and catering sectors of Baltic States. In Estonia, workers of those sectors were paid gross average monthly salary of EUR 819 (EUR 638 in Latvia and EUR 566 in Lithuania).


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