Wages forecast to continue growing this year in Latvia

Last year, compared to 2022, the average monthly wage increased by 164 euros or 11.9% and the average monthly wage after tax was 1,119 euros. Given inflation, real net wage growth was only 2.2% as prices grew faster than residents' incomes. This year the pace of wage growth will decrease, according to economists surveyed by Latvian Radio March 4.

Although Latvia's economy has not grown in the last year, wage growth persisted. Last year wages grew faster in the public sector - by 13.1%, but in the private sector by 11.5%.

"In the public sector, people are mostly employed in education, health, public administration and defense, as well as in transport and storage. Where there are more employees, the sector also has a bigger impact on statistics, and from larger sectors of the public sector, wage growth has been close to 15% a year. They represent more than 60% of all employees in the public sector and it also gives such a strong impulse why there is such a rapid increase in wages in the public sector," said Latvian central bank economist Andrejs Migunovs.

SEB Bank economist Dainis Gašpuitis said wage growth last year was influenced by both the tense situation in the labor market and labor force shortages and profit growth in companies in certain sectors.

"There were enough sectors in recent years that saw very good profit growth. In other words, there were also opportunities to raise remuneration. For timber industry, the trade went pretty well, of course, businesses are taking advantage of the situation, and then if there is that possibility, they are raising prices. Gone slightly the other way at the moment, but still, that pressure from the staff to keep increasing wages hasn't significantly eased," he continued.

Will wage growth continue this year? SEB Bank economist Dainis Gašpuitis estimates wages will grow, but not as rapidly as in the last three years.

"Inflation has also dropped substantially right now. In the State budget institutions, the possibilities to continue raising wages are also decreasing. The number of municipalities whose financial problems, let's say, are exacerbating is increasing, so that growth will slow down, but its trend will still be positive," Gašpuitis predicted.

“Pay will continue to rise to around 8%, which means it will be challenging for employers to hold that pace as well,” the expert added.

Last year, the average monthly wage was higher than the national average in the financial and insurance sectors, IT services, energy, professional, scientific and technical services, public administration and defense, mining, health and social care, as well as agriculture, forestry and fisheries.

The lowest average pre-tax wage – EUR 993 was observed in the accommodation and catering sector.

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