Rise in wages drops year-on-year

As expected, in the first quarter of 2015 the annual rate of rise in wages has diminished slightly. Even though the minimum wage rose also this year, economic growth has slowed down a little.

The rise in wages in Latvia slowed down in the first quarter.  The gross average full-time monthly salary increased by 6.1% in the first quarter of 2015 (the year-on-year rise in the fourth quarter of 2014 was 6.6 %), which means a slight slowing down also compared to the average in 2014.  The annual inflation remained low, the tax burden also continued to diminish slightly. Thus the year-on-year rise of the net real wage, which determines purchasing power, is faster than is that of the gross wage, i.e., 6.8%, which also maintains a rise in private consumption.

The annual rise in wages could continue to slow down this year, for the so-called base effect or the impact of last year's rising compensations will disappear gradually. The majority of enterprises surveyed in the second quarter do not consider shortages in labour force a crucial limiting factor for entrepreneurship: this indicator has dropped year-on-year in manufacturing, services, and construction, but, quarter-on-quarter, it has increased slightly in manufacturing alone among these three largest sectors.  Shortages of labour force thus do not exert a pressure on salaries, which in turn means that the pressure of salaries on inflation will not grow.

In a breakdown by sector, the dynamic of compensation rises is more stable in goods production sectors, whereas fluctuations, including slowing down in growth rate, are more characteristic in construction and services, with the exception of accommodation and food services as well as culture-related services where the rise in year-on-year growth rate in the first quarter could result from the Latvian presidency in the Council of the European Union.

In the private sector, the rise in wages in the first quarter was slightly faster than in the public sector (6.9%), but its difference with the rises in wages in the public sector has remained similar than last year in the same time period.  

For more information regarding sector data, please consult the Press Release of the Central Statistical Bureau