Wage growth decelerated slightly in the second quarter

In line with our forecasts, wage annual growth in the second quarter decelerated (to 6.4%), indicating that its substantial acceleration in the first quarter was determined by a combination of several one-off factors. In the coming quarters wage growth is likely to abate even more while still exceeding the common 4-5%.

Real net wages or the purchasing power of after-tax wage has returned to the pre-crisis level, in line with our projections.

The fact that lately wages have been growing more rapidly than productivity feasibly points to gradual changes in the Gross Domestic Product income side structure instead of a departure from the macroeconomic balance. Labour income share in the value added in Latvia is substantially lower than in most other member states of the European Union (EU). Business claims of labour shortage (European Commission data) remain moderate, which also in the future will prevent the wages to substantially exceed the productivity rise. . A stable low inflation and a sustainable (completely compensated by the inflows of foreign direct investments and EU funds) current account deficit are additional indicators that reflect the preserved macroeconomic balance.

Average net wage for full-time work (euro; seasonally adjusted data)

Average net wage for full-time work

Source: CSB data, author's calculations 

APA: Krasnopjorovs, O. (2023, 01. dec.). Wage growth decelerated slightly in the second quarter. Taken from https://www.macroeconomics.lv/node/2017
MLA: Krasnopjorovs, Oļegs. "Wage growth decelerated slightly in the second quarter" www.macroeconomics.lv. Tīmeklis. 01.12.2023. <https://www.macroeconomics.lv/node/2017>.

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