Work pay close to the 2007 level; increase expected next year

The drop in remuneration in the second quarter of 2010 has abated - according to our estimates, the seasonally adjusted pay for an hour's work did not change over the quarter. Thus the average monthly pay in the private sector has returned to the level at the beginning of 2008 and in the public sector to the level in mid-2007 (seasonally adjusted data on full-time employees).

Despite the recovery of the Latvian economy since the first quarter of 2010 and the increase in the number of the employed since the second quarter of  2010, it is likely that the quarterly changes in pay will continue to be negative or close to zero for some time yet because of the momentum and the high unemployment. A sustained renewal of salary growth is therefore predicted for 2011.

The annual drop in pay was 6.3% - less than in the previous quarter (8.3%). In the public sector a faster annual drop in hourly pay remained (11.5%) compared to the private sector (2.7%). Compared to the maximum at the end of 2008, the annual drop in hourly wages in the public sector was 22%, thus any further expenditure consolidation must apparently be made at the expense of function audit, at the same time retaining a competitiveness of the remuneration of the best employees with the private sector.  In the private sector the drop in hourly wages was much less - only 5% compared to the end of 2008, because entrepreneurs mostly cut their expenses by laying off employees and shortening the work week.

In the private sector, the most rapid annual drop in the hourly wage was observed in construction (7.3%), trade (6.1%), as well as in the sphere of information and communication (5.5%). In other branches of the private sector the hourly wage contracted less, but in agriculture, mining industry, and the energy sector a small growth in remuneration as even observed. These data however should be interpreted with the proviso that in branches with greater changes in the numbers of employed the changes in pay can be substantially influenced by structural effects.  Thus, for instance, an increase in the proportion of highly qualified employees shifts the average remuneration statistics upward.

It can be predicted that as the pay levels reach their lowest point, the hourly wage will not drop under the average for 2007. Yet the discrepancy between the demand and supply of labour - there is a demand for highly qualified employees but the majority of the unemployed have low qualifications - can express itself as an increase in the pay average for high level specialists in those branches and professions of the economy where the supply in Latvia is limited. Branch specialists usually mention here information technology and highly qualified construction specialists and managers. The increase in wages is likely to begin showing up in the irregular component of remuneration, as several enterprises return to the bonus system linking bonuses to the results of work execution. The regular component is more inert and an increase in it will be observed later.