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Monday 30.03.2020 | Name days: Nanija, Ilgmārs, Igmārs
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Bank of Latvia: labour productivity rising faster than salaries

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The average hourly wage kept increasing in the 2nd quarter of 2011, hitting 5.5% over the year. Moreover, it is not hampering the national economic competitiveness, says Olegs Krasnopjorovs, economist at the Bank of Latvia.

Considering that consumer prices are up 4.8% over the year, the average gross wage growth was smaller than the estimated labour productivity growth of 0.7% against nearly 2%. Thus, the wage growth is not disproportionate to the labour productivity, as it was observed during the economic overheating.

Salary growth beating the productivity would result in damaged national economic competitiveness, since inflation would cancel out wage increases and this would be followed by job cuts. However, likelihood of such a scenario is low.

Currently, the only sector with clear inadequacy of the available skills is construction. It is due to seasonality, the economist says.

The Central Statistical Bureau’s survey shows that in August 2011, 16% of construction businesses (seasonally unadjusted data) reported labour shortages as the key factor hindering their business development. Moreover, the European Commission estimates that the seasonally-adjusted rate will stand at 10.3%. Although the difference from the economic overheating years’ index is still significant (over 40% in the summer of 2007). Yet it is dropping from the 1% recorded in the summer of 2009.

It should be noted that the construction industry not only lacks workforce, but also high-skilled workers, the expert says.

On the one hand, there is huge demand for qualified construction workers. The number of jobs in construction grew at a faster pace than in the national economy in general in the first quarter. Latvian companies are in tough rivalry with foreign companies for qualified workforce. Moreover, the average remuneration in construction started to climb in the second quarter of 2011, exceeding the average levels in the national economy.

On the other hand, low-skilled workers are still barely demanded. Neither has the State Employment Agency (SEA) any information on significant staff increase in the construction sector, compared to the growing number number of shop assistants. It means construction businesses barely want the jobless registered at the SEA, the economist adds.

Construction companies could benefit from emigrants returning to Latvia, because Irish unemployment rates are nearing the ones of Latvia, with their construction hit especially hard. Many Latvian immigrants are now left jobless. Construction recovery in Latvia could serve as a motivation for them to finally decide on returning home, he says.


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