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Tuesday 17.07.2018 | Name days: Aleksejs, Aleksis

Economists: lack of workforce increases pressure on salary level

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Even in the coming months and next year, workforce availability in Latvia will continue to decrease; though not as rapidly to slim down departure queues from the state. At the same time, the lack of specialists will motivate entrepreneurs to think about raising salaries, economists of Latvian banks comment the latest employment data.

Bank of Latvia Economist Oleg Krasnopyorov:

The latest data of the Central Statistical Bureau of Latvia states that there is no reason for concern in regard to unemployment rates becoming higher. The proportion of job seekers in Q3 of 2012 was 13.5% of the total number of economically active residents, which is the lowest index since the end of 2008. The recovery of the job market, which has been going continuously since 2010, will be reflected not only in the increase of employment, but also in the reduction of unemployment.

It is expected that the reduction of unemployment will continue in 2013, but it will not be more rapid that this year’s. On the one hand, the rapid GDP growth will contribute to the recovery of the job market. On the other hand, the dynamics of the reduction of unemployment will be affected by the success of combating structural unemployment. More and more employers complain about the lack of qualified workforce: according to the latest data of the European Commission (EC) regarding the lack of workforce, this is mentioned by 12.3% of construction businessmen as the main factor that holds back the industry (8.7% in manufacturing, 7.1% in servicing). The level of unemployment among holders of general education is much higher than that among holders of higher education (25.1% and 6.9% respectively) and is the main reason for the “problem of unemployment” among young people.

According to the unemployment indexes, Latvia is on the 6th place in the EU behind Spain, Greece, Ireland, Portugal and Slovakia.

SEB Banka Economist Dainis Gaspuitis:

It was expected that, compared with Q1 and Q2, Q3 will show a more rapid reduction of unemployment. Economic development rates increased during Q4, but the demand of export industries for employees strengthens service industries. Of course, the seasonal jobs factor played a large role in all this.

What is important is the fact that employment has also increased – reaching 57.5%. However, it is still low when compared to other EU countries. The situation on the job market is slowly changing. Growth ensures demand for workforce, which, in turn, increases pressure on the level of wages. Even though growth shows a quite rapid rate, the unequal regional division cannot be ignored as it is reflected in unemployment statistics. Therefore, there will be a great challenge in improving workforce mobility within Latvia, as well as regional development. We will see the reduction in the number of job seekers in Q4; though it will be at a slower pace. Unfortunately, it should be concluded that the situation on the job market will not recover as rapidly as it is needed to reduce the proportion of people leaving the country.

Swedbank Senior Economist Lija Strasuna:

Excluding the effect of the State Employment Agency (SEA), the number of employed people has increased by 5.6%, compared to last year’s Q3. This means 48 thousand more employed people than last year.

Even though the reduction of job seekers in Q3 was expected, results turned out to be somewhat better than predicted.

It is predicted that the situation on the job market will continue to improve in the coming quarters, though slower than it was in Q3. Surveys show companies are still very careful both with increasing the number of employees and with increasing wages.


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