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Sunday 22.07.2018 | Name days: Marija, Marika, Marina

Why Estonian salaries are getting increasingly higher than the Lithuanian?

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Baltic news, News from Latvia, BNN.LV, BNN-NEWS.COM, BNN-NEWS.RULinas Jegelevičius for the BNN

The encroaching autumn has triggered a number of new job offers, but the hirer’s and to-be employee’s expectations are often starkly different, say human resources experts.

As a rule, says Rita Karavaitienė, marketing director of CV Online, an online job database service, the preparation of fresh job market participants is not often up to the employer’s requirements and, in that case, the job seeker has to be additionally apprenticed to get started off.

Job seekers unskilled, employers skimp

«That is a reason why most of the employers are looking for a ready-to-start-working person. In other words, companies out there yearn for a know-how worker», she told.

Employers, meanwhile, are very selective with the candidates, and the threshold of the requirements in pretty high, while the salary, meanwhile, is on a lower end.

«The typical requirements we’re seeing are these: high education, age in the range of 30s, good English and Russian skills, a valid driving license and, sure, good computer and communication skills,» the online service rep told.

But the salary offered for the suitable candidate hovers around 1300 litas, or 376 euro, per month.

«That kind of person with the aforementioned requirements usually wants to start off from 2000 litas (580 euro), » Karavaitienė noted.

As long as there will be job seekers willing to toil for the offered 1300 litas, the employer will hardly offer a higher salary.

The market rules!

But perhaps not only it if we were to look at the gaping range of wages and salaries within the same jobs across three Baltic States of Latvia, Lithuania and Estonia.

A 400 euro gap in pay

According to Estonian statistics, the average Estonian salary in private sector was 997 euro in the second quarter of the year, while in Lithuania it was respectively a little bit over 600 euro.

But just a mere 20 years ago, when the countries had just started off their independent path as the former Soviet Empire breakaway republics, Lithuania boasted a better pay than the Estonia.

Twenty years into the states’ independence the gap between the average Lithuanian and Estonian pay is gaping- is nearly 400 euro to be exact.

And the Latvians, who, among the three neighbours, were hit the hardest by the 2009-2010 economic downturn, not only have successfully bounced back, but also have outstripped Lithuanians on the account.

How on earth this has been possible in a tiny region playing effectively by the same rules?

Estonia stuck with the West from scratch

Žygimantas Mauricas, Nordea bank chief economist, believes several reasons have to be taken into account searching for the explanation.

First, Estonia‘s economy level and, therefore, the GDP is higher, roughly 20 percent than in Latvia and Lithuania. Second, the “pie” that Estonia is producing is being distributed more effectively, meaning that the Estonians slice off a larger chunk from it than the fellow Lithuanians and Latvians. Third, the « black market» in Estonia is smaller than in the other two neighbour countries.

And, finally, comes the impact of Finland. The latter has become very obvious after the crisis was over.

Besides, the salary distribution in Estonia is more even and closer to that of the Scandinavian model, Mauricas noted.

In that regard, Lithuania falls in comparison with Central European countries or even Russia, where the salary range is extremely high and where the grip of «black economy» is tighter, he said.

Estonia had particularly noticeably leaped forward in the size of salaries around the outset of the new millennium.

«It is related to the strategy that Estonia chose- get closer to the West and be on par with Finland. Meanwhile, Lithuania and Latvia had tried to be a bridge between the East and the West. The Estonians turned effectively their backs against the East and trod westward, while Lithuania and Latvia courted both directions. The difference has become especially distinct during the Russian crisis in 1998-1999, by which the Estonians had already re-oriented their exports to the West, particularly towards Finland,» the expert said.

Shadowy economy is larger in Lithuania

The Estonians’ second leap forward was during the 2009-2010 economy shrinkage, the economist noted.

«They were really well prepared for it- had a smaller state budget deficit, had accrued some budgetary surplus and were further sticking with the West,» the economist said.

No surprisingly, Estonia’s GDP is 18 percent higher than that in Lithuania and the salary difference in the countries is in favour of the former at a staggering 44 percent.

«It means that the economy alone doesn’t explain such a difference in the salaries. But, also, we cannot affirm that the whole difference is about the shadowy economy,» Mauricas commented.

But it does play an important card in the structure of economy and, subsequently, the size of wages and salaries.

Some other peculiarities also have to be considered.

«In Lithuania, for example, there’s a big sector of transport, which tends to cast the shadow (on the whole economy). Since we’re seeing more of it, therefore the distorted statistics,» Mauricas mulled.

Another thing, the bank official paid attention to, is the rate of the salary and GDP in the countries.

«Look, in Lithuania, it stands at 44 percent, meanwhile in Estonia at 54 percent. It essentially means that that the Estonians get a larger piece of the «pie»; there’s a lot of money in Lithuania circulating and creating an additional value, but the money do not necessarily end up filling the pockets of the employed,» the economist emphasized.


Leave a reply

  1. Estonian says:

    Good Articel. Only one thing cross my mind, about Lithuania boasted a better pay than the Estonia. I was just curious to find is it true, because I think it was opposite.

    Information from Wikipedia:
    Per Capita GDP 1973 1990
    United States $16,689 $23,214
    USSR (all) $6,058 $6,871
    Russian SFSR $6,577 $7,762
    Ukrainian SSR $4,933 $5,995
    Byelorussian SSR$5,234 $7,153
    Estonian SSR $8,656 $10,733
    Latvian SSR $7,780 $9,841
    Lithuanian SSR $7,589 $8,591
    Moldavian SSR $5,379 $6,211

  2. Linda says:

    I agree don’t where they get the figures from, pay is abysmal in most newly re-independent states after all they have 50-70 years of soviet to shake off and find markets.

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