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Wednesday 19.09.2018 | Name days: Verners, Muntis
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Salary purchasing power increase – the largest since 2008

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Purchasing power of salaries grows while inflation drops in Q2 of 2012. Meanwhile, wage increase is still moderate. The average gross salary in Q2 of 2012 was 3.7% larger than it was one year ago. Salary increase is expected to continue in the next two years, says Banks of Latvia economist Oleg Krasnopyorov.

However, consumer prices growth slowed down notably as well (inflation was 2.3% in Q2 of 2012), the number of products and services in the consumer basket grew during the year – by 1.5%. This is the most convincing salary purchasing power increase since 2008 and one of the factors that states a stable retail trade turnover dynamic. It is expected that the salary purchasing power will continue to grow in the future, as the economist comment the Central Statistical Bureau’s published data on salary changes.

The growth of average wages in the private sector has stopped: due to conditions of high unemployment, newly employed workers cannot be offered average company salaries. This drives statistics down. Meanwhile, social sector wage growth has become more rapid. Nevertheless, there is no evidence that would show that there is some salary disproportion forming at the moment, which would lead to unpleasant consequences in the future.

Even though we can very much expect the media to come up with headlines like «Average wages in the public sector are still higher than those in the private sector!», there is nothing sensational in this. Yes, salaries in the social and private sectors cannot be compared directly, given the differences in the structure of these sectors and the spread of shadow economy, says the expert.

In order to make sure salary growth is sustainable in a long-term perspective and not threaten national economy’s competitiveness, it should be based on increasing work efficiency. Currently, salary and work efficiency balance remains. Risks that salary increase could exceed productivity are related to the slowly growing businessmen complaints about the lack of workforce (construction mainly). However, several factors will not allow the lack of workforce to affect national economy in a dangerous way. Firstly, current lack of workforce is not noted in all industries, as it was in 2006-2007, there is only a lack of high profile specialists. This increases people’s motivation to acquire knowledge and new skills. Secondly, there are many indicators that show the slowdown of immigration rates and the increase of re-immigration rates, says the economist.

Ref: 102.109.109.3353


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  1. Olga says:

    Of course salaries will go up the next two year to reach european level in two centuries.

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