Wage growth decelerated to 8% in Q3 in Latvia
In the third quarter, the average gross monthly wage was at 1006 euros, up by 8% compared to the same period a year ago. The wage growth was largely driven by pronounced labour shortage, minimum wage hike at the beginning of the year (by 50 euros), and income legalization, i.e. reduction of the share of “envelope wages”.
The wage growth remained fast, but it slowed from 8.6% in the first half of 2018 despite still rapid economic growth and tightening labour market. The deceleration was led by a slower wage growth in private sector (7.7%), while public sector saw slight acceleration (to 8.5%).
Although all sectors saw an increase in their average wages, the growth rates varied quite a lot. The health care sector was leading with 15.9% annual wage growth, while the wage growth in the financial and insurance sector stagnated. The former is the result of a health care reform, which basically boils down to increased funding for wages of medical workers since the start of the year. The latter is due to structural changes in the banking sector, with shrinking non-resident business segment.
Outlook: Wage growth will slow to about 7% in 2019
Labour market will continue tightening also next year. Declining unemployment rate and still serious labour shortages will lift wages. As the effect of minimum wage hike fades, the wage growth will slow from about 9% this year to 7% in 2019.
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