Flash comment: Lithuania - August 27, 2018
Wage growth accelerates yet again
Gross wage growth surged to 10.5% in the second quarter of the 2018 again breaking the record for the post-crisis period. The average net wage grew a bit more timidly at 9.5% annually because non-taxable income allowance for children was replaced with direct payments. However, real wage growth picked up to 6.7% as inflation retreated.



Very tight labour market, minimum wage increase an introduction of floor to social security contributions all fueled wage growth. The average gross wage in the private sector increased by 10.4% annually, while the average wage in the public sector is finally catching up and annual growth surged to an impressive 10.8% in the second quarter.

It seems that the government delivered on its promise to increase wages for medical workers - their wages surged 16.5% year on year. They are followed closely by hospitality and catering workers whose salaries grew 15.1%. Overall wage growth was rapid across sectors, just public administration and defense lagged behind with 6% growth.



Outlook: Wage growth to ease in the future

It is unlikely that the economy can sustain such an elevated wage growth for a prolonged period of time. Wage growth is likely to ease next year to a more moderate level, but will remain solid thanks to acute labour shortages. Unemployment dropped substantially to 5.9% in the second quarter of the year and is below the estimated natural rate of unemployment. Labour shortage is one of key concerns for businesses; current immigration flows alleviate the problem somewhat but are insufficient to lower labour shortages significantly.

 

For more information about this report, please contact Mr. Vytenis Šimkus, +370 5 258 5163, vytenis.simkus@swedbank.lt

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