Rise in the labour cost in Latvia has continued for the fifth year in a row by now. Before over two crisis years the labour had been sweepingly falling in price in the course of a large – scale cost consolidation both in public and in private sectors. The consolidation, mostly, consisted of cutting (or discontinue paying at all) wages, which are the key component of the general labour cost.
But, employees cannot be deprived of income completely, and the Latvian economics year after year has been locked in the cycle. It is impossible not to raise wages – people emigrate. It is impossible to raise wages as well — not too technological Latvian export goes up in price and becomes useless. Development of a technological sphere (to raise wages and export as well) does not work out either. There is no recourse but, for instance, upon the demand of the Organization for Economic Cooperation and Development to grind the banking sphere, which provides same high-paying jobs, thereby making high labour costs economically rational.
By the way, the foregoing is evidenced by estimates of the Central Statistical Bureau, according to which the most expensive employees of Latvia are the representatives of the banking and insurance sectors: the bankers and insurers cost to employers EUR 14.37 /hr. TOP-3 is closed by IT specialists (EUR 11.17 /hr) and power engineers (EUR 9.13 /hr).
Meanwhile, the lowest cost of employees is recorded at hotels and restaurants (EUR 4.63 /hr), and in education (EUR 5.63 /hr).
Seemingly there is a substantial labour reserve amid the unemployed, among which one in ten of economically active residents of Latvia is listed officially. But no, there is all the more non-competitive labour power, which costs cheap, but doesn’t do any good.
As a result the employers have, heavy – heartedly, to rise spending on personnel to hold out smart employees or pull out promising ones from the competitors. An outstanding question is — how long the financial resources would stand yet to hold out skilled staff? Judging by the annual decline in Latvian export by 10% percent, the labour cost in Latvia must, if not crash, then, at least, get fixed at the current level.
Meanwhile, the average growth is accounted for pulling up lame-duck industries. In the 4th quarter 2015 in comparison with the same period of 2014 the labour costs were growing most vigorously in public catering (+11.3%), construction (+9.5%), processing industry (+8.8%). As a comparison: the public sector ‘became more expensive’ just by 1.7%.
Expenditures on cooks and concrete workers could hardly grow quicker than on public officers. Most likely, here one can speak of income legalization within the framework of the campaign against the shadow economy. As for the public officers they have worked ‘in white’ for long, therefore the raise in their cost appeared to be comparatively little.
