Employment and Wages

Recently the National Statistical Institute published data on the employed and the average wage in the second quarter of the year. In comparison with the same period last year the employed in the second quarter of 2011 decreased with 29 thousands or 1.3%, as the reduction continues to be in the sectors, affected most seriously by the crisis – construction (down with 16.3 thousand people) and manufacturing (down with 15.5 thousand people)

Preliminary data show that the number of employees increases with 50.3 thousand or 2.3% in comparison with the first quarter of the year. Not surprisingly, with the beginning of the summer season the main part of this growth is in the field of the hotel and restaurant business – the increase of the employed there is with 41.7%.

At the same time the average monthly wage for the second quarter is 699 lv, which means a growth of 9.2% or 59 lv. for a year. In comparison with the first quarter of 2011 the wages in the country also marked a growth equal to 4.2%. Much of the annual growth is most probably correlated with the traditional increase of the minimum insurance levels from the beginning of the year, which directly increase the official (i.e. declared in the statistics, NSSI, NRA) wages and with considerable inflation of around 5% for the first quarter. Another reason could be found in the economic recovery and the increased number of employees, i.e. in the increased demand for labor.

Despite the increase on a quarterly basis, the data show a decrease of the wages in July to 690 lv. from 710 lv. in April and 698 lv. in June.

Average wage in the country by months (levs)

Source: NSI

What was recently discussed in the public space, however, was that in the past few months the number of the employed grows, while the wages decrease. There are two main reasons for this. The main part of this effect is due to the hiring of seasonal workers, especially in the hotel and the restaurant businesses, where the wages are (by official data) one of the lowest in the country. Another reason is that since the beginning of the crisis the most affected was the employment of the low skilled workers. This, along with the regular administrative increase of the minimum insurance levels in the country, helped for the “increase” of the average wage of the employed in the country. Now, when the economy begins to recover, the lowest paid workers begin once again to find jobs and the opposite process is observed.

Of course, the whole picture is distorted by the government’s intervention in the economy – first with the increase of the minimum insurance levels, and from September – again with the artificially increase of the minimum wage in the country.

The problem is that ultimately this intervention does not reflect the real improvement of the labor productivity and the economic growth, which will again mostly affect low skilled workers and will delay the recovery of the employment in the country.