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In the third quarter, the average salary in the private sector was 5.2 percent. higher than in the second quarter and suggests that private companies also felt stronger after the recession in the second quarter. On the other hand, the variation in the average salary in the last quarter of the year will be more modest due to the once again more difficult financial situation of the business as the second wave of the pandemic accelerates.
In the private sector, the average salary in the third quarter was 1,414 euros, an increase of 9.3 percent during the year, and in the public sector, 1,546 euros, or 12.7 percent. higher than a year ago.
For the third year in a row, wages in the public sector are growing faster than in the private sector. Wage growth in the public sector was driven not only by decisions made late last year to increase wages for education or healthcare workers this year, but also by the COVID-19 pandemic, which spawned increased perks for those who work in the health sector. In the last year, wages increased by up to 20.5 percent, in the education sector by 10.4 percent, and in the public administration sector by 11.5 percent.
In the private sector, wages and salaries in the transport sector increased considerably during the year, growing by 17.1 percent. This is more closely related to 9.4 percent per year. an increase in the monthly minimum wage and an increase in the coefficient used to determine the amount of tax-free daily allowances. As in previous quarters, the average salary of people working in the information and communications technology and financial and insurance sectors grew steadily, increasing by 7.2 and 6.8 percent during the year. Average monthly salary also increased slightly faster than in the second quarter in the industrial and commercial sectors with the highest number of employees. In the third quarter, the average salary of those most affected by the pandemic in the hotel and restaurant sector increased by almost 3%. According to Sodra, a quarter of employees in this sector receive a salary that reaches almost the monthly minimum wage, so the annual minimum wage was still significantly affected by the higher monthly minimum wage than a year ago.
It should be noted that this year’s pandemic had the greatest impact on the average salary in those sectors where salaries were already the lowest: accommodation and food service, arts, entertainment and recreation, administrative and service activities. The second wave of the pandemic, together with the second quarantine of this year, is hitting these sectors with more force, so we see that it is precisely the workers in these sectors who have been declared inactive. This year it only exacerbates the wage gap between people who work in different sectors. Theoretically, this should encourage more people to seek work in higher-wage sectors, but in practice, not only do employers face a shortage of adequately skilled workers, they also notice that some people who have lost their jobs are in no rush to Search for a job.
Employer downtime benefits for employees are included in the average wage in the country as calculated by Statistics Lithuania. The fact that many workers who have been declared inactive earn less than the median wage does not reduce the average wage compared to the situation that would be the case if the inactive were advertised to more wage earners. And the fact that the number of people working in the financial and information technology sectors even increased significantly during the year has a positive effect on the level of average wages.
This situation, where wages are rising rapidly along with unemployment, will not last long. We hope that after the jump, unemployment will begin to fall this year in the middle of next, when the most affected companies can return to the pre-pandemic level with the start of vaccination.
The average salary will grow more slowly next year; we forecast it to grow 4.5 percent. This is mainly due to the lower expected wage growth in the public sector and a lower increase in the monthly minimum wage.
So far, the government has confirmed that the monthly minimum wage will increase by 5.8 percent next year, but the last word will have to be said by the newly formed government, taking into account the updated forecasts of the Ministry of Finance. A cautious approach cannot be ruled out and it has been decided to increase the monthly minimum wage from the middle of next year, when the epidemiological situation is already likely to improve. Many other Central and Eastern European countries are not refusing to raise the monthly minimum wage next year with the start of the second wave of the virus, but the Czech Republic, for example, has decided to raise less than previously planned.
The author of the comment, Tadas Povilauskas, is an economist at SEB Bank
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