Latvia -Too many low wages -December 20, 2013

An OSE-paper explores the economic situation. From 2004 to 2007, the GDP grew by 34%. In just a couple of years, the property prices increased fourfold, while nominal wages doubled. Increases in public wages were even higher than in the private sector, in 2007, reaching 40%. At the eve of the financial collapse the consumer price inflation reached 18%. By most measures, the country’s credit boom outsized all other credit booms from 2000 to 2006, expanding annually from 37% to 64%. In the time period from early 2011 to mid-2013 the government secured compliance with the euro accession inflation target at the cost of (postponing) urgent reforms in social policy, as set out by the Country Specific Recommendations (CSRs). In two years the economy shrank by approximately 25%. Public wages were cut by 20%, then by another 5%. However, since the middle of 2012 the European Commission has expressed worries that the changes did not address the long-pending necessity to alleviate the tax burden on the poor. A Commission economist stated that there are too many low wages, and that the tax wedge on labour is highest for people with the lowest income.

English: http://www.ose.be/files/publication/OSEPaperSeries/Eihmanis_2013 ...  

 

For more information, please contact the editor Jan Cremers, Amsterdam Institute for Advanced Labour Studies (AIAS) cbn-aias@uva.nl or the communications officer at the ETUI, Mariya Nikolova mnikolova@etui.org. For previous issues of the Collective bargaining newsletter please visit http://www.etui.org/E-Newsletters/Collective-bargaining-newsletter. You may find further information on the ETUI at www.etui.org, and on the AIAS at www.uva-aias.net.


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