The latest data from Latvia’s Central Statistical Bureau (CSB) show that the average gross monthly wage reached €1,831 in the first quarter of this year, only 4.2% higher than a year earlier. The pace of wage growth has slowed significantly: in 2025, the average wage increased by 7.7%, while at the end of last year growth stood at 6.6%.
The slowdown appears unusually sharp and is therefore difficult to explain solely by fundamental economic factors. Whether it reflects genuine changes in employers’ wage-setting policies or is partly the result of statistical peculiarities will become clearer as future data revisions are published.
According to CSB data, wage growth has decelerated in both the public and private sectors. In the public sector, annual wage growth slowed from 7.0% at the end of last year to 4.6% at the beginning of this year, which may be consistent with budgetary constraints on salary and bonus increases.
More surprising are the figures for the private sector, where wage growth has slowed to 4.1% (down from 8.1% in 2025 overall and 6.6% in the previous quarter). This can partly be explained by weaker corporate profitability and competitiveness challenges, which limit companies’ ability to increase costs, including wages. At the same time, the labour market remains relatively tight: the unemployment rate is around 7%, and a significant share of companies continue to face labour shortages—around 20–25% in manufacturing and construction, and about 10% in service industries (according to Eurostat data). As a result, such a sharp slowdown in private-sector wage growth warrants a cautious interpretation.
When assessing wage developments across industries, the data should be viewed carefully due to changes introduced this year in sector classification methodology. In several sectors, average gross wage growth did not exceed 2% at the beginning of the year, including accommodation and food services, healthcare, construction, arts, sports and recreation, as well as transportation and storage. Meanwhile, stronger growth of approximately 6–7.5% was recorded in mining and quarrying, wholesale and retail trade, and the energy and utilities sectors.
The wage bill, or the total amount of wages paid across the economy, increased by 5.9% compared with the beginning of last year. CSB calculates the average wage by dividing the wage bill by the number of employees converted into full-time equivalents (FTEs). Over the past two years, the number of full-time equivalent employees had not increased significantly and had in fact tended to decline. However, this trend reversed at the start of this year, with FTE employment rising by 1.6%. This may be linked to a reduction in part-time employment, although it remains unclear whether these changes fully reflect actual developments in the economy.
The average net wage—earnings after taxes—increased by 4.5% over the year, slightly faster than gross wages. This was supported by an increase in the tax-free allowance from €510 to €550 this year. However, real wages, which measure purchasing power after accounting for inflation (2.9% in the first quarter), rose by only 1.6%.
If similar trends persist in the second quarter, it is likely that rising inflation will erode workers’ real purchasing power during the second half of the year. This could negatively affect household consumption and, consequently, overall economic growth.
