The results of the latest Citadele Bank Purchasing Barometer survey show that optimism about wage growth in the Baltic labor market is clearly declining.
According to the survey conducted in August, only 6 percent of respondents in Estonia expect a salary increase within the next three months. This is down from 11 percent in the first quarter and 10 percent in the second. Meanwhile, 10 percent of Estonians fear a wage decrease, making Estonia the only Baltic country where more people expect pay cuts than pay raises. The share of respondents who say they cannot predict changes in their salary has also grown-from 9 percent in May to 14 percent in August.
In Latvia, wage expectations remain somewhat more stable: 12 percent of respondents expect a salary increase, while 8 percent anticipate a decrease. In Lithuania, 15 percent expect wage growth and 6 percent foresee a decline. However, the share of Lithuanians expecting a raise has also fallen to its lowest level this year.
Edward Rebane, board member and head of Baltic retail banking at Citadele, described the trend as worrying.
“We are seeing increasing signs that the Baltic labor market is cooling in terms of wage growth-something we haven’t observed for quite some time. The situation in Estonia is particularly bleak: it is the only country where the balance of wage expectations is negative. Although economic indicators are slowly improving, the labor market is always the last to recover. On top of that, Estonian employees’ outlooks are affected by recent tax hikes, which force companies to be more cautious about raising salaries,” Rebane said.
“Until now, Lithuania has been significantly ahead of its neighbors in terms of economic recovery. The current cooling of wage growth expectations is influenced by a broader slowdown in the labor market, where unemployment is rising. In Latvia, conditions have statistically improved-employment has grown, and unemployment has decreased—but the economic cycle is not yet strong enough to meaningfully boost wage expectations,” he added.
Rebane also noted that the normalization of inflation has made employers more cautious.
“When price growth was rapid, many companies tried to support employees’ purchasing power with wage increases. Now that inflation is largely under control, there isn’t the same pressure to raise salaries. This is another reason why expectations for pay raises remain muted,” he explained.
Through its Purchasing Barometer, Citadele Bank regularly surveys people in the Baltic states about their short-term financial outlook. The latest survey was conducted in August in cooperation with Norstat, with 1,000 respondents interviewed in each Baltic country.
Source: BNS
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