Some may still be in denial but signs of labour market overheating are clear and have been so for a while. Expect this not just to continue in 2018 but to worsen. Here are ten reasons why.
1) Unemployment has been coming down relentlessly since the financial crisis ended. At 8.2% in October 2017, it is at its lowest since August 2008, i.e. the lowest for more than nine years.
Figure 1: Unemployment rate, monthly, 2002-I – 2017-10
Source: Central Statistical Bureau of Latvia
2) With low unemployment rates the number of vacant jobs grows – vacancies cannot easily be filled and their number has grown quite dramatically in Latvia. CSB (the Central Statistical Bureau) has a data series only from 2008 but it is quite telling, see Figure 2. 17332 unfilled positions in the 3rd quarter of 2017 were the highest recorded since spring 2008. A recent study by the Latvian Chamber of Commerce and Industry found that no less than 61.2% of employers have problems finding qualified work force, yet another indicator of a very tight labour market.
Figure 2: Number of vacant jobs, quarterly, 2008-I – 2017-III
Source: Central Statistical Bureau of Latvia
3) And in a tight labour market employers have to bid up wages. There is no wage explosion at the moment; wage growth has even slowed to an annual growth of 7.6% in September compared to a high of 9.3% in June but a) it is still higher than productivity growth and b) the tight labour market will not see a downward wage growth trend so expect continuing high – and higher – growth of wages,
4) …. which will spill into inflation – and so it has already done. After prices had a comeback following the deflation years of the financial crisis and after the slow-to-no inflation of accession to the euro and low oil prices, the trend for inflation is clear although the level is still quite low – but nevertheless clearly above the European Central Bank’s target – Latvia is thus in for some problems with competitiveness in the years to come. Do also expect some employees to seek compensation for higher prices via higher wages and we can have another small wage-price spiral in the making.
Figure 3: Inflation rate, monthly, 2011-I – 2017-XI
Source: Central Statistical Bureau of Latvia
Note: 12 months over 12 months inflation rate; a “longer” and more smooth measure of inflation, which is better at identifying the trend rate for inflation.
5) And so much of this comes from a long period of growth. While the (in)famous “seven fat years” saw uninterrupted growth 1999-III through 2008-I (31 quarters, i.e. closer to eight fat years….) the current growth of the economy has actually lasted since 2010-IV. This is 28 quarters, in other words a period almost as long as the one back in the 2000s. No wonder that unemployment has dropped so much (with bad demographics and migration helping out, of course).
6) The current growth rate in Latvia has accelerated to 6.2% in the 3rd quarter of 2017, clearly above potential but being helped by growth that has finally resumed in the Eurozone. Eurozone growth = good news for Latvian exporters.
7) But the lack of synchronization is a problem: Latvia has grown for seven years in a row; finally the Eurozone starts growing which creates demand for Latvian products at a time when capacity is running out, exactly because of the past seven years of growth. The revival of the Eurozone thus happens at the wrong time for Latvia.
And beware of momentum – three examples will follow.
8) Good times breed optimism (anyone old enough to remember 2004 – 2007 should recall that). Recently Citadele could report that their index for Business Sentiment is positive for all sectors of the economy for the first time in four years. This will mean more investment and again at a time of lack of work force, which will exacerbate the labour market overheating.
9) Construction – possibly the most volatile of all sectors of the economy has been revived after years in the doldrums and is now growing at 24.6% on a yearly basis. This will attract labour force from other sectors, starving them for labour, create bottlenecks and exacerbate the labour market problems.
Figure 4: Construction sector, year-on-year growth, constant prices quarterly, 2003-I – 2017-III
Source: Central Statistical Bureau of Latvia
10) Add to all this a tax reform that will give most of us a bit more to spend in 2018 and the years to come. More spending requires more production, which requires more labour…. – at exactly the wrong time in the economic cycle of Latvia.
A quick summing up: Ten points (and more could have been added) that point in one and the same direction: A tighter and tighter labour market where problems of finding well-qualified work force will intensify. With all the problems it brings along in terms of labour costs, inflation and eventually a loss of competitiveness.
Morten Hansen is Head of Economics Department at Stockholm School of Economics in Riga and a member of the Fiscal Discipline Council of Latvia.
Points of view expressed here are my own and not necessarily those of the Fiscal Discipline Council of Latvia.
Komentāri (3)
traductrice 22.12.2017. 14.27
Manuprāt, visu histērisko bļaušanu par darbaroku trūkumu var skaidrot pavisam vienkārši – daudzi uzņēmēji nevēlas iespringt uz produktivitātes celšanu, bet grib “lēto darbaspēku”. Kaut kā neesmu manījusi, ka mūs kāds biedētu ar kvalificēta darbaspēka ieplūšanu. Nē, mūs brīdina par lētā darbaspēka plūdiem. Un vienlaikus biedē ar sēņu lasītāju aizvilināšanu uz vietām, kur debesis zilākas un zāle zaļāka. Latvijas problēma, ka vietējie uzņēmēji nespēj nodrošināt tādu produktivitāti, lai vietējam sēņu lasītājam samaksātu tik, cik viņam paliek pāri pēc tam, kad viņš ārzemēs atskaita visus obligātos (augstos) izdevumus, un izvēlas meklēt sēņu lasītājus, kuriem Latvija ir “augsto ienākumu” zeme. Tāda lejupejoša spirāle, kas tiešām ir bīstama.
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PukitisL31 > traductrice 27.12.2017. 23.11
Propelleru aviācijā to sauca par grīsti – nevadāms kritiens pa spirāli, kas beidzas ar atsitienu pret zemi. Par ”produktivitāti”, komentāros jau ilgāku laiku klejo jautājums, ar ko meitene pie kafijas automāta Parīzē ir produktīvāka par savu kolēģi Rīgā, ja saņem reizes vairāk? Parīzietei nav 6 roku, viņa neatrodas 3 kafejnīcās vienlaicīgi un Parīzē diennakts nav 72 stundas. Klientu skaits vienāds, kafija tā pati. Kāda ”produktivitāte” un no kā tā sastāv?
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Rīgas Tehniskās universitātes Zinātniskā bibliotēka 22.12.2017. 13.25
Profesors Morten Hansen Latvijā ir kopš 1993.gada. Šajā laikā ir radījis virkni publikāciju, dažreiz centies brīdināt par briesmām, kādas sagaidāmas Latvijas ekonomikai. Šāds draudošas darbinieku trūkuma katastrofas signāls nepārprotami jaušams 21.decembra tekstā. Vai patiešām 10 analizētie faktori un “daudzi citi, ko iespējams uzskaitīt” profesora prāt parāda patieso situāciju Latvijas darbaspēka tirgū?
1) Vai 8,2% bezdarba līmenis ir draudošs un var dot nepārprotamu norādi, ka mūsu darba devēji nespēs atrast darbarūķus? Manuprāt, šāds “vidējās temperatūras palātā” rādītājs neatklāj neko.
2) Ekonomiski aktīvo uzņēmums skaits (bez pašnodarbinātajiem) pārsniedz 120’000. Ja 61,2% darba devēju apgalvo, ka nespēj atrast kvalificētus darbiniekus, tad darbavietu piedāvājumam būtu jāpārsniedz 70’000 profesora piedāvāto 17’332 vietā.
Mūžīgais stāsts par mūsu zemo produktivitāti, bet – kā tad šo produktivitāti vairot? Ekonomikas students parasti spēs pateikt priekšā, ka produktivitātes “pacelšanai” jaunu darbavietu radīšana ir vismazāk vēlamais pasākums.
3) Vidējai “oficiālajai” darba algai Latvijā jāpalielinās. Ja nodokļu sistēmas reforma un “ēnu ekonomikas” izskaušana būs efektīva. Neņemot vērā citus faktorus.
4) Dažiem ekspertiem ir raksturīgi baidīt ar slikto inflāciju. Tikai – kāda tad ir “sliktā inflācija”?
5) Var jau mūžīgi piesaukt treknos gadus. Tikai – cik bija ekspertu un akadēmiķu, kuri tajā laikā centās skaidrot darba devējiem, bankām, valdībai – nesaprātīga kredītu apguve nestabilai ekonomikai, kas galvenokārt paļaujas uz ES fondiem, ir mīna ar laika degli?
7) Piedodiet, bet šo profesoram vajadzētu izvērst. Varbūt nonāktu pie jaunas teorijas. Kādēļ gan Latvijas tautsaimniecībai ir kaitīgi, ja eirozonā pašlaik vērojama izaugsme?
8) Primitīvā tautsaimniecībā, iespējams, tā notiek, ka investīcijas vienmēr izraisa akūtu nepieciešamību pēc jaunām darba vietām. Vai tad SSE in Riga un citu augstskolu studenti tiek gatavoti šādiem projektiem. Investīcijas modernajās tehnoloģijās parasti saistās ar darba vietu samazināšanu un produktivitātes pieaugumu.
Grafiki, protams, bija vērtīgs informācijas avots.
T.Laizāns, RTU IEVF
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