No more big spending cuts are planned by Latvia’s Welfare Ministry for 2012, but it does anticipate saving around LVL 20 million (€28.5 million) thanks to the declining number of people claiming benefits because they are out of work.
The ministry also aims to crack down on people falsely claiming long-term sick leave – well known to be a means for individuals and families who are barely getting by to take additional money from the state.
Out of the above amount, LVL 3 million will be saved as the ministry tightens control over the issue of sickness notes given by doctors, who are sometimes tempted into providing them with small bribes. But, Welfare Minister Ilze Viņķele stressed during a recent news conference, there are no plans to cut the amounts paid for sickness benefits.
The remaining LVL 17 million will be saved in the social insurance budget due to the forecast reduction in the numbers of jobless people, Viņķele said. Unemployment is falling in Latvia due to emigration as well as the improving economic environment.
Meanwhile, salaries in Latvia are rising at a stable rate. According to Oļegs Krasnopjorovs, a Bank of Latvia economist, the average gross monthly salary in the third quarter of 2011 grew by 4.3% y-o-y, which is about the same as the 4.4% growth seen in the previous quarter.
Writing for the website Macroeconomics.lv, Krasnopjorovs said that salaries in the public sector are not rising at a faster rate than in the private sector.
“Up until the first half of 2011, the faster rate of growth in the public sector was determined by a low base, and in part this was compensation for the earlier steep salary cuts for teachers and other groups of employees in the public sector,” he wrote.
“In the third quarter of 2011, however, a faster growth in salaries was observed in the private sector.” 
The economist added that salary growth can be seen in all branches of the economy.
“Among the fastest annual rates for average salaries is the one observed in construction (6.8%), a branch where employers are complaining the most about the lack of qualified labor. In manufacturing, salary growth is less (4.9%), despite the fact that in terms of production volumes and productivity this branch's performance during the year was much better.”
However, for the future, “we do not predict an increase in wage growth during the coming years. With inflation dropping substantially, purchasing power will grow, supporting domestic demand in the conditions of an uncertain external environment.”

[photo by Maris Lielkalns; courtesy Latvian Tourism/TAVA]