Working Life Barometer in the Baltic Countries 2002 (pdf) - mol.fi

WAGE EARNERS' NET INCOME 1998 – 2002 IN
ESTONIA, LATVIA AND LITHUANIA
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The wage earners' standard of living is substantially affected by changes in the
net income that remains in hand. This study takes a look at these changes for
each of the three countries separately. The idea is not so much to examine
changes in the Baltic countries' salary level or wage structure per se. Rather,
the question is to investigate the wage earners' standard of living and changes
in that.
In this survey, the respondents were asked the amount of the net salary that
remained in hand. Also included in this net salary has been the pay for any
secondary job. In principle, it includes any black income as well. It is nevertheless
clear that only a very small proportion of income like this is brought to
light by the survey method. Secondary jobs and black income are discussed
separately towards the end of this chapter.
It is rather difficult to evaluate differences in living standard between the
countries on the basis of salary alone. The main emphasis here is therefore on
changes within each country. The purchasing power of wages varies according
to the country, because of the difference in price level for instance. The countries'
currency values have been tied to the dollar and, more recently, to the
euro. The external values of the currencies have fluctuated very strongly, particularly
because of variations in value between the dollar and the euro. For
example, if the income level of each country is converted into euro, then, due
to strengthening of the dollar, the income level appears to have improved. In
actual fact, however, looked at from within the countries, that has not been the
case. Internal inflation and weakening of purchasing power have, to a greater
or lesser degree, eaten away the income level improvement resulting from the
external strengthening of the currencies.
One way of describing the change from the consumer's point of view is to call
it a change in purchasing power parity. The World Bank, among others, has
estimated the changes in purchasing power in different countries. The idea of
purchasing power parity is that the different countries are compared with the
United States and with what an American can buy with one dollar, for example.
How many local monetary units – krones, latis or litas – are needed to