Wages in the economy are expected to grow at a faster pace in the coming years due to structural changes in the labor market. The high demand for employment in some sectors as the workforce has stopped growing will create the conditions for wage increases in the coming years. The Bank of Albania predicts that, therefore, inflation over the medium term will be affected by wage growth.

"Our estimates suggest that the economy is operating under conditions of a fuller utilization of free capacity in the labor market. Bearing in mind the delayed wage response to the closing of the unemployment rate gap in recent quarters, it is expected that in the future, wage pressures will increase, contributing to the return of inflation to the target in the medium run �.

Thus, for example, the average salary increase over the period 2015 - 2019 has been relatively faster in the service sector, not just in the wage sector above the average salary level in the economy (â??Real estate, professional activities and support servicesâ?). , but also in salaries below the average wage level in the economy (â??Trade, transport, accommodation and food serviceâ?).

But on the other hand, a number of structural factors, such as the increase in the concentration of urban population, the higher female labor force participation rate, when they are paid at a lower average wage than men, as well as the phenomenon of skills mismatches with those offered, may also determine wage performance in the domestic economy at more moderate rates.

But by the first half of 2019, average wage growth in the economy has been slower, despite positive dynamics in the labor market. The average gross monthly salary for a salaried employee has increased by an average of 2.5% in nominal terms and by 0.7% in real terms, during 2015 - Q2 2019.

During this period, the indicator recorded slightly higher average growth in the public sector compared to the resulting increase in the private sector.

Wage growth by economic activity has been relatively faster in service sector branches such as "Real estate, professional activities and support services" (5.5% on average) and "Trade, transport, accommodation and food service" (on average). 4.3%).

By gender, the average wage for men not only remains higher than for women, but has also increased at a slightly higher average annual rate. Meanwhile, during 2017 and 2018, the wage index increased on average by 3.0% and 3.1%, while in the first half of this year the annual growth was higher, about 4.7%. Increasingly influenced by the increase in the minimum wage in the country, as well as the increase in the average wage for certain segments of the public sector employees.

Source: Monitor