Have living conditions improved?

At least 30 years to reach the standard of living

By Oleg Bozhko

Standard of living is measured by various indicators - average income per capita, GDP per capita, the share of population living on an income not exceeding a dollar a day, share of food expenditure, etc. All these indicators show that it will take at least three decades for Estonia, Latvia and Lithuania to reach the average living standard of the European Union, which the Baltic States are eager to join

Comprehensive indicator

Share of GDP, that is GDP per capita, is the simplest and most often used indicator when drawing international comparisons. A significant part of the GDP is formed at the expense of resident salaries, therefore this indicator rather adequately reflects the standard of living in a particular country.

In comparison with Estonia, which leads the ranking with 5,000 euros, the lowest GDP per capita among the Baltic States can be observed in Latvia (3,600 euros per annum). According to the data provided by the European statistical office EUROSTAT these are 30% and 38% of the average level in the EU. The GDP among the candidate countries is lower only in Romania, Bulgaria and Turkey (after devaluation of the Turkish lira last year).

It should be mentioned that the average living standard in the EU is even not so high (at the expense of less developed countries like Greece and Portugal). Due to this reason, living standard, for instance, in Prague, the capital of the Czech Republic, is by 24% higher than the average level in the EU, but in the Slovak capital of Bratislava this figure accounts for 95% of the average Union's level. Meanwhile, the living standard in London is 2.2 times higher, but in Brussels by 2.1 times higher the average level.

Therefore, when making calculations on how many years will be necessary for the Baltic States to reach the average level of living standard in the EU (even according to the most optimistic forecasts it will happen no sooner than in the year 2030) one should be aware that there are differences also inside of the EU - as a result the Baltic States will not succeed in reaching the average living standard of more developed countries even after 50 years.

Lithuanians - pessimists, Latvians - optimists

It is interesting how residents of the Baltic States themselves evaluate the living conditions in their own country. Results of the Eurobarometer public opinion survey carried out on the initiative of the European Commission in March of 2002, show that Lithuanians are least satisfied with their lives (only 39% of respondents), whereas 55% of Latvians answered positively, and it is the highest figure among all three Baltic countries.

If compared with other aspirant countries, this figure is lower only in Bulgaria (32%) while 85% of all respondents in Slovenia were satisfied with their living conditions, and that is the highest number among all candidate countries. Evaluating the period of last five years, Lithuanians turned out to be the largest pessimists among the Baltic States - 52% of respondents were confident that their living standard has changed for worse over this period. Compared by the level of pessimism Lithuanians are surpassed only by Turks (56%) and Bulgarians (55%). In Latvia and Estonia the same indicator is 35% and 33% correspondingly.

A little more than a quarter of the Lithuanian population hopes that their living conditions will improve over the next five-year period, despite the real chance of being admitted into the EU during this time. And once again Latvians proved to be the most optimistic - approximately 40% of respondents thought their life would improve. For comparison: the most optimistic attitude towards the EU can be observed in Romania, which is one of the poorest candidate countries.

What about statistics?

Table 3 shows the current statistical figures characterizing the standard of living in the Baltic States. According to this table, Estonia has the highest average salary and the average income per household; Lithuania has the highest minimum wage, while the old-age pension is the highest in Latvia.

If the level of monthly income of an average Latvian resident (LVL 69.2) is compared to officially set wage minimum (LVL 89) it is obvious that not less than two thirds of the Latvian population do not reach this level.

It is interesting that in Estonia and Lithuania the share of monthly expenditure per household exceeds monthly income by 31 crown and 2.5 litas correspondingly (on the state level these are 250m crowns and 38m litas per annum). It means that the average Estonian and Lithuanian family is having debts. Latvian statistical information doesn't reveal such figures - expenditure and income as if are balanced here.

Indirect indicator revealing the standard of living is share of food expenditure. In Estonia this figure is the lowest among the Baltic States - 32% of all expenditure. For comparison: in the EU the figure accounts for 19%, in the USA - 13%, while in Romania these are 68%.

Food expenditure in Lithuania and Latvia exceed 40% of the total family expenditure. Besides, more prosperous Lithuanians spend on food only 28% of their budget, while less prosperous residents spend 65% for the same purpose. Moreover, in Lithuania the share of food expenditure in the first group of residents exceed the share of expenditure in the second group fourfold.

Of course, unemployment is another factor influencing the standard of living. Despite the current economic increase, the unemployment level remains high in all three Baltic States. According to the data, provided by the International Labor Organization (ILO), the highest unemployment level has bee recorded in Lithuania (15.6%), but the lowest in Estonia - 11.3%.

This indicator in the Baltic States is only little higher than the average level in the EU (up to 10%) and there is actual possibility to eliminate this difference before joining the EU.

Table 1

Share of GDP per capita in the Baltic States in 2002.

	euros per capita	percentage against the EU average
Latvia	3,570	30
Lithuania	3,960	33
Estonia	4,950	37

Source: EUROSTAT

Table 2

Affirmative answers to the results of Eurobarometer surveys

	Latvia	Lithuania	Estonia
Are you satisfied with your living conditions?	55%	39%	50%
Has your living standard decreased over the last five years?	35%	52%	33%
Do you expect your living conditions to improve over the next five-year period?	39%	27%	37%

Source: Eurobarometer, 2002

Table 3

A few indicators revealing the living standard in the Baltic states during the first quarter of 2002. (USD/per month)

	Latvia	Lithuania	Estonia
Average monthly salary	269	272	337
Average old-age pension	95	80	92
Minimum wage	94	107	103
Average family income per capita	109	105	131

Source: governmental statistics of the Baltic states