Analytics, Employment, EU – Baltic States, Markets and Companies, Technology

"Everyone is looking after their overheads and trying to provide good services in a cost-effective way," Loov, H1's chief executive, said in a phone interview to Bloomberg. He sees outsourcing to Baltic region, which also includes Latvia and Lithuania, as an emerging trend, writes LETA/ELTA, referring to Bloomberg.

Searching for ways to boost profit margins as Europe's debt crisis weighs on sales growth, companies have been lured to the Baltic countries by lower wages, geographical proximity and language skills. Unemployment in the three former Soviet nations remains more than double pre-crisis rates and the jobs are deterring some workers from seeking opportunities in countries such as Ireland and Finland.

After enduring the world's deepest recessions following Lehman Brothers Inc.'s collapse, the Baltic region has boosted exports of non-transportation services by about 20% since 2009 as foreign companies set up back offices.

Among non-Nordic arrivals, Western Union Co. (WU) (WU) set up a regional operations center with 460 jobs in the Lithuanian capital, Vilnius, in 2011, while Samsung Electronics Co Ltd (005930) created a call center in Latvia's capital, Riga.

At EUR 5.5 an hour, Lithuanian labor costs were the second-lowest in Europe last year behind Bulgaria, according to Eurostat. That's eight times less than in Norway, Europe's most expensive at EUR 44.2. Finnish rates were the lowest among the Nordic nations at EUR 29.7, while Estonia's were the highest in the Baltic region at EUR 8.1.

Employment costs, excluding expenses related to running a remote office, such as business travel, can be from 50% to several times lower in Lithuania than in Scandinavia, said Donatas Ozelis, who manages an information-technology center in Vilnius for Danish engineering consultants Cowi.

The Baltic nations re-calibrated their economies after a debt-fueled property bubble burst, inflows of credit stopped and export markets closed, erasing as much as a fifth of gross domestic product. Exports now generate 75% of GDP in Estonia, 78% in Lithuania and 55% in Latvia.

Estonia's economy outpaced the rest of the European Union last year, expanding 7.6%, while Lithuania's grew 5.9% and Latvia's advanced 5.4%. Still, jobless rates top 10% across the region, where governments cut spending and raised taxes by as much as 15% of economic output in 2009-2010.

Barclays which opened an IT unit in Vilnius in 2010, now employs 700 people in Lithuania, exceeding an initial plan to hire 250 people within three years.

Projects like these may persuade some workers to stay at home, according to Cowi's Ozelis. "I know for sure we have hired a few people who were seriously considering leaving the country to look for a job," he said. "These are young people that could not find such opportunities in Lithuania".