The bank states that the income of residents in all three capitals of the Baltic states has increased over the past three years – since 2021, the average salary has grown significantly in Riga, Vilnius and Tallinn, however, this increase has not been uniform.
Evaluating the income after paying taxes and assuming that the family has two children and both parents earn the average salary in the capital, the most significant increase in the last three years was in Vilnius, where the salary “on hand” has become 42% higher. Meanwhile, in Riga, the corresponding net salary increase with two registered dependents was 29%, while in Tallinn it was the most moderate – 24%. However, in general, Riga families still have to reckon with the lowest average income among the Baltic capitals, while living with not the lowest costs.
The income available to the family is affected not only by the salary “on hand”, but also by the allowance for children, which is given to parents in each country, the bank says, adding that Lithuania maintains a leading position in the Baltics in this area as well – there the monthly allowance for two children is 192 euros , 160 euros in Estonia, and 100 euros in Latvia. However, in Lithuania, this allowance completely replaces the personal income tax relief for dependents, which is applied to workers in Latvia on a monthly basis with the salary payment, and in Estonia once a year as a refund of the overpaid tax after submitting the annual income declaration. Thus, the amount of income that remains at the family’s disposal after receiving family state benefits and paying labor taxes differs significantly in Tallinn, Vilnius and Riga and is 3,576 euros, 3,127 euros and 2,655 euros, respectively.
“Start-up capital before all payments are made in the capitals of the Baltic states is still different. While the average disposable income in the capitals of neighboring countries is above the 3,000 euro mark, it is well below this level in Riga. It must be admitted that since the last study was conducted in 2021, these differences have become more pronounced , because Lithuania’s income growth was even faster,” explains Evija Kropa, Head of Financial Literacy at Swedbank.
At the same time, looking at the same food basket in all three Baltic countries, the most expensive food this year is in Tallinn stores – an optimal and balanced food basket for a family with two adults and two children costs 737 euros per month. Riga follows with 640 euros, but the cheapest food can be bought in Vilnius, where a relevant food basket for a family costs 544 euros per month.
Food costs make up a significant share of family income: in Riga it is the largest – 24%, while in Tallinn 21%, and in Vilnius 17%, which is also the average share of the entire European Union for food products and non-alcoholic beverages.
“It can be said with relative certainty that the increase in food costs in the last three years has been felt by absolutely every resident in all three Baltic countries. However, it has also been different. The price of the food basket has experienced the fastest increase in Tallinn – by 38%, in Riga the prices have increased by a third or 32%, but in Vilnius the least – by 23%. As this is one of the largest and most important expenses for families, their impact on the budget is just as significant. As you can see, the increase in the prices of food in Tallinn was the strongest, while it was relatively gentler in Vilnius Tallinn’s higher income factor alone does not immediately guarantee the most favorable living conditions,” says Kropa.
According to the bank’s data, families living in Riga have to expect the highest housing costs – 288 euros per month. In Tallinn, these costs are 260 euros, and in Vilnius – 209 euros per month. Compared to the situation in 2021, this year the costs for Riga residents have increased most significantly – by more than half, or by 108 euros, while in Tallinn by 87 euros and in Vilnius by 85 euros. Evaluating these costs in more detail, it was concluded that they have increased both for management, heating, water supply and sewerage, and electricity. In Riga and Vilnius, heating expenses have doubled, but in Tallinn they have increased by 71%.
“In almost all items, except for electricity, residents of Riga have to reckon with the highest housing costs among the Baltic capitals. In addition, families living in Riga must also pay real estate tax, which families in Tallinn and Vilnius do not pay at all. The problem of shared ownership is also still significant, because not a small part of Riga apart from the real estate tax, apartment owners also pay land rent for the premises, which is included in the manager’s bill,” says Kropa.
Assuming that the family moves only by public transport and comparing these costs with the capitals of neighboring countries, for the first time in the history of the study, Riga no longer takes the leading role. A family living in Riga must pay 60 euros per month for public transport, while in Vilnius it costs 64 euros, while residents of Tallinn continue to use public transport for free. By implementing changes in public transport ticket prices, Riga families have the opportunity to save 40 euros every month.
After evaluating all three main cost items that a family living in one of the three capitals of the Baltic states has to deal with, it was concluded that Riga has passed the status of the most expensive capital to Tallinn, where the families living in it have to deal with the most expensive everyday life, according to the bank.
According to “Swedbank” data, the three main cost items – food, housing and transport – cost families in Tallinn 997 euros per month, in Riga – 988 euros, while living in Vilnius is the cheapest – 817 euros per month.
Due to the difference in income, families living in Riga have the least amount of money left to cover other needs after covering these three main expenses. Assuming that there are two children in the family and both parents earn the average salary in the capital, for other needs – clothing, household goods, health care, education, entertainment and other expenses – households in Tallinn have almost half more money (2579 euros) than in Riga (1667 euros) ), but in Vilnius, 2,309 euros are left to cover other needs.
“According to the results of the study, it can be seen that the price increase has required the entire salary increase, leaving the families living in Riga at the level of 2021. It can be concluded that Riga families still have to count on the lowest average income among the Baltic capitals, while living with not the lowest costs. the conditions make providing for the other needs of Riga residents much more challenging compared to Tallinn and Vilnius,” notes Kropa.
She also points out that the compilation of data does not allow us to hope for any positive changes, because in recent years we have been allowing the neighboring countries to confidently maintain and even increase their advantage. “It can be seen that without reforms, at least in the field of labor taxes, bringing them in line with neighboring countries, Riga will likely retain its status as the city with the lowest disposable income after covering food, housing and transport expenses,” says Kropa.
