Automation Does Not Solve Skilled Labour Shortage at Baltic Companies
As labour costs rise in the Baltics, companies are investing in automation and artificial intelligence, yet this does not reduce the need for staff but changes the skills required. Small businesses in Latvia's regions are hit hardest.
Companies in Latvia and the other Baltic states are increasingly adopting automation and digital solutions, but this does not resolve the shortage of qualified workers: technology does not remove the need for people, it changes the skills expected of them. The problem is especially pronounced for small businesses in Latvia's regions, where demographic trends limit the available workforce.
Labour costs in the Baltics
Data from Eurostat, the European Union's statistical office, show that last year an hour of an employee's work cost a company on average 16.3 euros in Latvia, 17.8 euros in Lithuania and 21.1 euros in Estonia. These figures remain below the eurozone average, but costs are rising. In Lithuania, hourly labour costs grew by 9% last year, one of the fastest increases in the eurozone.
Rising costs are pushing companies to invest in automation, digitalisation and other solutions that raise productivity and help preserve competitiveness.
Business plans
A survey by the bank Luminor indicates that one in four small and medium-sized companies plans to invest in artificial intelligence and automation this year, as well as to increase spending on wages, employee training and talent development. Only 6% of small and medium-sized firms believe AI will allow them to cut staff in future. As a result, the need to invest in training is growing, which raises overall costs but helps companies retain skilled staff over the long term.
For small firms with turnover of up to one million euros, as well as for medium-sized and large ones, a key challenge is not only developing new skills but also keeping existing employees. In the regions, companies face a general labour shortage as well.
Labour market indicators
The Central Statistical Bureau's labour force survey shows the unemployment rate in Latvia was 7% in the first quarter of 2026. It rose slightly compared with the previous quarter, but year on year the changes are positive. The number of economically inactive residents rose to 427,400, pointing to a potential labour reserve.
Among young people aged 15–24, employment reached 31.6% (59,600 people employed), while youth unemployment fell to 9.4% (6,200 unemployed), the lowest level in 18 years.
