Changes in state support policy for families with children
Amendments to the Law on Maternity and Sickness Insurance were due to come into force on 1 July 2009. They stipulate that only one parent, who does not work, is entitled to receive parental benefit during the childcare period. They also reduce state family benefit, calculating the amount for each child aged one to 15 years. To receive financial support from international institutions, the budget deficit in Latvia in 2009 should not exceed that defined by the Maastricht criteria.
State benefits for families with children
The following types of family state benefits are provided in Latvia:
- maternity benefit;
- child birth benefit;
- childcare benefit;
- paternity benefit;
- parental benefit;
- family state benefit.
All of these types of benefits are negatively affected by the state budget curtailments.
From 1 July 2009, the average amount of the family state benefit and parental benefit provided by the state will be reduced along with the period of entitlement.
Family state benefit
In accordance with the law in force until 1 July 2009, the family state benefit was provided for each child in the family from the day of birth up to the age of 15 years. If the child continues to receive a general or professional secondary education and does not receive a grant, the child is entitled to receive a family state benefit till the age of 20 years, providing he or she does not marry.
Under these provisions, the family state benefit is granted to the following persons:
- one of the child’s parents;
- a child’s guardian or the person who is actually rearing the child and who is approved by the orphans’ court (parish court);
- the child on reaching the age of 18 years, if the child has been under guardianship up to that age.
The family state benefit amount varied with the number of children in the family:
- for the first child, the benefit amounted to LVL 8 (about €11.50 as at 7 July 2009) a month;
- for the second child, LVL 9.60 (€13.80) a month;
- for the third child, LVL 12.80 (€18.40) a month;
- for the fourth and subsequent child, LVL 14.40 (€20.71) a month.
From 1 July 2009, family state benefits will be provided for each child in the family aged between one and 15 years and up to the age of 19 years if certain conditions are met.
- There are some transitional provisions: for a child born before 1 July and during a period of 306 days after that date, family state benefits will be paid from the day of birth, not from the age of one year. New legal regulations will be applied to these families from 3 May 2010.
- From 1 July 2009, the family state benefit amount will not be contingent on the total number of children in the family, which means the abolition of the differentiation between families of different sizes. The family state benefit amount for each child in the family will be the lower rate of LVL 8 (€11.50) a month.
- The number of recipients of family state benefit in April 2009 was 382,123 persons, while the average amount of the benefit was LVL 9.39 (€13.50). The number of recipients of the benefit decreased by 17% compared with 2001, while the average amount of the benefit increased by 78%.
The parental benefit is granted to one of the parents in the following cases:
- the parent is caring for a child younger than one year old;
- the parent is employed on the day the benefit is approved;
- the parental benefit consists of 70% of the average monthly social insurance contribution but no less than 70% of double the amount of the state social security benefit – currently LVL 63 (€90.61) a month;
- the average monthly insurance contribution wage is calculated for a period of 12 months. The calculation is made on the basis of the date of birth minus the previous three months.
- From 1 July 2009, the parental benefit will be decreased by 50% for all employed parents, irrespective of the date of the child’s birth. The maximum amount of the parental benefit will be defined. Moreover, parents of a child born after 1 July 2009 will no longer receive more than 50% of the maximum allowance of LVL 500 (€719) a month. The benefit will be granted to one of the child’s parents, who is not employed and is caring for a child younger than one year old.
- The maximum amount of the benefit will not affect the benefits granted before 1 July 2009. However, also in this case, employed parents will not receive more than 50% of the maximum LVL 500 (€719) a month.
- In the case of a child born after 3 May 2010, the parental benefit will be granted to the parent who is on leave for childcare purposes and is not employed until after the child’s first birthday.
All of the abovementioned amendments have been passed after difficult negotiations between the social partners. Demography experts are anticipating a decrease in the birth rate in Latvia as a result of the changes in benefit policies. The consequence of this may be an intensification of the negative natural population growth in the country and may lead to social and economic consequences, such as a reduced labour force and human resources, heavy tax burdens and an increasing proportion of older people in Latvia’s national economy in the future.
Andrejs Berdnikovs, Institute of Economics, Latvian Academy of Sciences