Boosting employment during economic recession

The economic downturn has affected working conditions and increased unemployment in Latvia. In November 2009, the unemployment rate in Latvia reached 15.1%. The proportion of registered unemployed people differs by region, with 42% of all registrations in the Riga region. However, unemployment in Riga is the third lowest in Latvia at 11.5%. To reduce the social effects of unemployment, the State Employment Agency has initiated several projects to support those affected.

Government policy to decrease social imbalance

According to the Support for Unemployed Persons and Persons Seeking Employment Law (110Kb MS Word doc) (passed in 2004) to encourage the involvement of unemployed persons in the labour market, the government seeks to promote active labour market measures and preventive measures with the aim of reducing unemployment. In November 2009, the registered unemployment rate in Latvia amounted to 15.1% or 169,300 people. Significant differences in unemployment emerge when measured by region: 42% of all registered unemployed people are registered in the capital city Riga and its surrounding region. This is determined by the historical concentration of a higher amount of residents and business activities in the Riga region – the region accounts for about 60% of Latvia’s gross domestic product (GDP). However, the unemployment level in the Riga region is third lowest in Latvia at 11.5%.

Types of measures pursued

Labour market promotion measures include: raising qualification levels, paid temporary employment, employment for specific social groups such as persons with disabilities and persons aged 15 to 24 years and above (Section 3, paragraph 4 of the abovementioned law), as well as vocational training in companies. Preventive measures to reduce unemployment include: career counselling services, qualification enhancement, promotion of workers’ regional mobility and adult training programmes.

Projects to promote training

Since September 2009, the State Employment Agency (Nodarbinatibas valsts agentura, NVA), with the financial support of the European Social Fund (ESF), has implemented three projects with the aim of supporting unemployed people, jobseekers and employees faced with the risk of unemployment. Under the Regulations regarding the Procedures for Organising and Financing of Active Employment Measures and Preventative Measures for Unemployment Reduction and Principles for Selection of Implementing Bodies of Measures (142Kb MS Word doc), the following projects have been implemented:

• vocational training for employees at risk of unemployment;

• unemployed persons and jobseekers training in Latvia;

• promoting work vacancies in local governments in order to develop and maintain work skills.

Unemployment benefits

Unemployment benefits aim to preserve the previous standard of living of unemployed persons. As Latvia’s fiscal policy in the current period of economic recession seeks to cut its budget expenses, the amount of average unemployment benefits has been reduced following the adoption of legislative amendments in July 2009. Data from the Central Statistical Bureau (Latvijas Statistika) and the State Social Insurance Agency (Valsts sociālās apdrošināšanas aģentūra, VSAA) show that the number of people receiving unemployment benefits increased, while the rate of average unemployment benefits declined (see Table 1 and Figures 1 and 2).

Table 1: Amount of unemployed persons in Latvia, 2002–2009, 3rd quarter (thousands)

	2002	2003	2004	2005	2006	2007	2008	2009
Total	118.8	123.1	114.6	99.4	73.9	70.7	87.3	214.9
Time spent without a job
Less than one month	6.6	6.6	6.9	8.8	10.7	19.1	13.4	11.9
1–2 months	12.4	14.7	13.5	11.9	14.7	13.9	20.6	33.8
3–5 months	17.6	25.5	16.3	15.1	13.7	10.7	15.3	40.2
6–11 months	26.6	30.2	24	19.2	11.5	13.4	14.2	65.5
1–2 years	16.1	20.4	21.5	13.6	6.2	8.2	10.8	38.2
2–4 years	17.5	8.8	14.7	10.7	5.5	...	3.1	13.9
4 or more years	22.2	16.9	17.6	20	11.7	4.3	9.7	11.3

Source: Central Statistical Bureau

Total amount of unemployment benefits paid, by month, 2004, 2008 and 2009 (€)

Average individual unemployment benefit, by month, 2004, 2008 and 2009 (€)

Employment promotion

In order to reduce the social effects of unemployment, the Latvian government has introduced a policy of employment promotion in local governments. According to this programme, local governments provide work vacancies for non-commercial purposes in structural units of local governments, institutions and agencies, and state social support centres.

An unemployed person participating in the programme ‘Training for receiving and keeping work practice if the employer is a local government’ receives a grant of €142 (about LVL 100 as at 23 December 2009) grant. The NVA provides both the grant and health check for the unemployed person if required, which does not exceed €28 (LVL 20).

An unemployed person who participates in the programme is insured against accidents at work as long as the terms of employment do not exceed six months a year.

Another NVA measure to promote employment during the economic recession is improving the qualifications of unemployed persons. From September 2009, the NVA, with funding from the European Union Structural Funds, has been implementing unemployment reduction measures, such as professional training using vouchers.

Employees working in the private sector who, due to the reduction of production capacity, are now part-time workers (a full-time job according to Latvian legislation amounts to 40 hours a week) can avail of training vouchers under certain circumstances – namely if they are employed for more than six months in the company and as long as their working hours have been reduced a month before applying for the programme.

The voucher is a guarantee bond for an employee at risk of unemployment, enabling them to choose an educational programme relevant to their work. The training expenses will be covered by the government to the amount of €711 (LVL 500) for a professional vocational education programme and €427 (LVL 300) for a professional postgraduate education programme. The minimum duration of training is six months.

The programme aims to involve at least 11,000 employees who may face the risk of unemployment up to 2013. This includes about 2,000 employees in 2009 who were at risk of losing their jobs.

Economic and social effects of labour market stimulation

In this current period of economic recession, an increased number of unemployed persons indisputably raises social inequalities within the Latvian population (Table 2). These inequalities should be addressed by economic policy.

Table 2: At risk of poverty rate in Latvia, by age group, 2005–2008 (%)

	2005	2006	2007	2008
Total	19	23	21	26
Age groups
0–17 years	22	26	21	25
0–59 years	19	21	18	20
0–64 years	19	22	19	21
0–74 years	19	22	20	23
18–24 years	17	18	17	17
18–64 years	18	21	18	20
25–49 years	17	19	16	18
50–64 years	20	26	23	25
18+ years	19	22	21	26
60+ years	21	30	33	46
65+ years	21	30	33	51
75+ years	22	32	36	58

Notes: The relative median annual income representing a risk of poverty in 2008 was €2,899 for a one-person household and €6,088 for a household with two adults and two children younger than 14 years of age.

Source: Central Statistical Bureau

Government measures that focus on reducing unemployment also stimulate growth of human capital, as well as preserving job vacancies and creating jobs in both the public and private sectors. Along with measures that aim to reduce unemployment, the Latvian Ministry of Welfare (Labklājības Ministrija, LM), with the financial support of the ESF, has introduced lifelong learning programmes for adults. Workers taking part in such schemes can raise their professional education level if they are full-time workers. These workers can study for up to one year, using a voucher to the value of LVL 150, LVL 200 or LVL 250 (€213, €284 and €355) depending on the course of study chosen. In total, LM, with funding from the ESF, will allocate more than €7 million (LVL 4.9 million) to the implementation of these measures.

Santa Antona and Irina Curkina, Institute of Economics, Latvian Academy of Sciences