Labour shortages due to emigration of Latvian workers
The high rate of emigration among workers is impacting on the local labour market and society. The reported number of emigrants from Latvia is about 50,000 people, but the real figure is likely to be higher. Employers claim that the resulting shortage of labour supply hampers their businesses as well as the development of the national economy. They have requested the government to prepare legislation enabling the employment of guest workers and encouraging Latvian citizens to return.
Growing economy requires more workers
The rapid changes in the Latvian labour market over the last two years have generated both economic and social effects. Latvia’s economic development has led to an increase in the number of people in employment. In 2002, some 989,000 persons were employed in Latvia; by 2005, this figure amounted to 1.04 million people. In the second quarter of 2004, 62.4% of residents aged 15–74 years were economically active (working or looking for work); of those, 56.3% were in employment compared with 57% in 2005.
Nevertheless, a noticeable labour shortage remains despite continuous high unemployment indicators in some regions.
Changing demographic trends
Since 2001, those born in the 1980s have been entering the labour market, and the birth rate during that decade was almost twice as high as the current level. Traditionally, Latvia has a high proportion of students in the younger age groups; experts thus forecast an increased supply of well-educated young workers over the coming years. However, the number of job seekers has actually fallen by an average of 12,000 people per year. It therefore seems that unemployment in Latvia is related to structural problems in the labour market.
Moreover, experts also predict that, due to the currently negative demographic trends, the number of people of working age could drop dramatically between 2010 and 2020. This would lead to significant changes in the structure of the workforce. It is anticipated that there will be a sharp decline in the number of young people aged 15–24 years as well as an increase in the number of those aged 45–64 years.
Emigration causes labour shortages
The increased emigration of Latvian workers, which is mainly driven by low wages in the local labour market, is exacerbating the country’s problem of labour shortages. According to estimates from the Ministry of Economy, about 50,000 Latvians have moved to other EU Member States; indeed, the actual number of emigrants may be even higher since illegal employment in other countries is highly likely (LV0512104F). Experts believe that Latvia can expect another wave of emigration as new labour markets open up in the EU.
In December 2005, the private and independent SKDS research agency (SKDS) revealed in a survey that about 139,000 to 207,000 Latvians in the 15–74 year age group are considering going abroad for work in the next two years. As a result, further labour shortages could lead to a reduction of 15% in production volumes in Latvia.
In recent years, emigration has necessitated real wage increases in the local economy in order to attract workers, but pay levels continue to be lower than in other accessible labour markets. While improved economic conditions can lead to a decline in emigration motivated by financial reasons, they will not reduce the emigration rate of people who are driven by the search for new experiences and knowledge. Nevertheless, it is anticipated that around one third of those who have departed will return.
Sourcing labour from abroad
State bodies have proposed several ways to compensate the labour force deficit, such as improving the quality of life, raising employment levels, increasing labour productivity and facilitating immigration. Any changes in these areas will affect the country’s labour relations and social cohesion.
In order to increase employment, the government plans to amend the Labour Law in the near future. Changes are expected in relation to the provisions regulating the recruitment and dismissal of workers, and working time in order to ease regulations in this respect.
However, bringing in low-cost foreign labour remains a politically sensitive issue and none of the parties involved – the government and employer representatives – is ready to implement regulations facilitating such procedures. Latvia’s Office of Citizenship and Migration Affairs (Pilsonibas un migracijas lietu parvalde, PMLP) has released figures showing that the number of people moving to Latvia has not increased after two years of accession to the EU.
Nevertheless, some information sources show that non-nationals are among those illegally employed in Latvia, including people from neighbouring countries. The employment of foreign workers thus seems more prevalent than statistical data indicate, and experts and business people increasingly express the need to employ workers from abroad.
Both emigration and immigration are sensitive issues and, if not addressed by the authorities, can lead to increased social tensions. For example, it seems that the open or hidden employment of foreign workers reduces the rate of wage increases in Latvia, but these pay increases are necessary in order to reach the level of other EU Member States. This consequence of curtailing wage growth generates dislike towards the new arrivals and maintains the problem of people emigrating to look for better pay elsewhere.
The government claimed that employers should create working conditions conducive to the return of Latvian workers, without specifying its own role in this process. In fact, Latvian enterprises have started to improve their employment offers in order to attract workers from other companies and less developed rural areas. They also hope to encourage workers who are currently operating outside the tax net with the offer of more secure employment. Meanwhile, some employers have called for eased immigration rules to address the labour shortages due to high emigration.
Evaluating the situation, trade unions consider that, in the near future, social dialogue will be vital in resolving labour market problems pertaining to: the employment of local labour and foreign workers; an increase in the minimum wage and overall wages; and working time and working conditions.
Political attention is currently focused on labour emigration processes and the protection of workers’ rights abroad. For example, there has been discussion about forming a union for Latvian workers in the United Kingdom where several tens of thousands of Latvians are working, according to official figures.
However, planning for the arrival of foreign workers in Latvia is also important at this stage. Even if it were possible to halt the departure of Latvian workers, increase employment levels and raise productivity levels, it will clearly be impossible to meet the labour requirements of a growing economy, based on demographic trends. It is therefore in the country’s interest to provide for the recruitment of qualified workers, including those from abroad, and to establish the appropriate conditions to attract them.
To date, difficulties remain in employing workers from abroad in Latvia. According to the Immigration Law, foreigners who wish to work in Latvia must receive a work permit. In early April 2006, the Latvian parliament (Saeima) amended the legislation on immigration in order to facilitate the procedures for issuing work permits.
Raita Karnite, Institute of Economics, Latvian Academy of Sciences