Latvian Labor Market
In brief:
* the number of economically active inhabitants – 1.03 million (4th quarter 2011) or 50% of the total population;
* unemployment as a percentage of all economically active inhabitants – 14.3% or 165 200 persons (4th quarter 2011);
* average gross wages EUR 660 (2011), a 4.4% increase from a year earlier.
The level of unemployment and its structure
* The level of unemployment grew in Latvia from 2008 onwards. The low point for the labor market was in the 1st quarter of 2010, when the number of employed inhabitants shrank to 916 000 and the unemployment hit 20,5%.
* In the 4th quarter of 2011, there were 165 200 jobseekers in Latvia or 14,3% of all economically active inhabitants, which is 2,6 percentage points lower than in the year-earlier period. There were 986 600 employed persons (56,2% of all inhabitants between the ages of
15 and 74), of these 50,5% were women.
* The registered unemployment rate according to the State Employment Agency (NVA) was 11.5% as of the end of December, 2011. The number of registered unemployed in the country declined by 21% during the year. There were 43 jobseekers for every vacancy in early December, 2011.
* The number of vacancies has declined more than tenfold during the years of economic crisis. In 2007 the NVA registered, on average, 20 000 vacancies each month, but in 2011, the monthly average was 2 300 vacancies. The actual number of vacancies is considerably larger, because the NVA only registers vacancies that employers have agreed to fill from the ranks of the unemployed (these are not the most highly qualified jobs).
* At the end of 2011, the 11th largest bank in Latvia, Latvijas Krājbanka, went bankrupt with around 900 employees, which should affect unemployment statistics for 2012.
* The decline in unemployment in 2012 will be slower than in 2010 and 2011. Several factors are behind this: a decline in enterprise and consumer optimism because of the uncertain external economic climate will lead to a slower rate of job creation. There is a risk that, with a change in the structure of the economy and an increase in the role of tradable sectors (including exports) in the economy, structural unemployment will increase. The new temporary work program for the long term unemployed, partly replacing the so-called "100 lats" program, will be smaller and reflected in worsening statistics.
* Training of the unemployed is planned to start in 2012 in cooperation with employer organizations. The government estimates that an additional EUR 43 million will be necessary to support employment measures.
Supply and demand on the labor market
* Demand for labor is slowly growing in Latvia, including not only replacement vacancies (for existing jobs) but also vacancies for new jobs. Despite this activity on the labor market, there are still enterprise considering staff reductions and cost cutting.
* The importance of education, professional and work experience in the job-seeking process is increasing.
* In 2012, 60% of enterprises plan to hire at least a few new employees, but at the same time 68% of enterprises do not plan any change in wages, according to a survey by CVmarket.lv.
* The greatest shortages of labor are in IT, sales and engineering/technical specialties, according to a study by the Hay Group.
* Comparatively high growth in 2012 is expected in accommodation and food services, construction and information and communication services, which will be reflected in demand for labor. An increase in demand for labor is also expected in the transport and storage business, as well as in professional, scientific and technical services.
Remuneration
* Wage indicators have returned to growth after two crisis years: official statistics show a rise in gross wages of 4,4% in 2011 compared to 2010 to EUR 660. Wages increased both in the public and private sectors, by 4,7% and 4,6% respectively. An increase in wages was observed in all areas of the economy.
* One of the factors that have favored an increase in remuneration is the desire by enterprises to obtain experienced specialists and the overall positive mood on the market, according to Fontes.
* Most enterprises have implemented or are planning to implement a variable part of wages or a regular bonus system that is related to work performance.
* A slowdown of the rate of increase in gross wages is expected in 2012, with the rate falling under 4%. The strongest potential increase in wages is in export-related sectors, where the increase in productivity in the last few years has been higher than the increase in wages.
* The best-paid sectors in 2011 were finance, IT and pharmacy. There is competition for the good employees in the IT, sales and engineering/technical professions. Average monthly wages vary significantly between sectors.
* In any analysis of the Latvian labor market, one must take into account "the shadow economy" which has grown recently under the influence of the economic crisis. According to a study by the international management consulting company A.T.Kearney, the shadow economy amounted to 39,4% of GDP or EUR 5,127 billion. The services sector makes up the largest part of the "shadow economy". The government action plan contains several points that are aimed at reducing the shadow economy. According to estimates by the Employers’ Confederation of Latvia (LDDK), the state loses more than EUR 700 million in unpaid taxes from wages that are paid "in cash in an envelope".
Labor migration
* Relatively low average wages in Latvia, the inability to find work as well as a high debt burden has encourage the migration of local labor to other EU countries. Census data confirmed earlier estimates by experts of the high level of emigration: during the last 11 years, the population of Latvia decreased by 309 000, with more than half, or 190 000, due to emigration.
* The recent trend is that qualified labor is leaving the country, though relatively few depart to work in their professions. Most do unskilled work, earning more than they could in Latvia.
* Because of low wages, Latvia is not interesting to guest workers from third countries (outside the EU). Citizens of these countries may be employed if they have a residence permit or a visa with a work permit. The largest numbers of officially registered guest workers come from the CIS countries: Russia, the Ukraine and Belarus.
* EU citizens do not need work permits in Latvia.
It is useful to know:
* Minimum salary – 284,6 EUR.
* Working week – 40 hours, with five working days and two off days.
* Holidays per year in addition to Sundays – 12.
* Pensioning – 62 years of age, with job tenure at least 10 years.
* State social insurance mandatory payment rate is 35,09%, consisting of the employer payments – 24,09% and the employee payment rate 11%. Persons aged 15 years and older may be employed, however in employing persons younger than 18 years of age, certain requirements of the Labor Law should be observed.
* Remuneration for night work – not less than 50% of the hourly or daily wage rate as determined for a person. For overtime or work on off days – at least 100% of the hourly or daily wage rate as determined for a person.
* Vacations – every person has rights to the annual paid vacation. Such vacation may not be shorter than four calendar weeks, not including holidays.
* Interests of employees are protected in Latvia by Latvian Free Trade Union Association.
Useful links
Ministry of Economy – www.em.gov.lv
State Revenue Service – www.vid.gov.lv
State employment agency – www.nva.gov.lv
Office of citizenship and migration affairs – www.pmlp.gov.lv
Photo: Pilseta24.lv
