31/03/2016: The “OECD Reviews of Labour Market and Social Policies: Latvia” provides a series of recommendations for the government as part of its strategy to tackle the country’s demographic challenge, reduce inequalities in the labour market, boost productivity and improve living standards and well-being. This will be part of a wider review of these policies as part of Latvia’s accession process to the OECD.

Latvia’s highly volatile economic growth, one of the highest levels of income inequality in the European Union and a working age population that is shrinking faster than in any OECD country create a pressing need for effective social policies. Its future growth prospects rest on its ability to raise labour productivity: factors holding back improvements in this area include a large shadow economy estimated to represent around a quarter of GDP, high levels of long-term unemployment, as well as a significant skills shortage.

To increase productivity and reduce labour market inequality, active labour market policies should be strengthened and upskilling strategies should be more directly linked with the needs of employers. Efforts to curb informality and under-reporting of earnings should be maintained and stepped up further, including by reviewing a range of regulatory provisions that may currently push some groups of workers into informal employment.

Making social protection a priority is key, according to the report. The existing system of taxes and transfers does relatively little to reduce income inequality, an issue, together with poverty, that Latvians report very little satisfaction around the government’s efforts to tackle. At just over 16% of GDP, public social spending is well below the OECD average of 21%.

Among its recommendations, the OECD says that Latvia should:

• Sustain efforts in key areas where major progress has already been made, such as promoting work-based learning and enforcing applicable labour and tax law.

• Redouble efforts in areas where they are weak, such as connecting with Latvians abroad and promoting labour migration to ease current or future skills shortages.

• Review existing regulations, such as the minimum wage or formal language requirements for a wide range of occupations, to promote equal access to good-quality jobs.

• Make adequate social protection and employment support measures more accessible for those who need them, notably by improving coverage for jobseekers and addressing projected pensions gaps to reduce the risk of rising pensioner poverty.
  
  

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The report is available at http://www.oecd.org/countries/latvia/oecd-reviews-of-labour-market-and-social-policies-latvia-2016-9789264250505-en.htm

For comment or more information on the OECD Reviews of Labour Market and Social Policies: Latvia, journalists should contact Herwig Immervoll of the OECD’s Employment, Labour and Social Affairs directorate at [email protected]

For further information on Latvia’s accession process, go to: http://www.oecd.org/countries/latvia/oecd-sets-out-roadmap-for-latvias-membership.htm