Trends and Problems in Latvian Welfare State Feliciana Rajevska Vidzeme University of Applied Sciences

The neoclassical social policy approach The development of welfare institutions is the outcome of complex negotiations among historical legacies, political and institutional settings, The development of welfare institutions is the consequence of strategic interactions of national and international actors.

The main trends in Latvia in the development of Welfare State From paternalistic etatist socialist policy towards neo-liberal model of social policy; removing responsibility about person’s welfare from the state and community to individual; Growth of inequality and polarization of income Decrease of state social expenditures as %of GDP Growth in employment

Growth in Employment Goal EU Latvia Women EU Latvia Age EU Latvia thousands or 17.4% of all pensioners were in labour market (data on August, 2008)

Level of wages and salaries and labour productivity to the EU-27 Latvia productivity wages&salaries % 15% % 22% % 28%

Protection against unemployment Duration of unemployment benefit since months - if work experience till 10 years 6 months – if work experience years 9 months – if work experience more than 20 Is it enough to receive new qualification and find new job?

Amount of unemployment benefit is earning related 50-65% from previous earning dependent on longevity of work experience No any ceiling and no any minimum sum Periodical reduce of amount 4 months: 2months (100)+2 months (75) 6 months: (2)100% +(2)75%+(2)50% 9 months: After – Local government social assistance benefit Guaranteed minimum income - 30 LVL= 43 EUR

Flexicurity Flexicurity is becoming central Integrated strategy to enhance at the same time flexibility and security in the labour market Solidarity – to promote social cohesion and sustainability; Such areas of social investment as youth and professional transition are becoming crucial

Consequences for crisis time High level of insecurity, especially for young persons; Heavy burden of social protection for local governments Amount of guaranteed minimum income is insufficient for survival

At-risk-of-poverty rates Year Latvia EU – Cut-off point: 60% of median equivalised income after social transfers; Eurostat, May 2008

Social Protection Expenditure as % of GDP Year Latvia EU

Social Protection Expenditure per capita/per inhabitant Year Latvia EU –

Social Expenditure: in absolute terms € per capita, before joining EU Lithuania Estonia Source: Eurostat

Expenditures on pension as % of GDP Country Latvia EU-25 Ireland % % % 12.1% 3.7% % 12.0% 3.8% % 10.9% %

Common Features of Welfare states in Baltic coutries Lowest share of social expenditure High income inequalities Weak civil society Low labour movement Insurance based social security with some element of targetting in the system

Empowerment state Policy-makers and politicians should now turn towards an “empowerment state”. This will be the key of success for future social policies. There is clear support in the world for socially responsible welfare state, for more active government intervention; Latvia – state social safety allowance (valsts sociālā nodrošinājuma pabalsts) 50 EUR –in 2005; 65 EUR in 2006,2007, 2008, 2009

Need to revise priorities and to redefine approach to security issues Crisis reduces opportunities for funding Crisis increases the demand for social support Traditional approach look on this as an individual of family problem only is not productive, it is even dangerous for the stability of society Creating and keeping up political will to respond on this challenge is becoming crucial for government, for parliament, for local governments, for civic society in general Charity channels only cannot fulfill this mission, more redistributive approach should be implemented

Security is not defense only An excessive devolution of responsibilities to the individual might not ensure basic social security. Latvia needs crisis management activities in social sphere