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OECD Reviews of Labour Market and Social Policies: Latvia 2016

image of OECD Reviews of Labour Market and Social Policies: Latvia 2016

Latvia has undergone major economic and social change since the early 1990s. Despite an exceptionally deep recession following the global financial crisis, impressive economic growth over the past two decades has narrowed income and productivity gaps relative to comparator countries in the OECD. But Latvians report low degrees of life satisfaction, very large numbers of Latvians have left the country, and growth has not been inclusive. A volatile economy and very large income disparities create pressing needs for more effective social and labour-market policies. The government’s reform programme rightly acknowledges inequality as a key challenge. However, without sustained policy efforts and adequate resources, there is a risk that productivity and income growth could remain below potential and social cohesion could be further weakened by high or rising inequality.

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A volatile economy heightens Latvia's social challenges

During the pre-2008 boom years, per-capita GDP growth in Latvia was among the highest in the European Union, averaging some 8.5% per year between 2000 and 2007. But highly volatile economic growth, one of the highest levels of income inequality in the European Union and a rapidly declining population create a pressing need for effective social policies. They also highlight the importance of well-functioning labour market institutions that support a continuation of Latvia’s economic transformation, while encouraging the creation of employment opportunities for groups that remain underrepresented in the labour market.

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