1

Strugling Imbalances Impact of Demographic Trends

on Latvian Social Policy Making

Arvils Ašeradens

Parlamentary Secretary

Ministry of Welfare

2

According to EuroStat in 50 years

population in Latvia will be less then1.6 mil people Age structure change

2011/2060

120 000 100 000 80 000 60 000 40 000 20 000 0 20 000 40 000 60 000 80 000 100 000

0 - 4

5 - 9

10 - 14

15 - 19

20 - 24

25 - 29

30 - 34

35 - 39

40 - 44

45 - 49

50 - 54

55 - 59

60 - 64

65 - 69

70 - 74

75 - 79

80 - 84

85 - 89

90 - 94

95 - 99

100+

2011 2060

male female

Latvia - Census 2011,unpleasant surprise....

Natural growth rate

Migration ratio ?

Negative, How?

Number of inhabitants in Latvia during last two decades

has decreased dramaticaly:

290 th from 1989 – 2000 (11%)

309 th from 2000 – 2011 (13%)

4

PostCrisis

Latvia

Gross domestic product:

2007-2011;

+11%, -5%, -18%,

-2%, +4.5%

Household debt:

2007-2011:

5.7 bil LVL

State budget deficit:

2009-2012

-6%, -3%, -2.5%, 0.8%

Outgoing migration:

2007-2011:

>200 000 inhabitants

Three most afected Social policy areas :

6

o Child and family policy

o Active employment policy

o Social insurance system

7

41275

1841019664

20334

21677

23948

19219

41757

32421

3420032710 33042

29897

30040

15000

20000

25000

30000

35000

40000

45000

19

88

19

89

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

Number ofbirthsNumber ofdeaths

Child and family policy

Desperate fight for stable birth rate

2011 19/30 Natural growth in

Latvia 1988 -2010

8

Top priority of Latvian government

Council of Demographic Affairs • Cabinet’s Regulations of 12 April 2011 No 293 “By-law of the Council of

Demographic Affairs”

• Henceforth demographic matters shall be dealt with under direct subordination of the Prime Minister, thus enabling that demographic issues are solved in an integrated manner in all the involved branches, not just only in a single ministry’s supervised fields of competence

• The aim of the Council is to promote national demographic policy and its implementation in all the levels of state administration

• The basic composition of the Council is formed by the branch ministers, nongovernmental organizations with which a good cooperation has been developed and which possess certain level of competence related to demographic issues, additionally such institutions have been included, which have a significant role in the Council’s work, such as Parliament’s Commission of Social and Labour Matters and Parliament’s Commission of Human Rights and Public Matters, Commission of Strategic Analysis, Employers' Confederation of Latvia, Latvian Association of Free Trade Unions, NGOs representing families’ interests.

Employment policy

High unemployment

Basic reason of outgoing migration Registred unemployment level at

State Employment agency (NVA)

78

48

2

68

94

4

52

32

1

76

43

5

17

92

35

16

24

63

16

45

51

16

48

80

16

34

54

15

78

57

14

96

00

14

24

28

13

76

38

13

41

75

13

16

59

7.4

6.5

4.9

7

16

14.3 14.5 14.5 14.4 13.9

13.2 12.6

12.1 11.8 11.6

0

2

4

6

8

10

12

14

16

18

0

20000

40000

60000

80000

100000

120000

140000

160000

180000

200000

I II III IV V VI VII VIII IX

2005 2006 2007 2008 2009 2010 2011

bezdarbnieku skaits bezdarba līmenis,%

Labour market Three spheres of interaction

Education

System Labour force Industries

Social Security Net

Effective coordination of involved actors

Welfare

Ministry

Economy

Ministry

Business Incubation

Education

Ministry Life-long Learnig

Inovation

•Secondary schools •Profesional education •Universities •Science

•Bussines environment •Industrial policy

•Labour market development •Social security net

Employment Policy

12

age group 15-74 , th.

Employment policy chalenge 2015:

labour deficit Dinamics of labour suplay and demand

Labour supply-

economicaly active population

Labour demand-

number of people employed

13

Social insurance system

Social budget deficit presure

14

Social insurance system

Social tax rate – 35,09% (11% paid by employee, 24,09% by employer)

• pension insurance 26,74%

• insurance against unemployment 1,50%

• work injury insurance 0,41%

• disability insurance 3,16%

• maternity and sickness insurance 2,28%

• parental insurance 1,0%

15

Factors afecting

social insurance system

• Demographic indicators

(birth rate, mortality, migration)

• Macro-economical indicators

• The proportion of grey economics

• Political decisions

16

Social insurance system burden

persons employed/pensioners

805772

729701

661619

588628

778 759

0

100

200

300

400

500

600

700

800

900

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

number of pensioners per 1000 contributors, at the beginning of the year (January)

17

Population age structure change (%)

57,20%58,90%

65,60% 65,80%

62,00%59,90%

57,20%

51,20%49,50%

22,30% 23,20%20,60% 20,50%

23,10%

27,10%

30,90%

36,50%38,60%

0,00%

10,00%

20,00%

30,00%

40,00%

50,00%

60,00%

70,00%

1996 2000 2008 2011 2020 2030 2040 2050 2060

working age (15-61) over working age (no 62)

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Projected average age for persons

reached age 62, years

80,381,8 82,5

83,985,3

86,787,9

89,1

8583,6

82,180,5

78,877,1

75,675,6

65

70

75

80

85

90

95

1990 2000 2010 2020 2030 2040 2050 2060

men women

19

Changes over the Life Cycle

• Approximately one third of the life cycle

person is retired

• Rising life expectancy of persons increase

the period of retirement, at the same time

employment period declines

• In order to maintain appropriate

proportions, retirement age has to be

increased

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Proposed Amendments in Concept Paper

On the Long-term Stability of the Social

Insurance System

1) Gradual increase of retirement age from 62 to 65

starting from 2014: – for 3 months starting from 1 January 2014 and 1 January 2015

– for 6 months starting from 1 January 2016 to year 2020

2) At the same time increase of early retirement age up to age of 63: – for 3 months starting from 1 January 2014 and 1 January 2015

– for 6 months starting from 1 January 2016 to year 2020

21

Social insurance budget deficit/reserve

balance after expected change

-2300

-1800

-1300

-800

-300

200

700

1200

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

w ith planed reforms w ithout planed reforms

22

Increase of retirement age in EU

Estonia until 2016 retirement age for women will be increased up to age of existing

retirement age of men – age of 63. Starting with year 2017 retirement age will be

increased each year for 3 months until year 2024, when retirement age will be 65

Lithuania from 2012 retirement age will be gradually increased up to age of 65: for women

– each year for 4 months and for men – each year for 2 months

Czech Republic from 2006 to 2030 retirement age will be increased up to age of 65

Germany from 2012 to 2027 retirement age will be increased up to age of 67

Hungary from 2012 retirement age will be increased up to age of 65

Malta until 2027 retirement age will increase up to age of 65

The Netherlands in 2020 retirement age will be increased up to age of 66 and in 2025 up to age of

67

Slovenia until 2020 retirement age will increase up to age of 65

United Kingdom from 2024 to 2026 retirement age will be increased up to age of 66

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Thank You! arvils.aseradens@lm.gov.lv