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Trends and Problems in Latvian Welfare State

Trends and Problems in Latvian Welfare State. Feliciana Rajevska Vidzeme University of Applied Sciences. The neoclassical social policy approach.

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Trends and Problems in Latvian Welfare State

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

  2. 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.

  3. 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

  4. Growth in Employment • 2003 2005 2007 Goal -2010 • EU-27 62.6 63.5 65.4 70 • Latvia 61.8 63.3 68.3 67 • Women • EU-27 54.9 56.3 58.3 60 • Latvia 57.9 59.3 64.4 62 • Age 55-64 • EU-27 42.5 50 • Latvia 44.1 49.5 57.7 50 • 82 thousands or 17.4% of all pensioners were in labour market (data on August, 2008)

  5. Level of wages and salaries and labour productivity to the EU-27 • Latvia productivity wages&salaries • 2003 44.2% 15% • 2006 49.2 % 22% • 2007 56.7 % 28%

  6. Protection against unemployment • Duration of unemployment benefit since 2008 • 4 months - if work experience till 10 years • 6 months – if work experience 10-20 years • 9 months – if work experience more than 20 • Is it enough to receive new qualification and find new job?

  7. 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: 3 +3+3 • After – Local government social assistance benefit • Guaranteed minimum income - 30 LVL= 43 EUR

  8. 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

  9. 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

  10. At-risk-of-poverty rates • Year Latvia EU –25 • 2000 16 16 • 2005 19 16 • 2006 23 16 • Cut-off point: 60% of median equivalised income after social transfers; Eurostat, May 2008

  11. Social Protection Expenditure as % of GDP • Year Latvia EU-25 • 2000 15.3 26.6 • 2001 14.3 26.8 • 2002 13.9 27.1 • 2003 13.8 27.4 • 2004 12.9 27.3 • 2005 12.4 27.4

  12. Social Protection Expenditure per capita/per inhabitant • Year Latvia EU –25 • 2000 547 5359 • 2001 566 5595 • 2002 590 5835 • 2003 591 5982 • 2004 625 6216 • 2005 700 6442 • +153 + 1083

  13. Social Expenditure: in absolute terms € per capita, before joining EU • 2002 2003 • Lithuania 609.6 645.9 + 36.3 • Estonia 724.6 807.8 +83.2 • Source: Eurostat

  14. Expenditures on pension as % of GDP Country Latvia EU-25 Ireland 2001 - 6.9% 2002 - 6.6% 2003 - 6.1% 12.1% 3.7% 2004 - 5.5% 12.0% 3.8% 2005 - 5.1% 10.9% 2006 - 5.0%

  15. 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

  16. 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

  17. 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

  18. 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

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