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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 • • • • • • • • • • 2003 2005 2007 62.6 63.5 65.4 61.8 63.3 68.3 Goal -2010 70 67 EU-27 Latvia 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 Level of wages and salaries and labour productivity to the EU-27 • Latvia • 2003 • 2006 • 2007 productivity wages&salaries 44.2% 49.2 % 56.7 % 15% 22% 28% 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? 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 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 • 2000 • 2005 • 2006 16 19 23 EU –25 16 16 16 • Cut-off point: 60% of median equivalised income after social transfers; Eurostat, May 2008 Social Protection Expenditure as % of GDP • • • • • • • Year 2000 2001 2002 2003 2004 2005 Latvia 15.3 14.3 13.9 13.8 12.9 12.4 EU-25 26.6 26.8 27.1 27.4 27.3 27.4 Social Protection Expenditure per capita/per inhabitant • • • • • • • • Year 2000 2001 2002 2003 2004 2005 Latvia 547 566 590 591 625 700 +153 EU –25 5359 5595 5835 5982 6216 6442 + 1083 Social Expenditure: in absolute terms € per capita, before joining EU • • Lithuania 2002 609.6 2003 645.9 + 36.3 • Estonia 724.6 • Source: Eurostat 807.8 +83.2 Expenditures on pension as % of GDP Country Latvia 2001 - 6.9% 2002 - 6.6% 2003 - 6.1% 2004 - 5.5% 2005 - 5.1% 2006 5.0% EU-25 Ireland 12.1% 12.0% 10.9% 3.7% 3.8% 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 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