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Wednesday 21.03.2018 | Name days: Una, Unigunde, Dzelme, Benedikts

Economic Diary of Latvia. On labour quality, games with social tax and altruism

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Baltic news, News from Latvia, BNN.LV, BNN-NEWS.COM, BNN-NEWS.RUThanks to statistical institutions of Europe and Latvia, it is possible to construct a general outlook about the employed people in Latvia, their work hours and they pay.

Because labour quality is one of the main components for the country’s overall competitiveness, this matter is not something to be overlooked.

Latvian residents work 32.2 years on average, which is slightly below the average index in the EU (35.4 years), according to data from Eurostat for 2015. In Estonia, average life expectancy of employed residents is 37 years (34.8 years in Lithuania).

The longest average labour life expectancy is found in Sweden (41.2 years), Netherlands (39.9 years), UK (38.6 years) and Germany (38 years). The shortest life expectancy is found in Italy (30.7 years), Bulgaria (32.1 years), Greece (32.3 years), Belgium, Croatia, Poland and Hungary (32.6 years each) and Romania (32.8 years).

Last year, the average labour life expectancy was 35 years for women and 35.4 years for men in Latvia. In Estonia, this index was 36.4 years for women and 37.6 years for men. In Lithuania, it was 35.1 years for women and 34.5 years for men.

In 2015, average labour life expectancy had increased in all EU member states when compared with 2014. The largest increase was registered in Malta (+5.1 years). In Latvia, it was 2.1 years (3 years in Estonia and 2.9 years in Lithuania).

The level of economic activity among women in Latvia exceeds the average level of activity for women in the EU by 4.9 percentage points, according to data from the Central Statistical Bureau of Latvia.

In 2015, women in Latvia worked on average 4.5 hours a week longer than other women on average in the EU. In Latvia, this index was 37.4 hours (32.9 hours in the EU). Men in Latvia work more or less the same hours as men in the EU in general – 39.2 hours a week.

Women in Latvia are most often employed in professions like customer service and trading (75.3% in 2015) and low-level office workers (74.1%). The most typical male professions in Latvia include – machinery operators, qualified workers and craftsmen (83.6%).

Women in Latvia usually earn less than men, which is a trend common for other EU member states. In 2015, average gross wages of women were 16.2% smaller than wages of men.

Social tax games

The regulation regarding mandatory payment of minimal social fees for employees, which is set to come into force on 1 January 2017, may be clarified. The government is currently busy reviewing additional cases for exceptions. In such cases, this regulation will not be applied, as reported by Prime Minister Maris Kucinskis.

For example, if a person has main job and an additional job in an NGO, there will be no requirement for that person on the next job. There is also an option to combine. There will not be many exceptions, as the largest portion of the current system is associated with envelope wages. But when it comes to social insurance service, it is not about partial unemployment benefits or partial healthcare services, said Kucinskis.

The prime minister believes the majority of complaints towards planned changes come from lack of knowledge. This is why it is planned to open a phone hotline in SRS to provide accountants and other interested parties with the necessary information.

To provide even the most basic social guarantees to people whose wages are below minimal, a minimal threshold of mandatory social insurance fees will be adopted on 1 January 2017. Amendments to the State Social Insurance Tax Law state that the employer is to cover the difference even for part-time employees.

This will apply to micro enterprise employees. The minimal social insurance fee amount will be around EUR 97. The payment of said fee will be performed by the employer.

Alcotourism blooming away

There are certain economic sectors that are doing well in Latvia at the moment. BNN had previously mentioned the topic of alcotourism. This week, this topic developed further. On 19 September, Estonian Raihan Group began performing direct bus trips from Tallinn port to Alko 1000 stores in Valka and Ainazi. It is planned that buses will course once a week on this route. A trip from Tallinn to Valka and Ainazi will cost EUR 45-50. Passengers will have one hour to make their purchases.

As reported by the manager of Alko 1000 in Valka Mielis Reiljans, 99% of customers of this network of stores are residents of Estonia.

In February, excise tax on alcohol in Estonia was raised by 15%. The government also plans to raise the tax even more in the future. Because of that, more and more Estonian residents have been travelling to Latvia specifically to purchase alcohol at lower prices this year.

A very acceptable budget

Another piece of good news:  the European Commission announced the end of assessment period for state budget projects of EU member states for 2017. The commission found Latvia’s state budget plan more or less acceptable with requirements of the Stability and Growth Pact.

EC found budgets of five EU member states to be acceptable: Estonia, Luxembourg, Netherlands, Slovakia and Germany. Budgets of those countries fully comply with requirements.

Budget projects of Latvia, Austria, Ireland and Malta mostly comply with requirements. Some of those countries have certain deviations from objectives of the medium-term budget plan.

Budget projects of Lithuania, Belgium, Italy, Cyprus, Slovenia and Finland, on the other hand, create risks of non-compliance with requirements set by the pact.


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