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

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: ; +11%, -5%, -18%, -2%, +4.5% Household debt: : 5.7 bil LVL State budget deficit: %, -3%, -2.5%, 0.8% Outgoing migration: : > inhabitants

Three most afected Social policy areas : 6 o Child and family policy o Active employment policy o Social insurance system

7 Child and family policy Desperate fight for stable birth rate /30 Natural growth in Latvia

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 Employment policy High unemployment Basic reason of outgoing migration Registred unemployment level at State Employment agency (NVA)

Labour market 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

17 _________ ___ _________ ______ _________ ___ _________ ______ _________ ___ _________ ______ _________ ___ _________ ______ Population age structure change (%)

18 Projected average age for persons reached age 62, years

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

20 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 ) 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

22 Increase of retirement age in EU Estoniauntil 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 Lithuaniafrom 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 Republicfrom 2006 to 2030 retirement age will be increased up to age of 65 Germanyfrom 2012 to 2027 retirement age will be increased up to age of 67 Hungaryfrom 2012 retirement age will be increased up to age of 65 Maltauntil 2027 retirement age will increase up to age of 65 The Netherlandsin 2020 retirement age will be increased up to age of 66 and in 2025 up to age of 67 Sloveniauntil 2020 retirement age will increase up to age of 65 United Kingdomfrom 2024 to 2026 retirement age will be increased up to age of 66

23 Thank You!