Latvian national Observatory report 2000
MODERNISATION OF VOCATIONAL EDUCATION AND TRAINING IN LATVIA

2. Labour market background

2.1. Economic activity of the population

In November 1999 a total of 58% of the population was economically active. Compared with November 1998, the number of economically active residents aged 15 and older had decreased by 11,000 or 0.6%. A comparison of the distribution by age group of the economically active population shows that those in the age groups 20-24, 25-34, 35-44, 45-54 make up 80% to 90% of economically active inhabitants both in urban and rural areas (see Tables 9,10 and 11 in Annex 2).

The highest proportion of the total number of economically active residents is among those persons having completed higher education (78%) and secondary technical education (77.5%), this distribution is similar for economically active residents living in urban areas. In rural areas the highest proportion of economically active residents have completed secondary technical education (80.3%).

It is evident that there is a higher concentration of men than women in the economically active population both in urban and in rural areas.

2.2. Employment

The total number of employed persons has decreased in the space of a year (November 1998 to November 1999) by 17,700 residents aged 15 years and older, but in comparison with data of 1990 the decrease is 371,000. Changes have also occurred in the structure of the employed population - the number of employers and company employees has increased, while the number of self-employed persons as well as unpaid family members and relatives has decreased. In several age groups the level of employment has decreased. The most rapid decrease is in groups of ages 25-29, 30-34 and 50-54.

The majority of full-time employees have a certificate of secondary education. The largest proportion are holders of secondary vocational education diplomas (25.5% of the total population of employed persons in November 1999), or general secondary education diplomas (24%). The number of women having completed higher education still exceeds the number of men. In the space of this year the proportion of employed persons with higher education diplomas has increased by 1.1 percentage points. There has also been an increase in the proportion of employed persons with secondary vocational education diplomas (see Table 15 in Annex 2).

2.2.1. Structural changes in employment

Rapid changes are taking place in the employment of the Latvian population in different sectors of the economy. If up until 1992 the majority of the population was employed in the public sector, then as of 1993 there is a greater number of employed in the private sector. In the age groups 15-19, 20-24, 25-39 there is a larger proportion of persons employed in the private sector, however, in the age groups 40-59, 60 and over, a greater proportion of persons is employed in the public sector.

The greatest number of employed persons works in the service sector. In November 1999, as compared with the previous year, there were considerable decreases in the number of persons employed in agriculture, processing industry, as well as financial services, health care and social services and several other types of services. However, the greatest increase in numbers and proportion of employed persons has taken place in property managment, rental services and commerce, as well as public administration and defence, social security services. A small increase can also be observed in the education, hotel and restaurant, transport and communications sectors.

This shows that VET should implement more to client and service oriented programmes and reduce its typical to producing process oriented programmes.

2.2.2. Employment in the private sector

The proportion of employed in the private sector increases every year.

Table 2: The share of employed by sector, 1992 - 1999, (%)

 

1992

1993

1994

1995

1996

1997

1998

1999

Public sector

59

49

42

40

37

34

32

30

Private sector

41

51

58

60

63

66

68

70

Source: Statistical yearbook of Latvia 2000, Central Statistical Bureau of Latvia, Riga, 2000

The declaration of the Cabinet of Ministers states that one of the main tasks for rapid development of the Latvian economy is developing a favourable business climate. For this reason a prerequisite should be the establishment of a training and up-grading system for upper and mid-level managers. Perhaps this could happen in co-operation with the network of Enterprise Support Centres.

The demand for employees with a high level of education and good practical skills is increasing also in the private sector. On the supply side, the market provides a wide variety of training courses, but enterprises, especially SME, lack current assets to invest under conditions of rapid growth. For this reason private enterprises face a considerable risk in freezing large volumes of funds in a long-term investment - the qualifications of their staff.

2.2.3. Employment opportunities for graduates

Since young people who graduate from general secondary education have neither professional training, nor work experience, their chances of successfully competing on the labour market are low. The majority of secondary school graduates plan to participate in higher education. There is no data about employment of school leavers. The CSB Labour Force Survey shows that in May 2000 the greatest rate of employment was among people having

  • higher education (72% of those having higher education are employed);

  • secondary specialised (63%);

  • secondary vocational (including secondary technical) - 63%;

  • vocational without secondary - 56%.

The given figures show that educational attainment is highly connected with the rate of employment. The people who are highly educated have more opportunities to find their place in the labour market and to ensure a stable and secure life for themselves.

2.3. Unemployment

In the second half of 1998 and the first half of 1999 under the impact of the Russian crisis many enterprises were forced to lay off people. Unemployment rate reached its peak in April 1999 (10.2%). Yet starting with May unemployment started to go down at the end of 2000 the registered unemployment was 7.8% of economically active population. However, real rate of unemployment was substantially higher (according to the methodology of International Labour Organisation, the survey carried out by the CSB says that unemployment in the third quarter of 2000 was 13.1%).

Unemployment rate is considerably different in different regions and cities. The most difficult situation remains in Latgale where unemployment in some regions exceeds 20% of economically active persons.

The CSB Labour Force Survey shows the number of persons who is unemployed and seeks a job. In total the number of job-seekers has decreased by 5,000 (from May 1999 until May 2000).

The largest proportion of job-seekers was among the 20-24 year old population, but the 25-29 age group has seen the greatest increase in the proportion of job-seekers (see Table 17 in Annex).
In rural areas the proportion of job-seekers among the economically active population has increased, but in urban areas it has slightly decreased. An analysis of the distribution of the proportion of job-seekers among the economically active population according to gender and territory shows that the changes in proportion are irregular - the proportion of men in urban areas has increased, while for women it has decreased, however in rural areas the proportion of both men and women seeking jobs has increased.

The number of job-seekers by age groups, by gender and duration of job seeking is reflected in tables 17 and 19 in Annex 2. Labour Force Surveys show that three quarters of all job-seekers seek a job for a period of more than 6 months, but the average duration of job-seeking is 28 months. 58.4% of the total number of long-term unemployed are persons without a professional education, therefore it is hard for them to find a job.

According to the data of the SES, the proportion of registered unemployed has increased only among those persons who have a vocational or higher education diploma (see table 18 in Annex). The greatest decrease has been in the proportion of job-seekers having partially completed basic education, secondary technical and general secondary education.

The largest group of registered unemployed persons (see table 16 in Annex) are those who have pursued simple professions, and in the last years this stands at 26-27% of the total number of unemployed. The proportion of unemployed persons without a profession has been decreasing as of 1997 (5.4% in 1997, 4.7% in 1998). However, the largest proportion of unemployed persons are those with an incomplete or completed basic or general secondary education, but the lowest proportion is among those having completed higher education.

A comparison of the proportion of job-seekers among the economically active population with the level of registered unemployment in November and May 1999 shows completely opposite trends. The level of registered unemployment has decreased by 1 percentage point, but the proportion of job-seekers has increased by 0.5 percentage points. To a certain degree this is linked to the increased numbers of people who lose their registered unemployed status.

During 1999 118.3 thousands people lost their registered unemployed status (during 1998 85.4 thousands). 34.6% (36.6% in 1998) of them found job, but 58.4% (55.2% in 1998) did not follow the norms of law “On Employment”, that is after term of gaining the benefit for unemployed they did not continue to apply to the State Employment Service once a month, thereby they lost the status of registered unemployed.

2.4. Labour market policy

Labour market policy is an integral part of national social and economic policy. The labour market in Latvia is linked to the implementation of concepts and programmes developed for the promotion of economic growth (the medium-term economic strategy in the context of accession to the European Union, the National Programme for the Development of Small and Medium Enterprises, the Strategic Programme for the Development of the Education System, the National Programme on Youth Policy, etc.). The following priorities are set in the National Employment Plan for 2001:

  • improvement of the quality of the workforce;

  • promotion of youth employment;

  • reduction of the period of unemployment;

  • development of special programmes targeting re-integration of pre-retirement age unemployed into the labour market;

  • improvement of the quality and effectiveness of services for job-seekers and the unemployed.

Job-seekers’ clubs (JC) are an active employment measure. The goal of the clubs is to use psycho-social rehabilitation to promote the initiative, capacity for re-training and psychological adaptability to new labour market conditions of unemployed persons, as well as to prepare them to meet labour market demands.

In 1999 the quality and effectiveness of JC has improved, the demand for JC activities on the part of unemployed persons has increased. The following is evidence of the improved efficiency of JC:

  • the increased number of unemployed persons who find jobs after participating in JC activities;

  • the increased number of unemployed persons who take training courses offered by the SES after participating in JC activities;

  • the number of unemployed persons who continue to pursue other forms of JC assistance after participating in JC group activities, which indicates an increased level of initiative on the part of the unemployed persons in seeking their place in the labour market.

Another active employment measure is Paid Temporary Public Service, where unemployed persons who want to work but cannot find constant employment are involved.

In 1999, 2,586 unemployed persons, or 22.7% of those who participated in Paid Temporary Public Service (PTPS) projects found employment. In projects supported under the PTPS programme, the funding allocated for the creation of one new job in 1999 was 718 LVL, which was 117 LVL (or 13%) less than in 1998. The average monthly unemployment benefit is 48.07 LVL, which makes an average annual total of 432.63 LVL.

In regions suffering from the highest levels of unemployment, PTPS projects promote the development of small and medium enterprises, which in turn promotes the application of new technologies, manufacturing of new types of production and the development of the social infrastructure. In the 1999 PTPS project competition, 64 of the projects selected (47% of the total) were implemented in districts (Balvi, Preili, Rezekne, Kraslava, Ludza) and civil parishes.

It is expected that the development of institutional systems and strengthening of administrative capacity which is taking place in order to prepare for the EU Structural Funds will be actively pursued in Latvia at least until the end of 2002. During this period it is necessary to prepare the organisational structure, raise qualifications of staff and the capacity for quick and efficient flow of funding of the institutions of the Ministry of Welfare. This must be done in order to be able to absorb the assistance offered by the EU Structural Funds (or Phare Pre-structural Funds prior to accession) in a transparent and professional manner. Accordingly, there is a need to:

  • train staff in basic principles, prerequisites and conditions of EU structural policy and implementation procedures,

  • develop an efficient instrument for the administration and co-ordination of EU financial assistance in order to successfully meet the requirements of the decentralised implementation system of EU funds;

  • acquire management methods and technologies of EU funded programmes and improve project follow-up skills according to international best practice.

The person responsible for the expenditure of funds allocated to the welfare sector is the Senior Official of the Ministry of Welfare. The Senior Official of the Ministry of Welfare co-ordinates the technical management of EU Phare projects, but the administrative and financial management of welfare sector projects is ensured by the Central Financing and Contracting Unit (Implementing Institution), which is subordinated to the Ministry of Welfare.

2.5. Future skill needs of the economy

No set of forecasting methods has been developed yet on the national level and it is difficult to make future projections on what kinds of professions and how many employees will be needed. Employers surveys are organised (by the State Employment Service) on the regional or sectoral level, according to which it is possible to judge what kind of profile will be in demand in the near future (in 1 year or slightly longer).

One of the priorities of the vocational education system is to perform a methodologically sound analysis of sectoral labour needs and competences, and to begin developing a national qualification infrastructure based on the results. In the framework of the EU Phare programme methodology on sectoral surveys was developed.

In the framework of the EU Phare programme “Vocational Education and Training 2000” surveys of the information technology, telecommunications and electronics (ITTE) sector and construction sector were carried out. They present data on future labour force needs in these sectors.

It is considered that the demand for ITTE specialists will increase more than twice in the following 3 years. The number of university graduates in the ITTE field must be expanded as much as possible - at least by three times. According to the study of Latvia’s ITTE companies, specialists with fourth level vocational qualifications are in greatest demand. The results of the survey of Latvian ITTE companies show that the largest increases in staff numbers can be expected in these professions: software designers, software project mangers, system analysts, software product testers, ITTE consultants, computer network and system administrators and others related to development and servicing of software and Internet applications.

The survey of Latvian construction companies shows that an increase in staff number can be expected at all levels of qualifications. The greatest increase of demand (30%) in the next three years is expected for specialists having vocational qualifications of level 4 and 5. The increase of demand for low qualified workers is expected to be only by 5%.

2.6. Conclusions as regards the key labour market issues and their influence on aspects of human resource development

  • The state economy has overcome results of Year 1998 economic crises. The rate of registered unemployment has decreased from 10% at the middle of 1999 to 7.8% at the end of 2000.

  • It must be noted that radical socio-economic disparity exists among Riga and rural regions (for example, in Latgale and Vidzeme GDP in 1999 was 16% and 19% of the EU average level, but in Riga - 37%). In 1999 in Riga the average salary was 116% of the average in the country. The employment rate in Riga was 9%, but in Rezekne - 35%. Therefore young people leave rural areas, the labour force and intellectual potential is concentrating in Riga.

  • There are significant disparities in the dispersion of foreign investment, as 65% of the total investments in Latvia are concentrated in Riga and the surrounding region.

  • The state support to small and medium enterprises is insufficient. The main barriers to small and medium enterprises development are insufficient financial resources for starting up and developing business, limited opportunities for receiving credit, a tax system that doesn’t offer incentives. It is difficult for small enterprises to survive in the process of globalisation.

  • Since 1991 the natural increase is negative. The population is aging more rapidly. That will lead to decrease of schoolchildren and of people who reached the age of entering the potential labour market in the following years.

  • The structure of employment is changing. The proportion of employed in services is increasing (53.2% in 1997, 58.7% in 2000), but in agriculture and fishing is decreasing (21.6% in 1997; 14.5% in 2000). Due to process of privatisation the share of employed in private sector is increasing.

  • In 1999 in SES there was demand on the labour market for employees in 288 professions, but the SES register included unemployed persons representing 2,142 professions. Of course, labour quality criteria are increasingly more demanding. An analysis of long-term job vacancies performed by the SES last year provides evidence that employers require workers with excellent theoretical knowledge and well-developed practical skills.

  • Therefore, in order to ensure the correspondence of the educational qualifications of Latvian residents to the current and future demands of the labour market, one of the priorities in human resource development is the development of regional administrative infrastructure for the implementation of labour development policy.

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