Giving people better opportunities to participate in the labour market improves well-being and strengthens economic growth. Better labour market and social protection policies help countries to cope with rapid population ageing by mobilising potential labour resources more fully. Many OECD countries achieved record employment levels prior to the global financial crisis, but in all countries employment rates differ markedly across population groups. High unemployment, weak labour market attachment of some groups in society, and frequently unstable, poor-quality employment reflects a range of barriers to working or moving up the jobs ladder. In many countries, the crisis has accentuated long-standing structural problems that are causing these disadvantages. It is a major challenge for policy makers in the coming years to address these problems and make OECD labour markets and, thus, OECD economies more inclusive.

This review discusses the evolution and performance of active labour market policies in Latvia since 2012, as the Latvian labour market emerged from the particularly severe effects of the global financial crisis. In the immediate aftermath of the crisis, Latvia experienced one of the largest increases in the unemployment rate – 15 percentage points – of any OECD country and Latvian workers experienced a drop in both real and nominal wages. Yet the recovery from the crisis was relatively strong and rapid, and Latvia’s unemployment rate halved between 2010 and 2015. Nevertheless, in 2018, the unemployment rate was still at 8%, close to pre-crisis levels in Latvia, but above the OECD average. Moreover, long-term unemployment has remained a challenge in Latvia: in 2017, just seven other OECD countries had a higher proportion of the labour force unemployed for 12 months or more.

In the aftermath of the financial crisis, Latvia had experienced one of the largest increases in unemployment – 15 percentage points – among all OECD countries and falling real as well as nominal wages. During a strong recovery, Latvia’s unemployment rate halved between 2010 and 2015. At 8% in 2018, it was close to pre-crisis levels but remains above the OECD average. Latvia’s employment and participation rates have risen beyond pre‑crisis levels and OECD averages, respectively reaching 63% and 78% in 2018. However, most sectors have not fully regained the absolute levels of employment they exhibited before the crisis, substantial numbers of unemployed persons have left the labour force or emigrated from Latvia over the past decade, and high unemployment rates persist in some regions and demographic groups, such as youth and older men.

This chapter provides an overview of recent economic and labour market developments in Latvia, draws on a range of data sources to analyse current unemployment from several angles and identifies vulnerable groups of jobseekers in the Latvian labour market.

This chapter provides overviews of both active and passive labour market policies in Latvia. First, it presents the set of active labour market policies available to jobseekers. Second, it provides a brief description of the social benefits system and its possible implications for work incentives. The chapter then reviews the activities of the main actors involved in the design and implementation of labour market policies and most importantly of the State Employment Agency (SEA) and municipalities. Special attention is given to the SEA’s engagement with jobseekers and employers, the role of caseworkers and the co‑operation between the SEA and municipalities.

Training for the unemployed has remained a key component of active labour market policy in Latvia. This chapter assesses how effective such trainings have been in helping unemployed people access good jobs and considers how training provision could be improved using detailed, linked administrative data. The chapter finds that training for the unemployed has had positive effects on individuals’ chances of (re-)entering employment and on earnings among those who found a job. While these effects differed according to the gender, age, and social assistance receipts of training participants, virtually all types of participants benefited from taking part in training for the unemployed. In addition, combining training with other active labour market policy measures, especially measures to support regional mobility, appeared to boost effectiveness. On implementation, the chapter directly considers the implications of providing training for the unemployed through a voucher system.

Active labour market policy in Latvia faces particular challenges in some regions outside the metropolitan area of Riga. This chapter documents differences between Latvia’s regional labour markets before focusing on two aspects: the regional mobility of unemployed persons and the role of entrepreneurship in reducing regional unemployment. In this context, the chapter assesses ALMP programmes that foster mobility between regions and start-ups from unemployment.

This Chapter analyses the labour market situation of Latvia’s most vulnerable groups, mainly the long-term unemployed, young and old unemployed persons and persons with disabilities. First, it presents recent trends in unemployment, disability and Guaranteed Minimum Income benefit recipiency and examines the extent to which certain population groups are dependent on these benefits. Second, it conducts an in-depth assessment of Latvia’s employment subsidy programmes that focus on the most vulnerable groups. Finally, the Chapter discusses Latvia’s Public Works Programme that was extensively used during the economic crisis as an income support measure combined with activation support.