Latvia in search of a social policy model

Latvia: Both Sides of the Economic Recovery Success Story

Latvian social policy is close to the neoliberal model of the welfare state based on macroeconomic indicators of low welfare state spending, high income inequality, low minimum wage and low degree of decommodification. Latvia was among the first countries to be stung by the crisis in 2008. Key words became: austerity, fiscal consolidation and structural adjustment measures. A minimum social safety network was introduced to improve targeted social support. Funding from the European Social Fund was instrumental in mitigating unemployment, facilitating a large temporary works programme. Latvia joined the Euro zone in 2014 and is quite successfully returning loans. Such is one side of the succe…

Social policy reforms in Latvia

Why the share of small amount pensions is so substantial in Latvia?

More than 70% of all old-age pensions in Latvia are smaller than 300 euro, which is close to the monetary value of the at-risk-of-poverty threshold. There is a number of reasons for it: the lack of non-contributory component and inadequately low minimum pensions, the absence of redistribution mechanisms in the mandatory notional defined contribution (pillar I) and funded (pillar II) schemes, an unfair conversion of pre-reform employment record into pension formula, and a high tax burden on pensioners. The authors proposed a package of measures to improve the situation: an introduction of basis pensions, linking minimum pensions to the country average wages, increasing income tax exempt for …