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Thursday, 28.03.2024, 20:44
Past experiences dampen Latvia’s appetite to patch looming labour gap
Accenture, a global IT company, this year conducted a promotional campaign looking
for workers in the Latvian regions. The incentive was an offer to work from
home. More than 100 people signed up.
The head of the
company’s branch in Latvia, Maksims
Jegorovs, is optimistic about the results as even some local governments
have expressed an interest. Valka, a town on the border with neighbouring
Estonia, has offered working space rent-free. The local government in Madona, a
small, mostly rural municipality of about 10,000 people in eastern Latvia, has
regularly inquired about the skills the company was looking for and local
schools have pushed towards math and computer science.
“The local
governments are very active. There is no political divisions like in a large
cities, so they approach their affairs pragmatically,” says Jegorovs. “I
am very happy with what I see.”
By the Latvian
standards, Accenture is a large company,
employing about 1,258 workers, with plans to expand to 2,000 in the near
future. To lure qualified workers the company uses local and international
headhunting firms, conducts intensive courses for students and re-trains adults
with non-technical degrees.
Jegorovs does
not sound worried about the potential shortage of labour. He hopes more people
would study IT in the future and the company would have a choice of workers.
The economy
ministry, however, paints a very different picture. In 2021, there will be the
surplus of about 10,000 professionals in humanities and social sciences. At the
same time, maths and engineering will face a shortage of 16,000 workers. Also,
about 30,000 people with vocational education will be needed on top of the ones
graduating that year.
After joining
the European Union in 2004, Latvia has suffered a dramatic population loss.
Many Latvians boarded planes to live and work in Ireland, United Kingdom and
other western European countries with a higher salaries and living standards.
As a result of mass migration compounded with the death rates exceeding the
birth rates, the population shrunk from 2.2 million people in 2004 to 1.9
million people in 2017, according to the Central Statistical Bureau of Latvia.
To grow or not to grow
If the “positive
scenario” by economy ministry sees the daylight, Latvia will need at least
35,000 extra workers by 2022. The number may be small on a global scale,
but for Latvia, this is similar to a medium-sized city.
The calculations
are based on assumption that GDP would grow by about 5% every year and looming
labour gap would transform the structure of Latvian economy, forcing the focus
to technological solutions and innovations instead of low wages and expenses.
As a result, the
population of Latvia would be only a little smaller than it is today: about
1.92 million.
If the GDP grows
2 to 3% a year (as it has been in the last few years), a negative scenario may
come to fruition and by 2030, Latvia’s population would drop to 1.64 million
people.
Estimates by Zane Vārpiņa, a demographer and an
assistant professor at the Stockholm School of Economics in Riga, show that by
then almost half of Latvia’s population would be 50 years or older. Every
fourth Latvian would be retired. Latvia’s population would shrink and age.
Illustration:
Lote Lārmane
This is why this
isn’t a question of economic growth, but also of the future of Latvia as a
nation, concludes the minister of economy Arvils Ašeradens (from the
ruling Unity party).
Historic fear returns
Latvia has a
history of influx of workers during the Soviet occupation, when the Soviet
government sent migrant workers from the other parts of the communist empire to
the Baltic nation with a purpose to build factories and russify the formerly
independent state, tipping the ethnic scale in favour of non-Latvians.
In the late
1980s, the plans to construct a subway system in the capital, Riga, drew
protests from ethnic Latvians, who feared that the influx of workers would
spell the end of the Latvian nation. The subway never materialised, but these
protests culminated in Latvia regaining its independence from the Soviet Union
in 1991. After the fall of the Soviet Union, those workers and their
descendants, many of whom are Russian-speakers, were not granted automatic citizenship
and their position continues to dominate the political life of Latvia to this
day. Failure to integrate the large parts of Russian-speaking population in
Latvian society has turned many Latvians fiercely anti-migrant.
Urgent changes needed
The fear to
pronounce the words “foreign workers” is reflected in the ideas how ministry of
economy proposes to fill the upcoming labour market gap. First proposal is to
motivate expats to return (target is around 22,800 people), followed by
retraining of existing workers (around 12,500).
Illustration:
Lote Lārmane
However, this
scenario would require significant changes in the education and the business
culture. Currently, the education system produces a lot of “cheap” laborers,
but demand for these professions would decrease in the future, the ministry
forecast shows. After graduating from high school, only two thirds of students
enter a university.
Compared to
other EU states, very few adults in Latvia seek to change careers to match the
market demands. They are likely to be unemployed.
“The standard of
secondary education is falling dramatically. It’s even more tragic in our
institutions of higher learning. The economy demands completely different
skills, but the education system, with a few notable exceptions, refuses to
change,” says Ašeradens.
He claims that
one positive example is found in vocational schools which have benefited from
the massive investment of EU funds. Although the number of students is slowly rising, Re:Baltica’s previous investigations have shown
that a modern equipment and a new shiny school buildings do not automatically
translate into the higher educational standards. One in five vocational school
students drop out. The ministry of education has no data what happens to them
after that.
The problem with
the business sector is different. The economy ministry blames poor foreign
language knowledge and lack of desire to innovate as key reasons why the
business sector is unable to change. “We try to keep a worker whom we pay very
little and in whose education we do not invest. We want to invest even less in
innovation, a new technological approach that would allow me to be competitive
with others,” says Ašeradens.
Low wages no more?
Illustration:
Lote Lārmane
Minister
Ašeradens believes that the labour shortage will force employers to change
as Latvians would no longer agree to work for low wages. This year saw a
sharp increase in the average wage (927 euros a month before taxes). The
ministry hopes that in 2018 it can reach 1,000 euros, and in the next five
years 1,500 euros. With that, the wages would move closer to the average
salaries in the countries that welcomed Latvian migrants after the country
joined the EU. It would also motivate them to return.
In many opinion
surveys, however, the Latvian expats say that apart from wages, stability and
security are important to them, and they don’t feel that in Latvia. Changes in
the education system are happening slowly, as demonstrated in the Re:Baltica’s earlier series about half-empty
schools, which local governments are afraid to close to improve education
quality in the others.
Top 3: Ukraine, Belarus, Russia
Latvia has very
few sources of additional workers. If the expats don’t return, locals cannot be
forced to retrain, and it is already too late to hope for more births, what is
left is immigration.
Accenture has already done that. Every fifth worker is a foreigner from one of
the 27 countries, including Lithuania, Canada, Argentina, Spain, Belarus and
Ukraine. The highest number is from the neighbouring countries, excluding
Estonia where wages are higher than in Latvia. Workers from Morocco and Egypt
see Latvia as an entry point into the EU.
The workers
at Accenture seem to match a profile of the guest
workers in the country, according to the data from the Department of the
Citizenship and Migration Affairs. In 2016, top three source countries for
guest workers in Latvia are Ukraine, Belarus and Russia.
Illustration:
Lote Lārmane
In the last five
years, their numbers has doubled. The government issued 6,007 work permits in
2016. Highly-demanded professions are long-haul truck drivers, which
account for almost half of all guest worker permits, followed by IT, catering
and construction.
Latvian government
will have to make a political decision – “smart” jobs or cheap foreign labour –
in very near future.
To facilitate
arrival of highly qualified workers, the ministry of economy has drafted a
list of professions where people can be brought in if no Latvian resident has
applied the job in two weeks (instead of the current one month).
But it got stuck
because the ministry of transport is asking to include also long-haul truck
drivers on the list. There is already a labour gap as a the job is physically
hard and the drivers spend a lot of time away from their families. It pays only
700 euros before taxes (not including a per diem). The ministry of economy
opposes the request because “then everything’s out the window. Businesses have
no motivation to think about innovation. This is why we intentionally put on
the list highly-qualified professions, which should force changes,” explains
Jānis Salmiņš, the expert at the ministry of economy.
Support for “controlled” migration
The loudest
opponents against guest workers are the right-wing National Alliance (NA),
which draws on support from mostly ethnic Latvians in the ethnically-divided
country. But even its board member Janis
Iesalnieks admits that the shortage of labour will not be solved with
higher birth rates because there are too few women in the fertile age. This is
why NA hopes automation and influx of highly-qualified workers is a solution,
but in much smaller numbers than has been proposed.
Illustration:
Lote Lārmane
“The artificial
intelligence is developing and in Latvia too innovative solutions are being
created, diminishing need for manual labour,” says Iesalnieks.
The chairman of
another party in governing coalition, the Union of Farmers and Greens (UFG), Armands Krauze believes a priority
should be attracting Latvian expats to return. Guest workers would be the last
resort, and they shall come from from countries whose mentality and culture is
similar to Latvia’s, such as Ukraine. UFG would not oppose attracting
guest workers for manual labour for farming (the party draws a lot of its
support from the countryside). “There are a lot of Ukrainian guest workers that
work in Poland and then we wonder why their products are cheaper,” says Krauze.
The largest
opposition party, Harmony, draws most of its
support from the Russian-speaking minority. Its representative Andrejs Potapkins says that there are
66,000 unemployed in Latvia, therefore finding 35,000 workers shouldn’t be
difficult. The party does not hope for expats as the salaries are still
low and the tax burden on smaller wages is high.
As a solution,
Potapkins proposes the creation of an effective retraining scheme. “If an
employer is ready to hire a foreigner, but is not ready to hire a Latvian
resident, helping him to gain necessary training, then the state does not
promote retraining of workers and does not motivate employers to invest in
retraining.”
Mārtiņš Bondars, a former
leader of the Latvian Regional Alliance, supports the tightly-controlled guest
worker program. Otherwise, he says, there would be not enough people who would
pay for pensions and social benefits.
None of the
questioned politicians has a clear plan how to implement all the listed
priorities. The politicians will likely avoid the question until the next
general elections in the fall 2018 in order not to lose their conservative
voters. “People are not ready to give their votes for the demographic issue,”
says Bondars. “If I were to say I am for controlled migration, part of voters
would not vote for me.”