Poverty has been studied extensively in economies in transition since the beginning of the 1990s, but the dynamics of living standards have received scant attention. A 1998 survey of 3,200 households in Latvia sheds some light on the perceptions of households about the effects of transition. The majority of respondents (62 percent) reported consuming much less in 1998 than in 1991. Another 14 percent reported consuming somewhat less, 12 percent reported consuming about the same level, and only 9 percent reported consuming more in 1998 than in 1991.While these figures reflect respondent opinions, not actual consumption, correlation between households’ welfare level and their perception indicates that most respondents have a fairly accurate understanding of their economic situation.

One important result of the survey is that both improvement and deterioration are closely related to employment and employment possibilities. People who are employed tend to live in households that report consuming as much as or more than in 1991. In contrast, among the unemployed, 80 percent live in households that report consuming far less today than in 1991. Households with a main income earner with a nonagricultural job are generally better off than those with income from employment in agriculture or from social transfers.

On average, households that believe that they consume more today are larger and have more children, more prime-age adults, and fewer elderly. These results differ from results of other surveys. Other poverty assessments in Latvia—as well as surveys in other countries—have found that households with children are worse off than other households. Households with members over 60 years of age are not among the losers in transition in most other countries, and the elderly do not belong to the most vulnerable groups in Latvia.

Interestingly, the gender of the breadwinner is a significant determinant of household perception of well-being. Households headed by men have a more positive view of their possibilities than households headed by women. Ethnicity is also important: Russian and other non-Latvian households have more negative perceptions than do Latvian households.

Respondents tend to be more pessimistic when asked about improvements in general than when asked whether things improved (or at least did not get worse) with respect to specific items (food, clothing, equipment). However, the vast majority of people believe that life in Latvia has become more difficult: gains in terms of consumption possibilities are the privilege of the upper-income minority. For most people, consumption possibilities have declined.

More than 75 percent of the population believe that they are among the losers from transition. The perception of the past and the changes that occurred during transition depends on where one stood before the transition. In general, those that had much to lose believe they lost more than those who did not have as much to lose. Pensioners, for example, tend to be pessimistic in their assessment of transition. People who held well-paying jobs in 1991 also tend to assess the transition negatively. Individuals’ initial position clearly influence survey results, because their responses reflect their perceptions of reality.

Younger generations and families with children—identified as highly vulnerable groups, both in the poverty profile for Latvia and in the literature on other transition economies in the region—tend to be more positive. These people are more likely focused on the future and expect their situation to improve. Their assessment of their current situation could be an expression of their hopes that current low living standards are only transitory.

A main conclusion from the survey is that life in Latvia has become more difficult and insecure and that the future is uncertain. The fact that most Latvians feel they have lost in the transition and are worse off today than they were 10 years ago should cause concern. People in Latvia did not just get poorer, they became more pessimistic. This political reality cannot be ignored, even with economic growth rates that appear to have recovered.