Latvia Is Addressing Challenges of Aging, But Efforts Should Be Intensified, Says World Bank

October 1, 2015

RIGA, October 1, 2015 – Today, the World Bank presented its new report The Active Aging Challenge for Longer Working Lives in Latvia, prepared in cooperation with the Ministry of Welfare of the Republic of Latvia.

The main objective of the report is to provide background analysis for the Government of Latvia in preparing "Latvia: Developing a Comprehensive Active Aging Strategy for Longer and Better Working Lives”—its active aging strategy for the population aged 50+ for 2015 to 2030. The goal of the Government of Latvia’s active aging strategy is to facilitate longer and better working lives. The World Bank report highlights the opportunity provided by longer lives, with a focus on enabling greater labor force participation and enhancing the productivity of the aging labor force.

This report concentrates on productive aging: the conditions necessary to support employment and productivity over longer working lives, including lifelong learning and skills development over the lifecycle,” said Emily Sinnott, World Bank Senior Economist and leading author of the report, at the launch. “It also looks at how economically secure the 50+ population is—essentially how older people fare along different welfare dimensions. A particular challenge in Latvia is healthy aging—too often lives are cut short, especially those of men, due to preventable causes.”

“Current demographic trends in Latvia point to the need to efficiently use the potential of the existing labor force,” said Uldis Augulis, Minister of Welfare of the Republic of Latvia. “Longer and better working lives are important not only for the welfare of the older population, but also for future growth prospects of Latvia. In order to perceive aging as an opportunity and develop policies that correspond to current and future challenges, an extensive analysis of the situation was needed. Therefore, the World Bank report on active aging situation in Latvia and evidence-based recommendations for better active ageing policies and thus informing the forthcoming active aging strategy are important for our further work.”

The report notes the strong recent gains achieved by Latvia. The share of premature deaths, i.e. deaths before the age of 64, fell by more than a quarter among males and by more than a third among females since the mid-1990s, mainly due to falling mortality related to cardiovascular diseases and external causes. Furthermore, Latvia is performing relatively well in terms of labor force participation and employment of 50+. Indeed, according to the international Active Aging Index, Latvia ranks ninth among the EU28 in terms of employment outcomes for the older population. Labor force participation of older women is particularly impressive. In addition, educational attainment among the older population is high relative to other countries.

However, significant challenges remain in ensuring that Latvia’s aging population achieve productive, economically secure, and healthy lives:

  • Unlike in many countries in Western Europe, population aging in Latvia is happening not because of large life expectancy gains, but because of ever-shrinking younger generations. High emigration and low fertility is leading to an increase in the average age in society as younger generations fall in size. This makes its population age structure very top-heavy, with 50+ comprising nearly 30 percent of the working-age population.  
  • Life expectancy in Latvia is low (second lowest in Europe after Lithuania). The gap in life expectancy between Latvia and the EU15 has fallen since the early 1990s, but still was eight years in 2013. Health inequalities are large: Latvia has the highest proportion of people in the EU with unmet health care needs and the largest inequality between those with tertiary and basic education in accessing care.
  • There are large differences in employment rates between the highest‐ and lowest‐educated groups in the population, with the disparity being particularly high for women. Better-educated women in Latvia are doing very well in terms of employment, while the low educated have among the lowest employment rates in the EU.
  • Adult education and training, especially for older workers, remains underdeveloped. Only 40 percent of Latvian companies provided any form of training according to the latest survey—fewer than in many other European countries and Nordic neighbors. This is due to a lack of demand for training by both workers and firms, in conjunction with obstacles related to cost, time, information, and the availability of programs.

The report highlights an alternative approach of looking at dependency, focusing on the ratio of those who are inactive to active in the labor market for the whole adult population. In a world of increasing longevity, traditional measures of old-age dependency, which define working-age population with an artificial age cut-off (usually 64), become outdated. Also, they ignore the fact that many of those of working age are not actually working. By increasing labor force participation of currently underrepresented groups, such as, among the 50+, the low educated individuals and minority women, Latvia can go a long way to make up for falling numbers of labor market entrants.

Attaining this outcome and ensuring continued economic growth and fiscal sustainability can only be possible with enabling policies. These are, among others: (1) preserving working capacity at older ages by promoting healthy lifestyles and adapting workplaces and practices to an older workforce, and supporting efforts to increase productivity at all ages; (2) reducing employer biases against older adults through information campaigns and increased exposure to positive examples, (3) making child and elder care more available and affordable to alleviate the care burden, especially on women, (4) preparing for growing demand for adult education and training from employers and employees as the structural change in the economy continues; (5) improving availability and coverage of prevention and treatment programs, particularly for cardiovascular diseases and cancer; and (6) rebalancing the size of generations over the longer term, in part through continued support of families’ aspirations to have more children.

Responding to aging challenges would require more spending on critical programs. Since Latvians have limited private savings, there is a larger role for public provision at least in the immediate future. But this will entail economic benefits. For example, raising public spending on preventive and primary health care could bring more Latvians into the labor market. Providing more eldercare and continuing the expansion of quality preschool childcare could stimulate female labor force participation. Ensuring that future retirees have a pension that protects them from poverty may be costly, but worthwhile. The agenda is multi-sectoral and complex and involves action on the side of individuals, employers, civil society, and the Government of Latvia. But it holds the promise of Latvians achieving lives that are not only longer but also healthier, more productive, and more economically secure.

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