Latvia was hard hit by the global financial crisis, as combined GDP declined by nearly 25 percent and unemployment tripled from 6 to 20 percent between 2007 and 2009. As the economy gradually recovered, unemployment remained elevated at 15 percent by end-2011. The lower skilled suffered disproportionately from the deterioration in the labor market. Of particular concern were the socially vulnerable, long-term unemployed, and those who are not active in the labor market. Getting more people back to work was critical to reversing the deepening of poverty and social polarization that has occurred since 2007. Nearly two-thirds of Latvia’s poor lived in households with low work intensity.
The Government required answers to questions about benefit dependency, how the tax and benefit system could be changed to offer adequate protection and promote employment, the direction job placement and formal training programs should take to bring people back to work, and how the Government can use its wealth of administrative data to inform evidence-based policy making in all of these areas.
Latvia’s Ministry of Welfare engaged the World Bank to evaluate the country’s employment and social protection situation coming out of the crisis, noting especially the unemployed and inactive. A series of background notes were produced using detailed administrative household survey and spending data in collaboration with Government technical experts.
The study demonstrated how to use big data to inform a difficult policy debate on welfare dependency, tax benefit policy for lower-income groups, and employment programs. To investigate these issues, a large panel database was created linking data on individuals in the social security, social assistance, employment services, population registry, and health insurance databases. The data for 91 monthly waves from January 2006 to July 2012 covered 43 percent of the total population and allowed the Bank to investigate—with a strong evidence base—benefits dependency issues and the impact of employment programs.
By involving a large number of stakeholders in the study from inception to completion and making all the analysis available online and at public conferences, the project was seen as objective and without a political agenda.