FUTURE OF THE LABOUR TRENDS AND CHALLENGES

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1 FUTURE OF THE LABOUR TRENDS AND CHALLENGES Arvils Ašeradens Deputy Prime Minister, Minister for Economics

2 LABOUR MARKET SHORTAGE WILL REMAIN IN MEDIUM TERM Labour force supply and demand thsnds Labour supply Labour demand Source: Central Statistical Bureau, MoE forecast (218) 2

3 INCREASE IN WAGES WILL HAVE A POSITIVE IMPACT ON MIGRATION SALDO Average gross wage in Latvia and minimum wage in main emigration target countries EUR per month Employed by wage groups % 2 15 Average gross wage Increase by 5% annually Increase by 7% annually Minimum wage in Germany 144 Minimum wage in Ireland % 9% 8% 7% >15 EUR Minimum wage in Great Britain % 5% 4% 3% 2% 1% 1-15 EUR <1 EUR Minimum wage or below % After 5-6 years average wage in Latvia can reach minimal wage of emigration target countries Source: CSB,OECD

4 THE GAP BETWEEN PRODUCTIVITY AND LABOUR COSTS IS WIDENING 2 21 = 1 Lack of labour force and knowledge Current prices, % of EU28 average Labour costs Increase of wages Business costs increase faster than productivity Source: EUROSTAT Competitiveness is worsening Risk for long-term economic growth Increase of labour costs is inevitable in the open labour market Latvia can lose competitiveness in low cost segments faster than gain advantages in production of high value added products MEDIUM INCOME «TRAP»! Source: Eurostat

5 SUPPORT FOR FOSTERING PRODUCTIVITY % CIT for reinvested profit, more opportunities to develop new, innovative and exportable products and services; Support for companies who already have a sound proven track record in Latvia fast track support mechanism for new investment projects. Boosting capacity for investment and innovations through EU structural funds 46 M EUR development for new products and technologies, investment in infrastructure and financial availability. Support for competitiveness through EU structural funds 63 M EUR promotion of exports, including export credit guaranties availability. Support for attracting high level experts in large companies in order to promote change and increase in productivity. Client oriented public services Zero bureaucracy for companies and Consult at first. Openness of business environment and digitalization of public state services. Development of innovation economy ecosystem, closer synergy among existing businesses and start-up companies. Sectoral productivity, EU28=1 Manufacture of wood and its products Agriculture and forestry Manufacture of non-metallic minerals Manufacture of electronics and optical Transportation and storage Trade Accommodation and food services Food industry Construction Public services Light industry Water supply Financial and insurance activities Manufacture of paper; printing Manufacture of metal products ICT services Manufacture of machinery and equipment Mining and quarrying Manufacture of chemicals Manufacture of motor vehicles Electricity and gas supply Source: CSB 43 (215) 52% (22) from EU-28 average

6 Total A - Agriculture C - Manifacturing F - Construction G-I - Trade, transport and utilities J - ICT services K - Financial Services L - Real estate M-N - Bizness Services O-Q - Public Services R-U - Other Services PRODUCTIVITY AND EMPLOYMENT BY SECTORS 8 6 Annual average increase (%) Sectoral contribution to productivity increase, percent points O-Q - Public services ,3 3,2 3,7,5,4-1,3 Employed 2,8,6,4,4 6,3-3,3 1,7-1,6 2,2 2,9 -,5 -,8 3 -,1 1,9 -,7 2 1,7,9,6 M-N - Business services L - Real estate K - Financial Services J - ICT Services G-I - Trade, transport and utilities F - Construction C - Manifacturing A - Agriculture

7 Thank you! Ministry of Economics of the Republic of Latvia Address: Brīvības iela 55, Rīga, LV-1519, Latvia Phone: Fax: Home page: Youtube: Facebook: