Age Discrimination in Labour Market in Latvia

Bachelor Thesis Age Discrimination in Labour Market in Latvia Authors: Henrijs Jansons Dmitrijs Zukovs Supervisor: Olegs Tkacevs April 2012 Riga

Age Discrimination in Labour Market in Latvia 2

Age Discrimination in Labour Market in Latvia 3 Abstract Rapidly ageing population in EU has led to a situation where it s not clear how will governments be able to support the retired in the nearest future. Most reliable solutions to the problem are increase of the retirement age and integration of older people in to the labour market. Nevertheless, it is still not clear how this transition back to labour force will occur and how easy it will be for older people to find a job and make a living. This study concentrates on examining age discrimination of older people in Latvian labour market in low skilled jobs. Particularly, our research question is: Is there evidence of age discrimination in labour market in Latvia for low skilled workers? Our proposed hypothesis is: people age 50 and over will have a lower probability of getting job, than those younger possessing the same skills. To explore this problem we use experimental method sending out fake applications for salesman position to Latvian companies using specifically made-up CV s. Previous experience and education is basically equal for both applicants while they differ significantly by their age group (35 and 55 years old applicants respectively). Additionally interviews with field experts were conducted to get closer look on the problem. The results from the experiment showed statistically significant discrimination against older applicants both for males and females. Interviews also provided information that supported existence of age discrimination against older in Latvian labour market. Keywords: Ageing, Discrimination in labour market, Experimental method

Age Discrimination in Labour Market in Latvia 4 Abstrakts Straujā iedzīvotāju novecošana ES ir novedusi pie situācijas, kurā nav skaidrs, kā valdības varēs nodrošinat sociālās garantijas pensionariem tuvākajā nākotnē. Visreālākie šīš problēmas risinājumi ir pensionēšanās vecuma paaugstināšana un sekmīga veco cilvēku integrācija darba tirgū. Šobrīd nav īsti skaidrs, kā šī integrācija darba tirgū notiks un cik viegli gados vecāki cilvēki varēs atrast darbu un nopelnīt iztikai. Šaja darbā koncentrēsimies uz vecuma diskriminācijas Latvijas darba tirgū izpēti zemas kvalifikācijas darba ņēmēju vidū. Mūsu pētījuma jautājums ir: Vai ir pierādījumi vecuma diskriminācijai darba tirgū Latvijā starp zemas kvalifikācijas darba ņēmējiem? Mūsu izvirzīta hipotēze ir sekojoša - darbaņēmējiem pēc 50 gadiem un vairāk būs mazāka varbūtība iegūt darbu, nekā jaunākiem darba ņēmējiem, kuriem piemīt precīzi tādas pašas iemaņas un pieredze. Lai izpētītu šo problēmu, mēs izmantojām eksperimentālo metodi, izsūtot viltus pieteikumus pardevēju vakancēm uz visiem pieejamajiem Latvijas uzņēmumiem, kas bija ielikuši pārdeveja darba sludinajumu internetā. Iepriekšējā pieredze un izglītība būtībā bija vienāda abiem pretendentiem, vienīgā izteikta atšķirība bija kandidatu vecums attiecīgi 35 un 55 gadi. Mēs veicām intervijas ar vietējiem ekspertiem konkrētajā lauciņā, lai iegūtu labāku ieskatu šajā problēmā. Mūsu eksperimenta rezultāti bija statistiski nozīmīgi gan starp vīriešiem, gan sievietem un apstiprināja faktu, ka vecāki cilveki tiek vairak diskriminēti darba tirgū nekā jaunāki. Iegūtā informācija intervijās ar ekspertiem kalpoja kā papildus apstiprinājums vecāku cilveku diskriminācijas esamībai darba tirgū. Atslēgvārdi: Novecošanās, Diskriminācija un nevienlīdzība darba tirgū, Eksperimentālā metode

Age Discrimination in Labour Market in Latvia 5 Acknowledgements At first, we would like to express most gratitude to our supervisor Dr. oec. Olegs Tkacevs Chief Economist of the Macroeconomic Analysis Division, Monetary Policy Department of the Bank of Latvia, who was very supportive, motivating, helpful and always open to our questions throughout all the writing process. Secondly, we are very grateful to the Riga s Active Senior Alliance and especially the director of the organization Terezija Mackare for moderating discussion with RASA s members, Deputy Director for Employment Policy in State Employment Agency Vivita Pūliņa who provided us with good insights in the prospects of unemployed and Juris Jansons, Ombudsman of the Republic of Latvia, together with his legal advisors Charlote Berzina and Ruta Silina. Thirdly, we would like to thank Arnis Sauka for providing information on Best Agers project. Sincere thanks goes also to Eriks Dzons Lagzdins for giving valuable feedback on our paper. Finally, we would also like to thank our fellow students Gintaras Matuzas and Zilvinas Janukenas as well as our evaluator Justina Banyte for constructive criticism, challanging comments and suggestions during the presentation of review of the empirical findings.

Age Discrimination in Labour Market in Latvia 6 Table of Contents Introduction... 8 Latvian Pension System... 12 Literature Review... 13 Methodology... 18 Data and Results... 20 Experiment... 20 Interviews With Experts... 24 RASA (Riga s Active Senior Alliance)... 24 SEA (State Employment Agency)... 25 Ombudsman of the Republic of Latvia... 27 Interpretation of the Results... 28 Conclusions... 30 References... 32 Appendix 1... 36 Appendix 2... 37 Appendix 3... 41 Appendix 4... 44

Age Discrimination in Labour Market in Latvia 7 Table of Tables Table 1. 8 Table 2. 9 Table 3... 10 Table 4... 22 Table 5... 25 Table 6... 26 Table 7... 27 Table 8...41 Table 9... 42 Table 10...43

Age Discrimination in Labour Market in Latvia 8 Introduction European Union has declared 2012 as the European Year for Active Ageing and Solidarity between Generations. It was done to mark the 10th Anniversary of International Plan of Action on Ageing that was adopted in the United Nations in Madrid in 2002 and few month later endorsed by all EU Member States. The plan works as a framework for facilitating policymakers and stakeholders to encourage active ageing, raising awareness and enhancing greater cooperation and solidarity between the generations. The main task of the plan is to promote active ageing in employment and motivate older people to stay at work longer instead of leaving their jobs at pre-retirement age. Other objectives are to create the grounds for better social inclusion by encouraging active participation in local and regional communities as well as engaging in active citizenship initiatives, promote volunteering and caring, and enable healthy ageing and independent living to prevent dependency when people become very old (EY2012 Coalition, 2011). Longer life expectancy, low fertility rates, emigration and low GDP growth in last years and high unemployment levels all bring a considerable burden on the Latvia's budget to support retirement. Unemployment level in Latvia has sky rocketed to high levels as it can be seen in Table 1 after recent World Financial Crisis in 2008 (Chan, 2011). Table 1: Average annual rate of unemployment in Latvia Year 2006 2007 2008 2009 2010 2011 Unemployment (% of labour force) 6.8% 6.0% 7.5% 17.1% 18.7% 15.4% Source: Made by authors using data from Eurostat (2012) and CSB (2012) Estimated Non-Accelerating Inflation Rate of Unemployment (The rates of unemployment and capacity utilization that do not accelerate inflation) was 7.4% at the end of 2008 (A.Melihovs & A.Zasova, 2009). It can be observed that in last years registered unemployment has been well over the natural rate of unemployment measurement. Such rise of unemployment has resulted in emigration of labor force (see Table 2) to the other EU countries

Age Discrimination in Labour Market in Latvia 9 such as UK and recently Germany that has also become a major destination for job seekers from Latvia. Table 2 Emigrants from Latvia per year Year 2003 2004 2005 2006 2007 2008 2009 Number of emigrants to other countries 2210 2744 2450 5252 4183 6007 7388 Source: Made by authors using data from Eurostat (2011). Since younger people may be more exposed to emigration, this could eventually lead to faster aging labour force in Latvia (Smorodov, 1999). If older employees are being discriminated, they might choose an early retirement that would impose additional burden on the government budget. Smorodov (1999) in his study shows: The cost of early retirement schemes was estimated to be about 15 per cent higher than the average cost of other labour market policy measures and about 175 per cent higher per retiree than the net cost of an unemployed worker in the case of France, and about 10 per cent and 112 per cent in the case of the United Kingdom, where compensation paid to the retiree was lower. Another drawback of not hiring preretirement age workers is a high turnover of labour in organizations that could easily be omitted. As younger employees on average might be more willing to change work, especially if they are doing some low skill demanding job during their studies or having it as their first job after graduation. On the other hand, although older people might be more expensive to train, they are more likely to stay in an organization until their retirement just because it is much harder for them to find a new job (LETA, 2011). If this is true and age discrimination exists it might cause negative distractions in labour market; therefore government should probably take this into consideration and control it by much stricter legislation or provide funding to governmental and non-governmental organizations for creating awareness of the existing problem (J. Jansons, personal communication, January 25, 2012).

Age Discrimination in Labour Market in Latvia 10 Table 3 Distribution of unemployed by age group as at the 31 January 2011 Age group 15-19 20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60 + % of all unemployed 2.2 12.0 10.7 10.0 10.9 11.0 12.8 14.2 13.0 3.1 Source: Made by authors using data from NVA (2012). There is a slight increase in unemployment at the age 50+ in comparison to other age groups (see Table 3). At the age of 50 to 55 people still have on average some 10 years left to retirement, which essentially could mean older people experience difficulties finding jobs. There might be objective reasons not to hire people older than 50 if they would consistently lack energy and did not possess required skills. Unemployment rate ate the age of 60 or more is significantly smaller due to the reasons people at this age are already retired or soon to retire. Therefore, they do not register themselves as jobseekers. Or choose early retirement available at age 60 rather than reentering labour market if laid off. Research made by TSN Latvia about discrimination in Latvia discovers that society in Latvia believes age discrimination is most common discrimination, followed by discrimination by sexual orientation and handicapped inability (TNS Latvia, 2007). Discrimination in Latvia is forbidden by Constitution of the Republic of Latvia by code 91 (Constitution of the Republic of Latvia, 1922). Latvian labour law forbids discrimination and particularly age discrimination in labor market (Labor Law, 2002). Age discrimination in labour market is defined as Unfair treatment in recruitment, promotions, or granting of privileges, on the basis of the age of the recipient (Age discrimination, n.d.). In our study age discrimination in labour market happens when younger people are preferred to older applicants despite the fact that candidates from both age groups possess the same required skills, experience or necessary knowledge. In our study we will test for age discrimination and whether it is justified by correlation with necessary skills. Altonji & Pierret (1997) finds that some discrimination is actually justified, because discrimination by some measurable factor might be good estimate for some immeasurable skill. For example, level of education in specific sector could be a good estimate for the knowledge person has in that particular field. Nevertheless, there can be other factors

Age Discrimination in Labour Market in Latvia 11 such as experience, personal education etc, that affect knowledge. Thus, we want to find if there is pure age discrimination, where the other factors mentioned before are eliminated. To get better insight we will approach this problem from different angles. Our research question is: Is there evidence of age discrimination in labour market in Latvia for low skilled workers? The hypothesis is people age 50 and over will have a lower probability of getting job, than those younger possessing the same skills. We believe findings of this study will be relevant due to the fact age discrimination is currently widely discussed topic in Latvian media (see Appendix 1). It is said that the most common discrimination in labour market in Latvia is age discrimination (LETA, (2009 November 9 th ). Additionally, it has been reported that pre-pension job applicants (age group 57+ years) find it hardest to enter the labour market LETA, (2011 October 1 st ). Since government has supported gradual increase in the retirement age starting from 2014, integration of older people in to the labour market will become more and more important (LETA, 2012 March 27 th ).

Age Discrimination in Labour Market in Latvia 12 Latvian Pension System According to Latvian legislation any person is entitled for pension benefits if he or she has legally worked in Latvia for at least 10 years and has reached an age of 62. Also, there is a possibility for an early retirement at the age of 60 and receive 50% of pension benefits until reaching official retirement age. This rule applies to the most cases, while there are some exceptions for dangerous working environments (for example, army), people with disabilities and parents or legal guardians of 5 or more children or disabled. In our study all applicants will be fitted in the category of average low skilled worker with no priorities in receiving premature pension. There is possibility to receive unemployment benefits for 9 months, but sufficient amount will be received only first 6 months. So if people lose job at age 59.5, they might not be willing to re-enter the labour market, but rather take social guarantees and retire early. Pensions and unemployment benefits are low for low skilled workers, since they are calculated according to their previous official income (Law on State Pensions, 1996). This forces most preretirement age people and pensioners still work and search for work. In February 2012 well known economist in Latvia Girts Rungainis suggested to increase retirement age from 62 to 75. Main benefit for this would be lower working to retired people ratio. This in turn would provide that people who are currently employed and paying for retired people pension could enjoy the same retirement benefits after leaving the workforce as there would be sufficient number of working people paying taxes to fully support pensions required (BNS/Diena, 2012 February 18 th ). Already in the March 2012 the government agreed to gradually start increasing retirement age limit and president of Latvia has conceptually supported proposed changes in retirement law (LETA, 2012 March 27 th ) (LETA, 2012 March 29 th ). Also there positive effect is observed on old person employability when increasing the retirement age (Buesch et. Al., 2009), (Hairalt, 2010). Buesch et. al. (2009) also finds effect of less discrimination against old in labor market in countries where retirement age is higher. Probably increase in retirement age does not only encourage job search, but also gives signal in the market, that old people are as well capable of working as younger ones.

Age Discrimination in Labour Market in Latvia 13 Literature Review Before conducting our own research we looked at previous studies about age discrimination. First publications about this issue were made almost 60 years ago. For example, Tuckman and Lorge in 1952 published a work called Attitudes Towards Older Workers. were they investigate attitudes by questioning psychology students. They found that there were negative believes about older worker s skills and abilities, which were not proven to take place in practice. They also observed age discrimination in hiring processes: In business and industry there are significant restrictions in the hiring, upgrading, and retention of older workers, i.e. men and women of age 45 and over. (Tuckman and Lorge, 1952). Since then there have been various attempts to investigate extent to which age discrimination exist and reasons for age discrimination. Very common technique in researching age discrimination in labour market is measuring response rate to resumes sent to job vacancies. After sending 8000 applications to 4000 firms in Boston, Massachusetts and St. Petersburg, Florida, Lahey (2008) found that there is a 40% more chance of being invited to job interview for younger people, whereas older people being defined as aged 50+. Similar studies were conducted by Riach and Rich (2007) in London, UK, Paris, France and Spain. They found that there is a statistically significant level of discrimination of older women, when they apply for waitress position in all three countries. They also noticed discrimination of younger applicants for retail store seller s position. Both studies used fictional applications, as they could not find people with similar skills, necessary age gap and willingness to participate in the study by taking part in many interviews. Since no one could take part in the interviews, invitation to the interview was perceived as a valid positive observation. Invitation to the interview was declined telling interested employer that applicant had already chosen to go for another employer. This type of study is very useful for age discrimination topic, especially at current times of high unemployment in EU, US and many other countries. Also it is particularly hard to detect discrimination in hiring process in comparison with differentials in wages, not promoting elders and layoffs on age basis. However on the other hand this also is a drawback of such a study, it does not explain all other types of discrimination on the work. Another method to test age discrimination is using questionnaires about perception of older people abilities to work. We found that first such study was conducted by Tuckman and Lorgein 1952. We will focus on one more recent research done by Buesch et. al. (2004) in

Age Discrimination in Labour Market in Latvia 14 Norway and German. In this paper by Buesch students and company managers were questioned about hiring opportunities of differently aged applicants. Due to the fact that Norway has higher older people participation rate in labour market, 3 hypothesis were made: 1) more jobs will be seen as typically old in Norway than in Germany ( old defined as people aged 50+ work in those professions), 2) In contrast to Germany, the expected productivity within age rank(young, middle-aged, old) will conspicuously increase in Norway., 3) Less age discrimination regarding the hiring decision will be observed in Norway than in Germany. (Buesch et. al, 2004). No significant evidence was discovered to support and confirm first two hypotheses, contrary as the third one. Nonetheless, there were statistically significantly lower probabilities to be hired if applicant was older in both countries, especially in Germany. It was also concluded that some legislative acts can increase probabilities of older people getting hired, for example, by increasing retirement age etc. Additional method uses statistical analysis and mathematical models to measure age discrimination. Hairault et.al. (2010) develops a job search model based on McCall s (1970) model to measure distance to retirement and employment of older people, that supports the statistical data where smaller distance to retirement brings higher unemployment and decreases employment possibilities accordingly. This model also incorporates such factors as unemployment benefits and thus older people employability, labour demand and tax on continued activity. Results are straight forward: an unemployment benefit reduces employability as well as low demand, and decrease in tax increases employability of pre pension (up to 5 years to retire) aged people. Although method is interesting, it does not explain differences between age groups with differences in age more than 4 years. The main reason why employers are unwilling to hire pre-retirement aged workers is that they will generate little return to the capital invested in training. (Hairault, Langot and Sopraseuth, 2010) Discrimination also has positive effects that help to use observable factors to make good guess about unobservable ones. As for example Altonji and Pierret (2001) finds that on firms do discriminate new applicants on basis on their education and work experience. Wages is argued are associated with productivity of worker; however productivity of new applicant cannot be easily measured. Altonji and Pierret (2010) in their research concludes that starting wage and productivity is measured by experience, education and ethnic factors of applicant, however later

Age Discrimination in Labour Market in Latvia 15 on during carrier these factors receive less attention and wage is adjusted according to productivity. Age may also signal some unobservable characteristics of the new applicant. To find out what are the reasons that might be associated with older workers Lahey (2008) in her study runned a survey of employers on why are they unwilling to hire older applicants? Top 10 reasons for not hiring older people according to employers: 1) Short career potential, 2) Lack of energy, 3) Higher costs of health and life insurance and pensions, 4) Less flexible/ adoptable, 5) Higher salary expectations, 6) Bad health risk, 7) Decrease in knowledge and skills, 8) Blocking career path for younger employees, 9) Suspicious competence level, 10) Fear of suit for discrimination. Interestingly that many of those factors are not proven in literature and others are applicable only in certain industries. Kadefors (2011) in a report for Best Agers project finds statistically significant relationship between older 55-64 people participation rate and younger 15-24 people employability. Data of OECD countries in 2010 shows that countries with higher 55-64 aged people employability have also higher 15-24 aged person employability, statistically significant at the 0.01 level (Kadefors, 2011). This disproves argument under reason No 8. Salthouse (1997) in his research found that there is no relationship between age and on work performance considering cognitive tasks. The slack decline in cognitive knowledge is compensated by experience, as older employees have lower turnover and absenteeism and higher commitment to the company. (Kadefors, 2010) When concerning overpayment there is different views on older people wages and productivity and no clear conclusion is drawn from the data. Cardoso, Guimaraes and Varejao (2011) analyzed 22 year firm yearly data in Portugal (mostly industries providing service and manufacturing). Data was collected from mandatory surveys of the firms that included

Age Discrimination in Labour Market in Latvia 16 information about sales, industry, location, employee s age, education, etc. Analysis showed that productivity of workers tended to increase till age 50-54 and then stayed constant. The wages of the same workers increased till age 25-29 and stayed flat (Cardoso et.al., 2011). Interestingly, it s calculated that in US being accused of age discrimination may cost company on average 2% decline in their stock prices (Ursel and Armstrong-Stassen, 2006). Although age discrimination in labour market is currently much discussed topic in media in Latvia (Appendix 1), there are not much studies published on it. In 2011 ombudsmen bureau of the Republic of Latvia ordered a research on the level of discrimination in Latvian job market. The study was conducted by market research agency TNS Latvia (2011). The respondents of the study were employed people in Latvia aged 15 or higher. The purpose of the study was to determine the types of discrimination people encounter when applying for job, at the workplace and upon leaving their job. Additionally, this research tested for perceptions and understanding of the discrimination concept and whether respondents are informed about the procedures to defend their rights in case facing discrimination at their workplace. All together 1001 respondents were questioned in phone interviews within 2 weeks period in October 2011. As a result, age discrimination was discovered to be most popular with the positive response rate of 32%, followed by discrimination by nationality (23%) and discrimination by gender (19%). Interestingly, 72% of interviewed people had not encountered any kind of discrimination in last 3 years. Only 6% of respondents admitted to be discriminated by age in recent 3 years. It was discovered that mostly advertisements with some sort of discrimination are found in web recruitment pages such as cv.lv (55%) and in written press (41%). According to interviewees, 62% of discriminatory job advertisements contain age restriction. Alarming 57% of respondents reveal that they have no information about public instances that deal with discrimination where they could file a complaint. 31% people from the sample does not believe discrimination in labour market could be resolved successfully for the employee. Lastly, 7% of respondents believe they personally have lost their job due to discrimination. Moreover, 14% surveyed believe their work colleagues were discriminated and 18% know relatives, friends or acquaintances that have been dismissed from their job in a discriminatory manner (TNS Latvia, 2011).

Age Discrimination in Labour Market in Latvia 17 The second study we could find was questionnaire about discrimination in Latvia also created by TNS Latvia. It was part of a research on discrimination in European Union ordered by European Commission conducted with a help of TNS Opinion & Social the leading coordinator for international research. In the period from 7th of June till 12 of July 2007, all together 24796 citizens from 25 EU member countries and also 2 emerging EU membership candidate countries were questioned about discrimination. In Latvia 1019 EU citizens who can speak either Russian or Latvian participated in the study. The study asked four closed-end questions about perceptions about discrimination with possibility to choose from various answers. Age discrimination was found out to be the most common one here in Latvia. 72% of participants responded that the most obstructive discrimination reasons were disability, being gypsy and being aged 50 and above. The biggest share of respondents (39%) indicated age discrimination has increased the most over last 5 years (TSN Latvia, 2007). Unfortunately, it was not specifically defined how exactly age discrimination prevails in Latvia. Mihails Hazans (2007) in his research paper Looking for the workforce: the elderly, discouraged workers, minorities, and students in the Baltic labour markets examines 3 Baltic states labour markets and runs regressions on Estonian and Lithuanian micro data of labour market participants. Hazans (2007) indicates that all Baltic States have higher older people participation rates than EU15 average. In particular participation rates started to rise after abandoning low that restricted receiving full pension and salary simultaneously ( in Latvia in year 2002). Highest older people participation rate was reported in Estonia, which also has highest wage/unemployment benefit ratio. Higher participation rates in Estonia may also be explained by higher retirement age while Lithuania still had restrictions for working pensioners. After running econometric analysis of what determines employment in Estonia (2001) and Lithuania (2002-2003) controlling for education and non-labour income, data shows that age group 55 59 have lower participation rate of 7% for men and 44% for women in Estonia and 13% and 30% in Lithuania respectively (Hazans, 2007). Although low participation rates may be attributed to lack of skills we cannot draw conclusions about reasons of unemployment. Getting micro data for Latvia was indeed quite problematic. We have received denial to access and use this data from National Recruitment Agency that collects this information for studies on their own. Central Statistical bureau in Latvia replied that they do not collect such

Age Discrimination in Labour Market in Latvia 18 detailed data. Interviewing managers, employees and students measures the perception and attitude in the society rather than tests existence to actual discrimination. Thus we did not want to rely just solely on interviews in our study. Methodology Due to limited availability of data, we handle this research by applying experimental study method used by Lahey (2008) and Riach and Rich (2006, 2007). The method particularly examines discrimination in hiring process or job search process from workers point of view. Generally the only way to test for this is by running an experiment, because there is no data available on how much apply for the jobs or get rejected as well as characteristics of applicants and firms. The method is to send out similar resumes to job application with only main difference - applicant age. As it is hard to find similar people with different ages, who would be willing to participate in this study, resumes will be fictional and made up by the authors. This approach also comes with the first limitation of this study. Since we do not have any real persons for the resumes, nobody will go to actual interviews. Direct acceptance of the applicant and invitation to the interview will be treated the same, namely as a positive outcome of the sent application. The emails given in the CV s will be checked for the replies and the telephone numbers given will be answered by us. In response to the invitation for the job or interview we will reply, that the person applying already had got job at another company and therefore will not accept the job or invitation. For research purposes we have crated special e-mail accounts, to be able to receive feedback from interested companies. Phone numbers added to the CV s are these of authors. In case we on behalf of our fictional applicants received a call from some company, we would treat that as a positive outcome for the candidate. In order to eliminate all other common discrimination factors except age we need our fictional applicants to apply for age neutral, low skill jobs that do not demand great physical abilities considering that human strength tend to decrease with age (Buesch et. al.,2004) (Skirbekk, 2003). In such case employers must not have any preferences towards age of the employee as it s not reflecting on their skills. Companies will be from different cities, size and maturity. We will apply for salesperson position in all open vacancies in the Latvia found during 2 day period in middle of January 2012, using job advertisement webpages www.ss.lv,

Age Discrimination in Labour Market in Latvia 19 www.cv.lv, www.reklama.lv and corporate webpages of big companies such as Rimi & Maxima, who sometimes post vacancies only in their own homepage. We will apply to approximately 300-500 available positions that are open to low skilled employees. In comparison, Riach and Rich (2006, 2007) in their study sent 300 applications for retail managers in London where 273 appeared to be with no response to both applicants. In France for non-manual jobs they sent out 682 applications and got 267 responses. This sample of companies will cover most regions in Latvia, although region of Riga might be overrepresented in this sample, so we will be aware of region effect that might appear. Other company characteristics are hard to control. Maturity, size and communication language are usually not stated in job advertisements and could be hardly estimated. As already stated above, the applicants will have similar background, education and other knowledge. To make fictional curriculums of older employees more trustworthy, they will be fitted with more general working experience that has no relation to jobs we will apply, thus eliminating extra experience advantage over younger candidates. In order to get more significant results, we will perform same study with female applicants. In previous studies older women were found to be less discriminated. Becoming a widow or divorced were significant factors for easier entering in labour market and not being discriminated against (Lahey, 2008). In our study age of fictional old applicants will be 55 years. According to statistics from Latvian Employment agency there is high unemployment in this age group 55+. Age of younger applicants will be 35 years exactly 20 years younger, because people in the age group from 30-40 years have the lowest unemployment rate. CV s of the applicants will originally be in Latvian to attribute to Latvian labour market. Additional copies of translated versions of these CV s can be found in Appendix 2. Although Lahey (2008) found that adding sports to the resumes decreases chances of being hired for all applicants, we will add sports or other types of physical activity to the CV s that according to study by Riach and Rich (2007) is signaling energy of the applicant. For both women applicants we tried to design convincing CV where they are not expected to give birth or raise little children in nearest future, as often women with little children are more likely to be discriminated in job market.

Age Discrimination in Labour Market in Latvia 20 To analyze the results we will apply method used by Riach and Rich (2007) which is identifying discrimination against certain age in comparison to total responses. We will determine net discrimination which is defined as difference between cases where old people were discriminated against young minus cases where young applicant was discriminated against old. Net discrimination = Discrimination against old Discrimination against young Negative values indicate discrimination against young. Such measure more fully depicts situation in the labour market. The greater the positive value the higher is younger applicant s probability to get a job compared with older ones. The Net Discrimination is compared in percentage terms, expressed as percentage of all usable tests (invitations to work or interview). For example positive 100% would mean that Older applicant have no chances to get a job if both are applying to the same jobs, -100% other way around and 0% indicate equal chances of getting positive response if both applied. Statistical significance is calculated with Chi-square test. For Chi-squared calculations we use 2x2 (Old, Young / Accepted, Rejected) contingency matrix. Only cases with positive responses are taken into consideration. Cases with no reply are considered as failed due to lack of education or needed competences. The second part of our study is a qualitative study of age discrimination. We will interview field experts, who have some inside information the issue. The themes of interest would be the reasons for discrimination, finding some real life examples, how people deal with discrimination, and whether there is enough legal protection and law enforcement, how employment of older people is stimulated and what are the main problems in fighting the problem. The short guide for open interview could be seen in appendix 4. Data and Results Experiment Application letters and CV s were sent to 529 job advertisements. We sent out applications of 1 old worker (55 years old) and 1 young worker (35 years old) from the same gender to every advertisement we found on most popular job search internet pages cv.lv,

Age Discrimination in Labour Market in Latvia 21 reklama.lv and ss.lv. First, we opened these internet pages in January 2012 and send applications to every single available vacancy under section sales and salesman. A month later we browsed the same internet pages, and to make sure we do not send applications twice to the same company we filtered for the vacancies that have been posted in the previous month only. Lastly, we send out one last round of applications after 2 weeks, this time setting filter for vacancies that have been posted in previous 2 weeks. To make sure we had not sent job applications to the same companies twice or more, we recorded each company and their contact information. To eliminate gender bias, we send at first some male applicant CV s and then similar amount of female ones to other companies. Only exception was when the job advertisement had specified gender of the applicant, which happened mostly for the women, therefore in our experiment female applications are slightly more than male ones. When sending applications to regions in Latvia other than Riga, we also changed all applicants living addresses to the respective city where job vacancy was being offered. We were each responsible for one fake male applicant and one fake female applicant. For the safety reasons we each bought a mobile prepaid card with additional telephone numbers and used them for our female applicants. In this way we always knew that if theses phones are ringing the callers are recruiters who expect to hear a female voice. In order not to make the callers suspicious we proceeded with answering the phone in the following ways: 1. If there was a woman around at the moment of receiving the call, we instructed her to ask the caller which company he or she is from and then to apologize and reject the offer by telling that she already has found the job; 2. If there was no woman around, we picked up the phones ourselves and said that this is our wife s phone that she has forgotten it at home. Next we asked who is asking for her and when the caller revealed the company name, we apologized and told that our wife has already found a job. For both male and both female applicants we double checked whether they had been contacted by the same companies, by comparing the incoming telephone numbers to see if they matched. If they did we threated these observations as a representation of no discrimination. For the purpose of experiment, we created real e-mail address for each applicant. During the experiment we looked over the incoming mail of all applicants. If they had received some job

Age Discrimination in Labour Market in Latvia 22 offer we sent back a reply with apology stating that applicant has been already hired to make sure companies without delay could proceed further searching for their employees. Target companies were mostly based in Riga (442 observations). Only 87 were from other cities. All other free suitable vacancies were concentrated around region of Riga. Dividing data sample by regions would not bring any benefit as there are only six invitations from outside Riga region. Results are presented in the table 4. Column 1 depicts the number of advertisements applied (Note: for each advertisement two applications were sent - one Old and one Young applicant). Column 2 shows number of positions, for which neither applicant was invited. Column 3 shows number of firms, from which at least one of the applicants were invited. Column 4 presents number of firms that invited both applicants for the interview. Column 5 number of firms that invited only older applicant. Column 6 number of firms that invited only younger applicant. Column 7 difference between column 6 and 5. To get percentage terms, columns 3, 4, 5, 6 and 7 are divided by usable test number in column 3. Table 4 Results 1 2 3 4 5 6 7 Number of Younger Net Salesman Neither Both Older (55) sent out Usable test (35) discriminati (Riga) invited invited preferred applications preferred on Men 246 215 31 7 5 19 14* Percent 100% 22.58% 16.13% 61.29% 45.16% Women 283 247 36 9 6 21 15* Percent 100% 25.00% 16.67% 58.33% 41.67% Men & Women 529 462 67 16 11 40 29** Percent 100% 26.92% 19.23% 53.85% 34.62% Response rate 13% Source: Made by authors using collected data. *p <.05, **p <.001.

Age Discrimination in Labour Market in Latvia 23 Both men and women candidates are considered together and all in all we received invitations from 67 companies out of 529 applied to. And it accounts to an approximately 12.7% of total response rate. In comparison response rate in similar experiment in England was around 20% Riach and Rich (2007). The Old applicants in total received 27 invitations and Young applicants 56 out of 529 applications sent. This accounts for 5.10% and 10.58% response rate respectively. Essentially this means that on average to receive 1 job invitation 55 years old person will have to send out 20 applications while 35 years old person will have to send out only 10 applications to attract an employer. Simply, Younger applicant is 2.07 times more likely to be offered a job than the Older applicant possessing the same skills and experience. Lahey (2007) in her experimental study in Florida and Massachusetts, on entry-level jobs yield similar results: in Florida Younger applicant received invitation from every 19 applications sent, Old applicant from 27 respectfully, Massachusetts Young 16.4, Old 23. On average Lahey (2007) reports that it yields a 40% more possibility for younger applicant to get a job over older applicant, where older is considered aged 50 and over. Riach and Rich suggest comparing results of Young and Old applicant using Net Discrimination. Net discrimination = Discrimination against old discrimination against young. Meaning that, if both are equally much discriminated in the experiment than the chances of getting job are equal in the market as a whole. The Net discrimination in our case is 34.62% (Results presented in the Table 4) and significant at 0.05 level. Significance is calculated using Chi-square significant test. The data were categorized as accepted / discriminated for two applicants in a 2*2 contingency table (the calculations are shown in Appendix 3). As there is only one degree of freedom and we have categorical discrete data, we follow Owen and Jones (1994) suggestion and apply Yates correction to the calculation. Riach and Rich (2007, 2006) in France and England report 58.1% and 28.8% net discrimination when applying for waiter position, both significant at the 0.001 level. Results in Latvia are slightly less significant, but still goes along with the trend.

Age Discrimination in Labour Market in Latvia 24 Interviews with Experts RASA (Riga s Active Senior Alliance) We went to the RASA to get insight view on discrimination issue. We had opportunity to talk with the director of the organization Terezija Mackare. She admitted that many people from their community come for an advice on age discrimination on workplace. The starting age from which people start to come for consultation on age discrimination to a local judicial advisor Jeļena Kovardinska is 45. That is even lower age that we expected from examining the literature on discrimination or data of unemployed (personal communication, January 23, 2012). To our question- why they seek help at the RASA not for example to the State Labor Inspection (SLI) or Ombudsman of the Republic of Latvia (ORL)? - they replied that people are not well informed about those options, are afraid of being laid off and have lack of believe in positive outcome. Inguna Barinova, one of the community members, was laid off from some project she was working on as researcher for EU financed European Disability Forum. She was laid off because she had reached age of 50, at least this was mentioned as the main reason when she was forced to leave the job. She did not ask for legal advice on the matter though (personal communication, January 23, 2012). Some man, aged over 50 as well had to leave his job as a guard, because he could no longer legally renew his license, although he claimed, that he could do his job just fine (personal communication, January 23, 2012). Entrepreneur and member of the RASA shared his opinion on what skills are valued in the experienced/older workers. The most valuable is experience that they can share with the younger employees. This is consistent with results of Skirbekk (2003) that jobs where experience and verbal activity is important workers over age 50 maintain good productivity. As for the improvement on older people employability Terezija Mackare mentions need for special training programs for older people and communities like RASA that keep older people active in society. For example RASA have programs with State Audit Office of Latvia, where retired field experts provide their consulting (personal communication, January 23, 2012). Terezija Mackare agrees with increase in retirement age planed by LV government as a solution to better employment of older people (personal communication, January 23, 2012).

Age Discrimination in Labour Market in Latvia 25 SEA (State Employment Agency) Vivita Pūliņa Deputy Director for Employment Policy (State Employment Agency) admitted that SEA do recognizes pre-retirement age groups (aged 57 62) and those 50 and over as problem groups. This means that they make significant part of the all unemployed. Preretirement aged people on average are unemployed for longer time (unemployed for more than 1 year). (Personal communication, January 24, 2012) The problems could be seen from statistics presented in the tables 5 and 6. Table 5 Unemployed by age groups on 31.dec.2011. Age groups Unemployed Long term unemployed Proportion of LTU out of all unemployed Deviation from the average 15-19 2032 226 11% -29% 20-24 13355 3631 27% -13% 25-29 13452 4380 33% -8% 30-34 12520 4706 38% -3% 35-39 14016 5987 43% 3% 40-44 14711 6718 46% 6% 45-49 16779 8250 49% 9% 50-54 19819 10315 52% 12% 55-59 18364 10227 56% 16% 60 + 5248 2494 48% 7% Source: Made by authors using data provided by State Employment Agency.

Age Discrimination in Labour Market in Latvia 26 Table 6 How many from those who ended professional trainings found a job in 2011. Age group Ended professional training in year 2011 From them got a job in year 2011 Proportion of got jobs Deviation from the average 20-24 569 94 17% 1% 25-29 670 147 22% 7% 30-34 514 81 16% 0% 35-39 626 130 21% 5% 40-44 634 117 18% 3% 45-49 725 113 16% 0% 50-54 755 107 14% -1% 55-59 580 73 13% -3% 60 + 145 4 3% -13% Source: Made by authors using data provided by State Employment Agency. Data provided by SEA shows that indeed unemployed over 50 have some problems because (as previously depicted in table 3) they create major part of unemployment in Latvia. From table 5 it is seen that there are much more long term unemployed people over age 50 than on average of all other groups. Table 6 shows how many have completed professional training provided by SEA to increase competitiveness of unemployed in the labor market. Moreover, after receiving the exact same trainings as younger job seekers, unemployed over 50 have much more problems finding the job comparing to the rest of age groups. Although such data does not show direct signs of discrimination it definitely leaves us with some suspicions. One solution for this problem SEA wanted to make was special support program for unemployed age 55+ employment. The program should have been the same, as they currently have for the age group of 18-24 years old. They subsidize employers who employ those who are registered unemployed and lie in the age group from 18-24 years old. Subsidy is 100 LVL for the first 6 months and 50 LVL for another 3 months also. There are additional payments for employing handicapped people as well. However, government has denied this proposition and will finance only program made for 18-24 years old unemployed people.

Age Discrimination in Labour Market in Latvia 27 Furthermore, SEA is planning to have more interactive training for older groups, separately from others, to adopt trainings according to their needs and to develop missing competencies in the current labor market. SEA also supports increasing the retirement age to age 65 gradually from 2014 to 2020 as a solution to decrease older people unemployment. Ombudsman of the Republic of Latvia Discrimination at work place is a common daily issue at the bureau of Ombudsman of the Republic of Latvia. Each year significant number of people turns to ombudsman claiming they have been discriminated. Most discrimination cases at work have been discrimination by gender; nevertheless some applications are exactly age discrimination based (see Table 7). Table 7 Cases with age discrimination Year Received Received Initiated Closed with a Applications written Solved Refused oral investigations recommendation total applications applications 2010 5 n/a n/a n/a n/a 3 8 2009 4 2 1 2 n/a 2 6 2008 6 6 3 3 1 9 15 2007 3 n/a 1 n/a 1 17 20 Source: Made by authors using data provided from Ombudsman of the Republic of Latvia (2012). In case the fact of discrimination is proved, at first legal advisers of ombudsman contact the employer, and only if the employer does not want to cooperate and proceed as advised, The Consumer Rights Protection Centre is informed that investigates the case further (C. Bērziņa, Senior Legal Adviser, personal communication January 25, 2012). Ombudsman believes problem is insufficient state financing for this matter, although it s stated in the law of the bureau of the Ombudsman of the Republic of Latvia it has to inform society about discriminations and prevent them. Another correlated problem to the funding is

Age Discrimination in Labour Market in Latvia 28 shortage of staff in the bureau of the Ombudsman. In France, for example, effective number of people working with employee discrimination is 60 while in Latvia it s only 3. There is too little concern from the government about this problem, hence lack of financing. Additionally, bureau of Ombudsman of the Republic of Latvia is the only organization dealing with the issues of all sorts of discrimination while in other EU countries for every type of discrimination there is separate organization for people in need. However, the main reason, why in other EU countries discrimination is being dealt better, is because in Latvia people do not always recognize discrimination by age, therefore lots of times employers discriminate their current or potential employees unintentionally and employees fail to notice it purely because of lack of information on the subject. Finally, numerous beneficial changes and add-ons in law of discrimination have been created, unfortunately, discussion and implementation are being constantly rescheduled thus enforcement of the changes is postponed (J. Jansons, Ombudsman of the Republic of Latvia, personal communication January 25, 2012). Currently ombudsman bureau is planning to make special informative events and advertisements to educate both employers and employed people on what is discrimination. They also consider training group of social workers who then could work and educate job seeking people on this matter (C. Bērziņa, Senior Legal Adviser, personal communication January 25, 2012). Interpretation of the Results Field experiment using paired applications shows positive results on discrimination. Observed 43% net discrimination at 0.01 statistically significant level is consistent with findings in France and England, where Riach and Rich (2006, 2007) observed 58.1% and 28.8% net discrimination significant at 0.001 level. Lahey (2007) also recorded statistically significant preference of younger applicants in entry jobs in Florida and Massachusetts. Experiment proves that there is indeed discrimination on age basis in Latvia in low skilled labor market. Women as our test results shows are less discriminated with 41.67% net discrimination comparing to men with 45.16% both statistically significant at 0.01 level. Results supports our hypothesis, that