Ekonomista Oļega Krasnopjorova prezentācija "Future of jobs" konferencē.

1. Labour market challenges in Latvia and the EU:
from pandemics into Ukraine crisis
Olegs Krasnopjorovs
«The Future of Jobs», 12.05.2022.

2. ►How labour market came out of the Covid-19 pandemics?
►Russia’s invasion in Ukraine: how it affected macroeconomic forecasts?
►What are the long-term labour market challenges in Latvia?
Presentation outline

3. Source: Central Statistical Bureau of Latvia data, author’s calculations
Unemployed and state support receivers
(% of economically active population)
3
Covid-19 overall impact on the labour market was limited
Unemployment and employment rates
over 2002 – 2022 (%)
8.4 7.9 8.1 7.8 7.2 7.1
3.2
6.3
2.4
1.0
1.3
0.4
3.5
0
2
4
6
8
10
12
14
16
18
Q3 Q4 Q1 Q2 Q3 Q4
2020 2021
Unemployment rate Furlough (dīkstāves) benefit Wage subsidy
Without massive state support programmes
unemployment rate would be almost twice bigger
2020
2021
2022
2002
2008
2010

4. September 2009
0.0
0.5
1.0
1.5
2.0
2.5
2008
I
VII
2009
I
VII
2010
I
VII
2011
I
VII
2012
I
VII
2013
I
VII
2014
I
VII
2015
I
VII
2016
I
VII
2017
I
VII
2018
I
VII
2019
I
VII
2020
I
VII
2021
I
VII
2021
I
600
650
700
750
800
850
900
2008
I
VII
2009
I
VII
2010
I
VII
2011
I
VII
2012
I
VII
2013
I
VII
2014
I
VII
2015
I
VII
2016
I
VII
2017
I
VII
2018
I
VII
2019
I
VII
2020
I
VII
2021
I
VII
2022
I
Source: State Employment Agency, Central Statistical Bureau of Latvia and State Revenue Service data; author’s calculations
Newly unemployed people
(% of economically active population; seasonally adjusted)
4
Despite big layoffs in Spring 2020, job losses were much
lower than during the 2009 crisis
Number of employees with work income
(in thousand; seasonally adjusted)
Latest observation: March 2022
Latest observation: February 2022
April 2020

5. IEROBEŽOTA PIEEJAMĪBA
0
5
10
15
20
25
30
35
2002
Q1
Q3
2003
Q1
Q3
2004
Q1
Q3
2005
Q1
Q3
2006
Q1
Q3
2007
Q1
Q3
2008
Q1
Q3
2009
Q1
Q3
2010
Q1
Q3
2011
Q1
Q3
2012
Q1
Q3
2013
Q1
Q3
2014
Q1
Q3
2015
Q1
Q3
2016
Q1
Q3
2017
Q1
Q3
2018
Q1
Q3
2019
Q1
Q3
2020
Q1
Q3
2021
Q1
Q3
Registered unemployment (from SEA)
Official unemployment (job seekers) rate from CSB (U3)
+ Discouraged (don't believe in finding work) (U4)
+ Ready to work but not look for work; or opposite (U5)
+ Involuntary part-time workers (U6)
Source: State Employment Agency and Central Statistical Bureau of Latvia data; author’s calculations
Official and broad unemployment measures (% of economically active population)
5
Broad unemployment measures increased moderately as well
Blank Blank Blank Blank
official
statistics

6. 7.6
(+1.3) 7.0
(+0.3)
0
5
10
15
Spain
Greece
Italy
Sweden
France
Finland
Croatia
Latvia
Cyprus
Lithuania
EU-27
Slovakia
Portugal
Belgium
Estonia
Ireland
Austria
Romania
Bulgaria
Luxembourg
Denmark
Slovenia
Netherlands
Hungary
Germany
Malta
Poland
Czechia
2021 2019
BE
BG
CZ
DK
DE
EE
IE
GR SP
FR
CR
IT
CY
LV
LT
LU
HU
MT
NL
AT
PL
PT
RO
SL
SK
FI
SE
R² = 0.90
0
5
10
15
0 5 10 15
Unemployment
rate
Natural rate of unemployment
Source: Eurostat and AMECO data; author’s calculations.
Unemployment rate (% of economically active population)
6
Unemployment rate today
is only slightly higher than it was in 2019
Unemployment and natural unemployment rate in 2021
(% of economically active population)
Unemployment cross-country differentials mainly reflect different
labour market efficiency, rather than different phases of economic cycle.

7. 2002
2007
2010
2019
2021
-5
0
5
10
15
20
25
30
35
5 10 15 20
Annual
wage
growth
(%)
Unemployment rate (% of economically active population)
Source: Central Statistical Bureau of Latvia and European Commission data; author’s calculations.
Phillips curve (Latvia over 2002 - 2021)
7
Natural rate of unemployment decreased moderately over the years (but ↑ slightly
during the pandemics); there is a room for a further decrease
Economic
downturn
Economic
overheating
Natural rate
of unemployment ↑
Natural rate
of unemployment ↓

8. IEROBEŽOTA PIEEJAMĪBA
Source: Central Statistical Bureau of Latvia and State Revenue Service data; author’s calculations 8
Employment dynamics differs across occupations and sectors
Number of employees (%; changes
compared to Q4 2019; seasonally adjusted)
Red (green): relatively large decrease (increase) in the number of
employees during the reference month
0
2000
4000
6000
8000
2020
I
III
V
VII
IX
XI
2021
I
III
V
VII
IX
XI
2022
I
Number of jobs in selected occupations
(Jan 2020 – Feb 2022)
0
200
400
600
800
1000
1200
1400
2020
I
III
V
VII
IX
XI
2021
I
III
V
VII
IX
XI
2022
I
Hotel Receptionists
0
250
500
750
1000
1250
1500
1750
2020
I
III
V
VII
IX
XI
2021
I
III
V
VII
IX
XI
2022
I
Travel Attendants, Conductors
and Guides
0
2000
4000
6000
8000
10000
2020
I
III
V
VII
IX
XI
2021
I
III
V
VII
IX
XI
2022
I
Cooks Software Developers
White colour here…

9. IEROBEŽOTA PIEEJAMĪBA
Source: Central Statistical Bureau of Latvia and State Revenue Service data; author’s calculations
Number of employees with work income (index; Feb 2020 = 100; seasonally adjusted)
9
Young people suffered more layoffs;
Men and women were similarly affected in the medim term
White colour here…
Youth: 1) bigger employment in accommodation and food;
2) low qualification: will be easy to find these employees after crisis
=> higher probability of dismissal.
60+: 1) bigger employment in education and healthcare (almost no layoffs);
2) ↑ population in this age group.
80
85
90
95
100
2020
II
III
IV
V
VI
VII
VIII
IX
X
XI
XII
2021
I
II
III
IV
V
VI
VII
VIII
IX
X
XI
XII
2022
I
II
18-29 30-45 45-60 60+
80
85
90
95
100
2020
II
III
IV
V
VI
VII
VIII
IX
X
XI
XII
2021
I
II
III
IV
V
VI
VII
VIII
IX
X
XI
XII
2022
I
II
Men Women
In the short run: women were more affected than men;
In the medium term: men and women were similarly affected.

10. 85
90
95
100
2020
II
III
IV
V
VI
VII
VIII
IX
X
XI
XII
2021
I
II
III
IV
V
VI
VII
VIII
IX
X
XI
XII
2022
I
II
Public sector Private sector
10
Layoffs were bigger among the private sector employees,
and among firms located in Riga
Source: Central Statistical Bureau of Latvia and State Revenue Service data; author’s calculations.
Number of employees with work income (index; Feb 2020 = 100; seasonally adjusted)
85
90
95
100
2020
II
III
IV
V
VI
VII
VIII
IX
X
XI
XII
2021
I
II
III
IV
V
VI
VII
VIII
IX
X
XI
XII
2022
I
II
Riga Pieriga Vidzeme Kurzeme Zemgale Latgale
Pieriga: deep employment slowdown, but faster recovery

11. 11
Low-wage workers suffered more layoffs;
high-wage workers faced wage rises
Ranged by 2019 occupational mean wage – percentile rank
Source: State Revenue Service data; author’s calculations.
For methodology see Dolado, Felgueroso, Jimeno (2020). «The Spanish Labour Market at the Crossroads: Covid-19 meets and megatrends»
High wage
Low wage
-20
-10
0
10
20
30
below
400
400-700
700-1000
1000-1500
1500-2000
2000-3000
3000-4000
above
4000
Number of employees in the private sector subject to earned
gross monthly wage (%; Jan – Nov 2021 compared to
February 2020; seasonally adjusted)
Change in employment share during Apr 2020 – November 2021,
subject to mean wage in 2019 (smooth local regression with 95%
confidence interval; based on 3-digit ISCO occupation breakdown)
Y-o-y
change
in
employment
share
in
April
2020
–
November
2021
(pp.)
Gross monthly wage (euro)

12. 0
5000
10000
15000
20000
25000
30000
35000
2008
I
IV
VII
X
2009
I
IV
VII
X
2010
I
IV
VII
X
2011
I
IV
VII
X
2012
I
IV
VII
X
2013
I
IV
VII
X
2014
I
IV
VII
X
2015
I
IV
VII
X
2016
I
IV
VII
X
2017
I
IV
VII
X
2018
I
IV
VII
X
2019
I
IV
VII
X
2020
I
IV
VII
X
2021
I
IV
VII
X
2022
I
Source: State Revenue Service and Central Statistical Bureau of Latvia data; author’s calculations.
12
«Exponential growth» or «How Covid19 crisis differs from the
Global Financial crisis» in one slide
Global
Financial
crisis
Pande
mics
Number of private sector employees with wage exceeding 3 thousand euro
(gross; per month; seasonally adjusted data)

13. 0
1000
2000
3000
4000
5000
6000
7000
8000
2008
I
VII
2009
I
VII
2010
I
VII
2011
I
VII
2012
I
VII
2013
I
VII
2014
I
VII
2015
I
VII
2016
I
VII
2017
I
VII
2018
I
VII
2019
I
VII
2020
I
VII
2021
I
VII
2022
I
IT
Number of employees with wage exceeding 3 thousand euro (gross; per month; seasonally adjusted data)
13
Number of high wage earners increased in almost all sectors
0
500
1000
1500
2000
2500
2008
I
VII
2009
I
VII
2010
I
VII
2011
I
VII
2012
I
VII
2013
I
VII
2014
I
VII
2015
I
VII
2016
I
VII
2017
I
VII
2018
I
VII
2019
I
VII
2020
I
VII
2021
I
VII
2022
I
Construction
0
500
1000
1500
2000
2500
3000
3500
4000
4500
5000
2008
I
VII
2009
I
VII
2010
I
VII
2011
I
VII
2012
I
VII
2013
I
VII
2014
I
VII
2015
I
VII
2016
I
VII
2017
I
VII
2018
I
VII
2019
I
VII
2020
I
VII
2021
I
VII
2022
I
Professional and
administrative services
0
500
1000
1500
2000
2500
3000
3500
4000
4500
2008
I
VII
2009
I
VII
2010
I
VII
2011
I
VII
2012
I
VII
2013
I
VII
2014
I
VII
2015
I
VII
2016
I
VII
2017
I
VII
2018
I
VII
2019
I
VII
2020
I
VII
2021
I
VII
2022
I
Manufacturing
0
2000
4000
6000
8000
10000
12000
14000
16000
2008
I
VII
2009
I
VII
2010
I
VII
2011
I
VII
2012
I
VII
2013
I
VII
2014
I
VII
2015
I
VII
2016
I
VII
2017
I
VII
2018
I
VII
2019
I
VII
2020
I
VII
2021
I
VII
2022
I
Public administration,
education
and healthcare
0
200
400
600
800
1000
1200
2008
I
VII
2009
I
VII
2010
I
VII
2011
I
VII
2012
I
VII
2013
I
VII
2014
I
VII
2015
I
VII
2016
I
VII
2017
I
VII
2018
I
VII
2019
I
VII
2020
I
VII
2021
I
VII
2022
I
Agriculture

14. 4.2
1.8
0
1
2
3
4
5
2021 December forecast 2022 March forecast
6.1
9.5
0
2
4
6
8
10
2021 December forecast 2022 March forecast
Source: Bank of Latvia forecasts.
Macroeconomic forecasts (for 2022)
14
Russia’s invasion in Ukraine calls for a revision of GDP and inflation
forecasts. However, unemployment forecasts changed little
Consumer price inflation (%)
Unemployment (% of economically active population) Average wage growth (%)
Real GDP growth (%)
7.5
8.1
0
3
6
9
2021 December forecast 2022 March forecast
7.5
9.7
0
2
4
6
8
10
2021 December forecast 2022 March forecast

15. ► 28 ths. Ukraine refugees registered in Latvia (1.4% of Latvian population);
► Precise number is not known:
might be bigger: Ukraine citizens which don’t need any help can live in Latvia for 3 months without informing authorities;
might be smaller: unrecorded number of refugees returned to Ukraine or went to other EU countries after registering in Latvia.
At least 4 ths. already work in Latvia; some will begin to work in the coming weeks (up to ~40% of all Ukraine refugees):
► ~50% of refugees in the working-age (men in age 18-60 are not allowed to leave Ukraine);
► ~80% of them will be employed (-: need to acquire language skills, receive professional skill recognition;
+: very positive attitude from Latvian entrepreneurs).
► => ~ 40% of Ukraine refugees will be employed in the labour market.
11 ths. = 1.2% of Latvian employed people; unlikely to have a substantial impact on the labour market.
► Possible sectors: trade, catering, manufacturing (i.e., textile). Not in construction (majority of refugees are women).
► Currently, the influx of Ukraine refugees is decreasing. Future developments may depend on duration/outcome of the war.
Impact of Ukraine refugees influx to the Latvian labour market
is expected to be limited
15
Source: author’s calculations.

16. Source: Central Statistical Bureau of Latvia data, author’s calculations. 16
Skill mismatches and structural unemployment are long-term
challenges that must be addressed…
Employed to working-age population ratio by
education level (%)
Beveridge curve in the regions of Latvia (2016 – 2021)
Latgale: high unemployment miracle is a result of labour market
mismatches, not an absence of vacancies.
0
10
20
30
40
50
60
70
80
Total Higher
education
Vocational
secondary
education
General
secondary
education
Basic
education

17. 0
5
10
15
20
25
30
35
25-34 35-44 45-54 55-64
EU6 Estonia Latvia Lithuania
Source: Eurostat data, author’s calculations.
Participation in education and training
(last 4 weeks; % of population; in 2021)
17
… taking roots in low levels of lifelong learning,
digital skills, health
Individuals with at least basic digital
skills (% of population; in 2021)
* EU6 countries are Denmark, Germany, Netherlands, Austria, Finland and Sweden.
0
10
20
30
40
50
60
70
80
90
16-24 25-34 35-44 45-54 55-64 65-74
EU6 Estonia Latvia Lithuania
Self-perceived health (0-100 scale)
40
50
60
70
80
90
16-24 25-34 35-44 45-54 55-64 65-74
EU6 Estonia Latvia Lithuania

18. ► How labour market came out of the Covid-19 pandemics?
Overall impact of pandemics on the labour market was limited; but varied substantially by sectors,
occupations and population groups, with low-income workers affected the most. Massive state
support programs prevented a rise of unemployment and income inequality;
► Russia’s invasion in Ukraine: how it affected macroeconomic forecasts?
Limited effects on ↓ GDP and ↑ unemployment. Influx of Ukraine refugees: 1.0 – 1.5% of Latvian
population and employment;
► What are the long-term labour market challenges in Latvia?
Skill mismatches and structural unemployment: ↓ over the last 15 years, but ↑ somewhat during the
pandemics. Needs further human capital development (lifelong learning, digital skills, health).
Takeaways
18