ABSTRACT
Before proclaiming its independence in 1918 Latvia was a part of the tsarist Russian Empire. The independent Latvian state (1918-40) had a rather developed social policy with an advanced system of health insurance, elaborate labour market legislation, a social assistance network and an emerging pension insurance system. After annexation and incorporation into the Soviet Union in 1940, Latvia experienced
the common model of USSR social policy: standardization of protection and its extension to all employed people, integration of social insurance into the state budget, centralized and universal health services. The cornerstone of social security was the right to work. Other policies for income maintenance were based on it. Benefits were provided in respect of all the social security contingencies detailed in Convention No. 102, 1952, of the International Labour Organization (ILO) dealing with social security minimum standards. The social security system provided benefits in one contingency, paid leave for child
care according to more recent standards than those indicated in Convention No. 102; they were provided in line with Recommendation No. 165, 1981, which relates to workers having family responsibilities. Pensionable age was relatively low: 60 for men and 55 for women. Private com-
plementary schemes did not exist. Pensions were actually high enough to survive on. Health care was free of charge, financed from the state budget. Basic commodities and services such as food, shelter, heating and transport were largely subsidized and available at very low cost. The Soviet system of welfare was paternalistic. The absence of rights to articulate and
lobby for needs autonomously from below was a very important issue. Welfare recipients were objects of welfare provision, but never active subjects in defining their needs and in running services that met the needs. Salaries and wages were low and many people were dissatisfied with the quality of services and the huge deficit of goods. Such was the legacy and background for social policy making after the renewal of
Latvian independence in 1991. Latvia experienced all the consequences of a crisis in the economy in the early nine-
ties – high level of inflation, rapid collapse of the consumer market, disastrous decrease in
2000 Latvia’s has at an average annual rate of 9 per cent. Real expenditure exceeded remarkably the amount of people’s income due to credit boom between 2003 and 2007. In 2008 years of unsustainable high growth turned into a rapid decrease of economy (-4.6% of GDP) and large current account deficits. For economic stabilization Latvia signed conditions for receiving a loan from European Union, International Monetary Fund and partner countries in amount of 7.5 billion Euros. The conditions envisage strong cut of all expenditures including social, to reduce wage fund for public sector by 20% and other unpopular but necessary measures especially painful for vulnerable groups. The Gini coefficient in Latvia has been steadily rising from around 2.5 in 1991 to 3.6 in 2003 and 3.9 in 2006. The inequality gap is still growing. The at-risk-of-poverty group is among the highest in the EU: 19 per cent in 2005 and 23 per cent in 2006. The poverty risk has significantly increased for one-person households, especially for women. Social policy reforms in Latvia have had a very clear liberal orientation introducing social
insurance principles in some areas and providing social assistance in others. Reform included quite radical short-, mid-and long-term changes for employed people, turning from paternalistic expectations of the state towards personal responsibility for social welfare. This is also reflected in a decreasing share of GDP devoted to social expenditure (see Table 18.1) All inhabitants had to make radical changes in their expectations and behaviour in all
spheres of life, turning to the more individualistic way of life relying on one’s own forces first of all. State and local municipalities have created a social security safety net providing the country with social services. Parties in the ruling coalitions are opposed to state-supported redistribution activities.
The level of redistribution is in some way an indicator of the level of solidarity in society.
