Sebastian KönigsEconomist

Directorate for Employment, Labour and Social Affairs

Investing in YouthLatvia

Riga, 27 August 2015

• Young people in Latvia have been hit severely by the Great Recession. Today, the share of young people not in employment, education or training (‘NEET’) is back close to the OECD average, but large regional disparities remain.

• Only about half of all NEETs are looking for a job (unemployed), while the remainder is inactive (often for childcare or health reasons).

• NEETs tend to accumulate various forms of disadvantage: low education, health problems, less favourable parental background.

• Latvia’s vocational education system has long suffered from a lack of attractiveness: work-based training should be extended, ideally in an apprenticeship-style framework.

• The Youth Guarantee is a great opportunity for bringing NEETs back into education or work. Remaining challenges are a lack of administrative capacity and co-ordination, low programme participation among the most disadvantaged, and institutional obstacles to a quick introduction of the planned outreach services.

Main findings

2

Labour market outcomes for youth in Latvia

The youth population has shrunk dramatically over the last decade

Source: OECD calculations based on the Latvian Labour Force Survey and CSB data

left panel: size of the youth population (left axis: absolute count, right axis: relative rate)right panel: causes of the change in the youth population from 2002-13, by age group (%)

4

17

18

19

20

21

22

23

-

100,000

200,000

300,000

400,000

500,000

600,000

15-19 yrs 20-24 yrs 25-29 yrs Youth / Population (in %)

-22%

-46%

-10%-6%

-50%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

Allyouth

15-19yrs

20-24yrs

25-29yrs

fertility effect migration effect total effect

Young people have been hit hard during the economic crisis

1. Numbers are for individuals aged 15-29 years. Source: OECD calculations based on the Latvian Labour Force Survey and OECD Employment Database (www.oecd.org/employment/database)

left panel: employed youth as a share of the total youth population (%)right panel: unemployed youth as a share of all active youth (%)

5

40

45

50

55

60

65

70

Latvia Estonia Finland OECD Average

30.0

40.0

50.0

60.0

Youth employment rate

0.0

5.0

10.0

15.0

20.0

25.0

30.0

Youth unemployment rate

Only few young people in Latvia combine study and work

1. Statistics are for young people aged 15-29 years. 2. Results are for 2012 except for Latvia (2013).Source: OECD calculations based on the Latvian Labour Force Survey, EU-LFS and national labour force surveys

Labour market status of youth in %, 2012/13

6

Half of all NEETs in Latvia are not looking for work, but this share has been declining

1. Statistics are for young people aged 15-29 years. 2. Results in the right panel are for 2012, except for Latvia (2013)Source: OECD calculations based on the Latvian Labour Force Survey, EU-LFS and national labour force surveys

Inactive and unemployed NEETs as a share of the youth population in %, 2012/13

7

NEETs rates are much higher in Latgale and Zemgale, which benefited little from the recovery

1. Statistics are for young people aged 15-29 years. 2. Results in the right panel are for 2012, except for Latvia (2013)Source: OECD calculations based on the Latvian Labour Force Survey, EU-LFS and national labour force surveys

Left panel: NEET rates in % by region, 2013Right panel: change in NEET rates in percentage points by region

8

Who are those not in employment, education or training (NEETs)?

NEETs are more likely than other youth to…

1. Statistics are for young people aged 15-29 years. 2. Results are for 2013Source: OECD calculations based on the Latvian Labour Force Survey 1

0

… be femaleBreakdown of NEETs in Latvia by sex (in %)

NEET rate in %

11

6

7

9

women men

unemployed NEETs

inactive NEETs

55 45

women

men

NEETs are more likely than other youth to…

1. Statistics are for young people aged 15-29 years. 2. Results are for 2013Source: OECD calculations based on the Latvian Labour Force Survey 11

… be female… be aged in their (late) 20s

Breakdown of NEETs in Latvia by age (in %)

NEET rate in %

48

122

119

15-19years

20-24years

25-29years

unemployed NEETs

inactive NEETs

9

4348

15-19 years

20-24 years

25-29 years

NEETs are more likely than other youth to…

1. Results are for 20132. The term “low-educated” is used to describe individuals with at most lower-secondary education (ISCED levels 0-2);

“medium educated” refers to individuals with upper- or post-secondary education (3-4), and “highly-educated” is used to describe individuals with tertiary education (5-6).

Source: OECD calculations based on the Latvian Labour Force Survey 12

… be female… be aged in their (late) 20s… have at most ‘basic education’

NEET rate in %(25-29 year-olds)

Breakdown of NEETs in Latvia by educational attainment

(in %), 15-29 yr-olds

2211 9

17

114

low edumedium

edu high edu

unemployed NEETs

inactive NEETs

30

52

18

low edu

medium edu

high edu

NEETs are more likely than other youth to…

1. Statistics are for young people aged 15-29 years. 2. Results are for 2013Source: OECD calculations based on the Latvian Labour Force Survey 1

3

… be female… be aged in their (late) 20s… have at most ‘basic education’… have non-Latvian ethnicity

NEET rate in % Breakdown of the number of NEETs by ethnicity

(in %)

810

7

11

ethnicLatvians

otherethnicities

unemployed NEETs

inactive NEETs

61

39

ethnic Latvians

other ethnicities

NEETs are more likely than other youth to…

1. Statistics are for young people aged 15-24 years. 2. Results are for 2008Source: OECD calculations based on the European Health Interview Survey (EHIS) 1

4

… be female… be aged in their (late) 20s… have at most ‘basic education’… have non-Latvian ethnicity… suffer from physical or mental

health issues

accumulation of disadvantage

Share of youth who report health problems in %

41

15

710 3

19

914

8

18

2

Has been very nervous(past 4 weeks)

Has felt downheartedand depressed(past 4 weeks)

Non-NEETs NEETs

14

25

Physical limitations(past 6 months)

415

Has been very nervous(past 4 weeks)

… and also NEETs’ parents tend to be more disadvantaged

1. Statistics are for young people aged 16-29 years. 2. Numbers are for 2012, except for Latvia (2013), Belgium (2011) and Ireland (2010)Source: OECD calculations based on EU-SILC 1

5

Share of youth and NEETs living with workless parents(in % of those still living with their parents)

Periods out of education or work moreover tend to be widespread and long in duration

16

Results based on OECD calculations using the longitudinal EU-SILC, 2012.

When followed over a 48-month period, • 55% of all Latvian youth spend at least some time at NEETs

(compared to less than 30% in Norway)• 40% of youth have a single ‘NEET spell’ of more than six months’

duration• 30% of youth spend more than 12 months as NEETs (across

spells)… and women, youth with little education and those in poor health are most likely to report long periods of NEET status

Disclaimer: These results are based on data from the crisis years 2009-12

Providing high-quality vocational education and training

in Latvia

Vocational education in Latvia has suffered from low attractiveness and high drop-out

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• Latvia’s vocational education system is perceived to be among Europe’s poorest (EC, 2011)

• Enrolment rates in vocational education are low (39% of all secondary students, compared to 50% across the EU)

• Dropout rates are relatively high: ~25% over the course of a programme

• The practical component of vocational education is largely school-based; where company-based training is provided, this is little regulated: structure…? contents…? pay…?

Latvia has taken important steps to reform its vocational education system

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• consolidation of the network of vocational training institutions: – establishment of VECCs as modernized hubs for the provision

of vocational education – merger or closure of smaller training institutions

• establishment of Sectoral Expert Councils and their involvement in the revision of occupational standards and programme contents

• ongoing ‘work-based learning’ pilot provides a small-scale test of apprenticeship-style matching of students to employers (though without providing students with formal work / apprenticeship contracts)

OECD recommendations

20

Expand work-based training in vocational education, ideally through introduction of an apprenticeship-style system

Ensure training quality through introduction of an appropriate legal framework:• work / apprenticeship contracts that specify the rights and responsibilities

of schools, employers and students financial compensation for apprentices

• standardized training curricula and examination procedures

Challenges: 1. large number of micro-enterprises:

possibility of ‘sharing’ apprentices across multiple employers2. too high perceived cost to employers:

consider (temporary?) provision of financial incentives (subsidy, tax credit, lower minimum wage, levy financing) in return for high-quality training

Offering employment or training options to NEETs in Latvia

The YG represents a great opportunity for bringing NEETs back into education or work

22

• The Great Recession led to a massive inflow of registered job seekers: – 4x increase in registered job seekers < 25 years (2008-10)– 4x increase in young jobseekers registered over 6 months (2008-10)

• Participation in ALMPs has typically been weak in Latvia compared to other European countries

Introduction of a Youth Guarantee in 2014 in three phases:1. strengthening employment services for unemployed youth2. developing ‘second-chance’ learning options for the low-skilled3. improving outreach to inactive youth

In 2013, about 30% of NEETs were non-registered without health or family reasons

23

Breakdown of NEETs by registration status and reason for inactivityNEETs aged 15-29 years by status, in 2013

Unemployed NEETs -

registered, 19,800 , 31%

Unemployed NEETs - non-registered,

11,000 , 17%Inactive NEETs -others, 8,300 ,

13%

Inactive NEETs -health

problems, 4,300 , 7%

Inactive NEETs -non-formal education, 1,200 , 2%

Inactive NEETs -family reasons,

18,400 , 29%

Source: OECD approximations based on Latvian Labour Force Survey and administrative data

It’s still early for an assessment of the Youth Guarantee (I)

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Some first positive trends emerge…• distinct focus expanding career guidance and upskilling NEETs,

incl. strong expansion of second-chance ‘short-cycle’ VET options this is a promising approach especially in times of (still) weak labour

demand

• temporary public employment played an important role during the crisis, but is slowly being phased out encouraging, given that there is little evidence for positive long-term

employment effects of such programmes

• increased financial support for mobility / accommodation of job seekers important to boost opportunities of job seekers especially in rural areas

It’s still early for an assessment of the Youth Guarantee (II)

25

… but important challenges remain:• Administrative capacity and co-ordination remains low:

– integration of employment and social services is weak especially in larger cities, and caseload numbers for counsellors tend to be high problematic especially for the most disadvantaged

• Programme participation needs to be raised further:– In 2014, only 2 out of 3 registered job seekers participated in a

programme (and there are many unregistered NEETs…);– there is evidence of creaming, as programmes are offered primarily to

more motivated job seekers;

• Extending outreach will be a challenge, especially in areas without an existing local network of NGOs

OECD recommendations

26

Strengthen the integration of the employment and social services:• closer co-operation and information exchange is needed to ensure

comprehensive support, especially for the most disadvantaged• early profiling of benefit claimants can help reduce high caseload numbers

Tighten conditionality of income-support payments on active job-search or programme participation for employable NEETs;

Ensure gate-keeping for disability benefits among youth

Continue phasing out the public employment programmes for youth introduced during the crisis and consider expanding targeted hiring subsidies

Systematically implement the recently launched outreach stage of the Youth Guarantee to link up inactive NEETs with social and employment services

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Contact: Sebastian.Koenigs@oecd.org

Access the Latvian review online: Investing in Youth – Latvia

More recent work on the youth policies: www.oecd.org/employment/action-plan-youth.htm

OECD Directorate for Employment, Labour and Social Affairs: www.oecd.org/elsIn It Together: Why less Inequality benefits All: www.oecd.org/social/inequality-and-poverty.htmSociety at a Glance 2014: www.oecd.org/social/societyataglance.htmPensions at a Glance 2013: www.oecd.org/pensions/pensionsataglance.htm

Thank you

@OECD_Social