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Latvia needs serious reforms to defuse demographic time-bomb

Mar 01, 2012 from 14:00 till 16:30

On March 1, 2012 AmCham together with its partner SSE Riga held a seminar in the AmCham Outlook series to discuss how Latvia should respond to demographic change.

Joining the debate were the following experts and policy-makers:

  • Arvils Ašeradens, Parliamentary Secretary of Ministry of Welfare;
  • Edward Hugh, Board Member of Catalunya Caixa;
  • Mihails Hazans, Professor of University of Latvia.

The event was moderated by Morten Hansen, Head of Economics Department of Stockholm School of Economics in Riga.

Arvils Ašeradens explained that the number of inhabitants in Latvia during the last two decades has dramatically decreased and due to strong increase in longevity and slow growth in the fertility, people will be expected to work longer. The Welfare Ministry has therefore proposed to increase the retirement age from 62 to 65 as of 2014 and to increase the early retirement age up to 63.

Mihails Hazans said that the impact of the recent economic collapse was that thousands of young people were forced to leave to find work abroad. He emphasized that Latvia has lost at least 230 thousand people due to emigration during the last 10 years. “Latvia's society is much older than we used to think. Latvia is aging faster than in the old Europe. In addition, Latvia’s birth rate is lower and death rate higher than the respective rates of Estonia, Lithuania, the UK, Ireland and Norway show, and are getting even worse,” Hazans told. In his view, main findings of various surveys concluded in 2011 suggest that 8% of emigrants plan to return to Latvia within six-months time while about 20% say they may come back at some point in the future. As possible solutions to demographic change Hazans suggested certain policy recommendations such as liberalizing immigration, EU-wide compensation mechanism and EU-wide demographic stimulus.

Edward Hugh had the same opinion that Latvia’s population is in sharp decline and the real numbers are much worse than the official data reflect. According to Hugh, population has been falling due to both low birth rates and emigration and despite the fact that ageing is a global issue, East Europe’s problems are in particular severe. Rapid ageing happens because of the combination of declining fertility and steadily rising life expectancy. In his opinion, more importantly is not to look at the ageing itself, but at its velocity and global extension. Several examples from elsewhere in Europe indicate that immigration doesn’t necessarily trigger economic growth, therefore increased immigration cannot reduce the future fiscal burden, brought by ageing populations, alone. Hugh was certain that reforms that would help stabilize population flows and stabilize debt are needed across Europe including but not limited to shifting public resources from old to young as well as Europe-wide institutional changes. “We need more realism in policy-making and an honest debate about where our societies are going,” he concluded.

To view the presentation of Mihails Hazans
To view the presentation of Edward Hugh
To view the presentation of Arvils Aseradens

Media coverage:

TV3 News video of March 1, 2012 (The topic on AmCham Outlook starts from 24 minute) in Latvian.

The article by Leta on March 1, 2012. (In Latvian).

Click on the image below to view the entire video:

 

 

 

 

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