The pandemic is having a heterogeneous impact on the labour market
COVID-19 has affected the daily lives of all residents of Latvia by forcing them to change their holiday plans, encouraging them to plan their shopping trips or by motivating them to take advantage of the opportunities provided by communication technologies. At the same time, not all people have had equal opportunities to retain their jobs. The restrictions introduced to improve the epidemiological situation have affected the services sectors more severely as they had to temporarily suspend or significantly restructure their activities. Meanwhile, the impact on the goods-producing sectors has been less pronounced. This is also reflected by the employment indicators for 2020 compiled by the Central Statistical Bureau (CSB).
Overall, 17 thousand people lost their jobs in the previous year, with the rate of unemployment rising to 8.1%.
The most notable decline in the number of employed persons was recorded in the services sectors such as trade, transportation, construction, arts, entertainment and recreation, financial and insurance activities as well as accommodation and food service activities. Meanwhile, some services sectors, e.g. information and communication technologies (ICT), have reported higher employment rates since the demand for state-of-the-art and secure digital solutions continues to grow, with people increasingly using remote work opportunities and businesses shifting to online sales.
Among the employed, substantial differences were also observed in the breakdown by occupational group. Lower-skilled employees, including services and sales workers, suffered the largest job losses due to the crisis. Likewise, businesses were more likely to lay off employees who lacked previous work experience. Such a move on part of businesses is understandable. With demand for the services provided by them decreasing, such employees are less essential. Meanwhile, highly qualified experts often play a crucial role in the core activities of a business.
The general picture in the regions has not changed. Latgale, where productivity is lower, saw the highest unemployment also in the previous year.
However, the most pronounced decline in employment was recorded in Riga planning region (Riga and Pieriga) as well as in the cities.
This dynamics was determined by a more developed services infrastructure which requires the movement of people that only cities with a larger number of residents and developed tourism can offer. It is rather logical that these regions are the ones experiencing the sharpest drop in activity when mobility is restricted [1].
Overall, the unemployment rate was close to the projected one. So far, both the gradual lifting of restrictions over the summer and stronger economic activity across the goods-producing sectors at the end of the year have helped to prevent a steeper increase in the unemployment rate. The government support measures in the form of furlough benefits, wage subsidies and working capital grants had also a role to play in maintaining employment.
The COVID-19 crisis is not over yet; therefore, the support to the households hit by the crisis is vital to avoid an increase in inequality.
As an EU Member State, Latvia has access to significant financial resources for overcoming the crisis and dealing with its consequences. Thus, these funds provide Latvia with the opportunities not only to climb out of the pandemic pit, but also to move towards being a greener and digitally more developed country with a higher level of welfare.
[1] For a more detailed overview of the labour market developments due to COVID-19, see https://www.makroekonomika.lv/darba-tirgus-covid-19-krizes-ena-septini-fakti
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