Regional differences in registered unemployment no reflection on availability of labour

Registered unemployment rate continues to drop in Latvia, down in October by 0.3 percentage points (to 14.3% of the economically active population) and approaching the figure of October 2009. At the same time, the regional differences regarding registered unemployment are becoming more pronounced. Thus the registered unemployment rate in Latgale at the end of October twice exceeded that in Riga (21.9% and 10.3% respectively). The difference between Latgale and Riga, 5-6 pre-crisis percentage points, increased to 10.0 percentage points in March 2010, when unemployment peaked, and then to 11.6 percentage points in October 2010.

The regional differences in the percentage of employment seekers, however, are less pronounced. According to Central Statistical Agency labour survey data, their percentage in Latgale in 2009 (latest available data) was the same as in Riga (17.6%). To compare, the average registered unemployment rate last year was 16.3% and 9.5% respectively. The regional differences in registered unemployment can thus be said to reflect not the differences in the availability of labour but those in the degree of motivation to register with the State Employment Agency (NVA).

First, in the regions, the number of economically inactive population, i.e. able-bodied people that are unemployed but are not looking for work, is greater¹. Some of them, e.g., those who do not seek employment because of health or family reasons or have lost hope of finding it may still be motivated to receive an unemployed status from NVA. Albeit they are not entitled to unemployment benefits because of the lack of previous social security payments, the status of a registered unemployed is evidence of a lack of income from work thus increasing their chances of receiving the status of poverty and becoming eligible for the guaranteed minimum income benefit or social security benefit. The willingness of the population to participate in the educational events held by NVA should also not be ignored, particularly because during those a stipend is paid that exceeds the state social security benefit and the guaranteed minimum income (LVL 70, 45 and 40 per month respectively).

Second, the opportunities of participating in the 100-lats programme stimulate the motivation of employment seekers to register with NVA in the regions more than in Riga. In the rural areas, even those employed in shady economy could participate in the 100-lats programme. The greatest proportion of the shady economy in the rural areas may consist in the unpaid labour force of family enterprises and farms. Even though according to CSP survey they are classified as employed, the specifics of their employment (incomplete working day and flexible hours) permit some of them to register with NVA as unemployed to be able to participate in the 100-lats programme². At the end of 2009, a substantial rise in unemployment was observed, which was particularly pronounced in the rural areas, including Latgale - that could be directly related to the launch of the 100-lats programme in September 2009.

¹ For instance, in Latgale only 69% of the population aged 15-64 were economically active (2009 data), which figure is not only lower than in other regions of Latvia (78% in Riga), but lower also than among the rural population (70%).

² In the cities, the greatest proportion of the shady economy may consist of salaried labour. The relatively inflexible working hours prevent them from participating in the 100-lats programme.