How to achieve Latvia’s growth in the long term and contribute to the increase in the welfare level? This requires an economic transformation towards higher value added products, more active action in export markets and greater use of digital solutions in the domestic market. Transformation of the economy will also require a high-skilled workforce, while the number of low- and middle-skilled jobs will decrease. This transformation and increase in productivity levels will be largely driven by the refocusing of the economy from low and medium-low-technology sectors to high-technology sectors. Consequently, we predict that the share of high-skilled jobs will increase, but the share of middle- and low-skilled professions will decrease.
“Competitiveness is crucial for breakthrough of the Latvian economy; however, it will not be possible to change the growth trajectory of Latvia without structural changes and increasing productivity. The introduction of state-of-the-art technologies, the development of new products and services, as well as the wider use of digital solutions, and the efficiency improvement of processes have a significant impact on faster growth of sectors and the whole economy. However, solutions to the labour availability matters are also the most important factor in ensuring more rapid economic growth. Therefore, it is important to adapt the education supply of the population to the current and future labour market needs, which will strengthen the competitiveness of entrepreneurs and promote restructuring of the economy from low- to medium- and high-technology sectors, as well as ensure the well-being of the population,” Minister of Economics Ilze Indriksone emphasises.
What should young people study to earn more in the future?
According to the Ministry of Economics’ labour market forecasts, the most significant labour shortage will be for specialists with education in exact sciences. In 2030, the shortage of high-skilled specialists in natural sciences, ICT and engineering may exceed 9 thousand employees. Shortages of labour force with vocational secondary education, on the other hand, can reach nearly 70 thousand employees, especially there can be a severe labour shortage of specialists with vocational education in engineering and production directions.
People with secondary general education, basic education and lower levels of education could face difficulties in finding work. We predict that the labour surplus with such qualifications could reach almost 96 thousand by 2030. Similarly, high-skilled specialists with education in social, commercial sciences and humanities may have problems finding work.
Therefore, the most significant increase in new jobs until 2030 is expected in professional, scientific and technical services, information and communications, and construction.
At the same time, in the long term or up to 2040, most of new jobs could be in professional, scientific and technical services, information and communication services, as well as health and social care services, which will be largely affected by the general ageing trends of the population and by increased demand for various health maintenance, rehabilitation and other “silver economy”-related services.
The Ministry of Economics has published medium- and long-term labour market forecasts covering the employment needs of sectors by occupations and education until 2040. The forecasts were prepared taking into account the economic growth target scenario and the corresponding demographic forecasts, as well as the current global economic processes, including the changes introduced by the Covid-19 pandemic and the impact of the war caused by Russia in Ukraine.
Challenges of recent years – the COVID-19 pandemic, escalation of the geopolitical situation – have left visible “traces” in the labour market as the number of workers and employment indicators still lag behind the levels of 2019 or the time before the pandemic and war in Ukraine. With growing economic activity, the situation in the labour market is gradually stabilising, while at the same time labour supply narrows and labour shortage are growing. Although the decline in the population will become slower until 2040, ageing of society will continue and working age population will reduce. The most significant decline in the population count is expected in working age population, therefore demographic processes will leave a tangible impact on the labour market. In view of demographic trends, unemployment generally keeps shrinking both in the medium and long term – it could drop below 7% this year. Overall, unemployment in the medium and long term will be close to its natural level (within 5-6%). The highest unemployment risks are expected among the population with a low level of education and without professional skills/professional qualification.
As it is known, labour market forecasts have been prepared by the Ministry of Economics since 2008 and are based on national economy development and demography scenarios prepared by the ministry. Labour market forecasts allow for anticipating future labour market imbalances. They show possible trends in the labour market development and possible risks if the current education system and education supply structure are retained. Having identified problems, the ministry has developed proposals for solutions for materialization of labour market reforms in the medium term aimed at promoting a stable and balanced economic growth in the country.
The informative report on medium- and long-term market forecasts is published on the website of the Ministry of Economics. Detailed labour market forecasts, economic growth scenarios and demographic forecasts can be viewed on the website: https://prognozes.em.gov.lv.