2024-08-04 04:53:38
Since 2008, we have had 169,000 fewer workers, and like the population, the number of workers in the country is decreasing every year.
The crowd roars
Latvia is the world record holder in population loss and in first place if we compare with 1990. Due to this lack of people, approximately 2.5 billion euros do not enter the state budget, which are the unpaid taxes of these workers who are not in Latvia.
In Latvia, it is quite popular to talk about the fact that the main and determining factor in the economy is productivity and added value. Namely, the more a person works and produces better, the greater the benefit. Unfortunately, when talking about gross domestic product, you can’t think like that, because the total number of people in the economy is also important. Less productive jobs are also important, because not everyone can be a programmer, someone has to hoe the beets. Why? If we don’t grow any beets ourselves, they will cost us five times as much. Not only because they have to be transported far, but also because we don’t have them ourselves. You can talk about theories about supply and demand for a long time, but if you don’t produce a product, its price rises.
So it is important how many people live in the country and how many of them work in order to be able to take care of pensioners and raise future workers – taxpayers.
We are world leaders in reducing the number of people. Compared to the year 1990, in 2021 Latvia had lost the largest percentage of its population of all countries in the world – 29.2%, compared to the year 2000 – 20.4%, and compared to the year 2008 – 13.4%, thus maintaining a stable the third position in the world according to population decline, according to data from the World Bank, published in a study by Jura Paider on July 4 last year Days in Business. This loss of people for Latvia means about 10 billion euros less GDP than it would be if people still lived here. Namely, since 2008, Latvia has lost 169 thousand working people and the number of unemployed has also decreased. The workers are the ones who produce this GDP. In 2008, 1.055 million people worked in Latvia, in 2022 there were only 0.886 million of them. Taking more recent data would give an even bigger result, however, considering that the data has already been collected, moreover, in different sections, we will not try to give the results of the last days. In large numbers, everything is correct enough.
How are loss estimates made?
A study by J. Paider published Days in Business on February 6 of this year, provides a simple calculation. Namely, calculated in 2023 prices, the GDP per employee in 2022 was 47.4 thousand euros, while in 2008, at the same 2023 prices, it was 36.5 thousand euros. The change is influenced by both the increase in productivity and various investments from outside, for example, the increase in the amount of funds of the European Union (EU). Namely, the increase in the average GDP amount per employee does not mean that we have become comprehensively more productive, rather, we distribute the EU money we receive to a smaller number of inhabitants, and as a result, it creates a higher average GDP per employee. Therefore, even when counting backwards, it must be taken into account that there is an error created by the monetary contribution of EU funds, so we round down in advance.
That is to say, the number of workers, which was in 2008, or 1.055 million people, multiplied by the GDP per capita in the case of 2022, gives a slightly more than 8 billion higher result, which we also round up to 8 billion. Operations with average values are always slightly erroneous, however, in our estimation, this error does not exceed the 2% limit, so we can consider this approximate figure as acceptable for further calculations.
The state takes a third
Roughly calculated, 8 billion GDP gives about 2.66 billion in taxes, although the tax revenue from the mentioned number of employees is slightly less – about 2.5 billion euros. The budget is calculated in large numbers in a simplified manner. If the GDP is x, then the state will receive a little less than a third in taxes and fees. We strive for this size, but the country of Latvia fails to achieve it. The conclusion from this small detail is that it would be good to return to Latvia not only working people, but also children and pensioners, although manufacturers are only interested in working people. In the economy, not only value creators are important, but also consumers: children who go to school, pensioners who need doctors – this also forms GDP, economic circulation. In order for money to move, it must be spent, and in order to spend it, there must be a need.
Possible solutions
According to the data of the Ministry of Foreign Affairs, there are approximately 450 thousand Latvian nationals beyond the borders of our country. It’s not like there was never a desire at the national level to bring these people back home. There have been embellished remigration programs and plans, and work is currently underway in all planning regions, listing those who have moved, trying to offer them what they need. In short, a certain part of the system is working on remigration, but only conditionally successfully, because statistics still show that we lose more people than we get back.
If only 80,000 workers would go home, which means that twice as many people should be returned to their homeland, then we would increase the GDP by 5 billion without much effort and the intended plan to double the economy would seem easier than easy. Already next year, after the return of such a number of citizens to their homeland, the country would receive at least a billion (!) more in taxes. It’s certainly a motive to ponder what we’re not doing enough of. Unfortunately, if such a number of nationals really and immediately returned, we would have a major problem. Firstly, there would be nowhere to live, secondly, schools, kindergartens and the rest of the infrastructure are not ready for this. The economy has shrunk, and it’s not a balloon that can be inflated quickly.
The other solution, as trite as it may sound, is to encourage fertility. All the arguments that women do not want to give birth, men are non-payers of alimony, are actually the consequences of one important fact. It is difficult to support a family of three children on an average salary. We have previously published in this column figures based on the alimony amounts determined by the state, proving that two parents cannot support two children if they receive the minimum wage. Families are so vulnerable during childbearing that they stop at the first offspring. Our economic system is against children and it has to change or no amount of success in remigration will save.
Finally, the importation of workers from foreign countries, which is fiercely fought by certain political parties, must be made possible. It is understandable that when we talk about the determining role of high added value in the economy, we have scared away the simple workers, but they are also necessary. Work visas, regulated movement, strict supervision and rotation of foreign workers will ensure the necessary numbers in the short term, raise wage levels and lure them back home in the long term. The truth is that currently, in order to lure its citizens home, Latvia needs to be able to exploit migrant workers, so that the infrastructure is returned to the condition intended for 2.5 million inhabitants, and not all forces should fight it. The economy needs to be boosted again so that there is a place to return to, then the migrant workers can be sent home. If there is a desire to increase the economy rapidly, then bringing in migrant workers is not a nuisance, but a means to achieve the goal.
Who cares?
2024-08-04 04:53:38