A more productive labour force in Latvia

With a challenging demographic outlook, future growth prospects rest on Latvia’s ability to make the most of its available human resources. Although labour productivity has increased significantly since 2000, a number of structural barriers slow a further narrowing of the remaining gap relative to well-performing OECD countries. Factors that hold back Latvia’s productivity growth include a very sizable shadow economy, long-term joblessness, as well as significant skills shortages and mismatch. To tackle productivity barriers and reduce labour market inequality, active labour market policies should be strengthened and upskilling strategies should be more directly linked with the needs of employers. Efforts to curb informality and under-reporting of earnings should be maintained and stepped up further, including by reviewing a range of regulatory provisions that may push some groups of workers into informal employment.