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The Latvian NDC Scheme : Success Under a Decreasing Labor Force

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  • Palmer, Edward
  • Stabina,Sandra

Abstract

Latvia introduced a nonfinancial defined contribution (NDC) scheme in 1996 as it transitioned to a market economy. Despite a 20 percent decline in the working-age population from 1994?2016, the ratio of contributors to old-age pensioners rose from 1.6 to 2.1 given a steady increase in formal labor force participation and 5-6 percent real per capita wage growth. Projections show that long-term financial balance will be maintained through 2070, despite the threat of a projected 50 percent decline in the working-age population. Budgeted reserves will cushion the continued transition into a two-pillar public pension scheme. Latvia?s most important long-term policy challenge is to create the domestic investments and economic growth to reward younger workers for remaining in the country.

Suggested Citation

  • Palmer, Edward & Stabina,Sandra, 2019. "The Latvian NDC Scheme : Success Under a Decreasing Labor Force," Social Protection Discussion Papers and Notes 136546, The World Bank.
    • Handle: RePEc:wbk:hdnspu:136546
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    Keywords

    Social Development&Poverty; Labor&Employment Law; Adolescent Health; Labor Markets; Demographics;
    All these keywords.

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