Latvia: Population Decline Since the Fall of the USSR

Latvia is a small nation located in the Baltic region of the world and was once a part of the former Soviet Union (USSR). Latvia is a Northern European country with a temperate climate and located on the Baltic Sea. It is considered a developed nation with a modern economy and democratic governance.

The population of Latvia is mainly centered in and around the capital of Riga. In fact, fully 2/3 of the population lives there, with the rest scattered around the remainder of the country.

To truly understand the effect of the Socioeconomic pressures on Latvia today, a review of the economic history of this country is a critical component.

Prior to 1918 Latvia's economy consisted primarily of farming, fishing, and forestry. Up until this time their primarily agrarian society was dominated by single family farmsteads and small towns scattered around the nation. Serfdom was the primary means of farm life until it was finally and fully abolished in 1861. These former Latvian peasants took over much of their Feudal estates and began farming for themselves. Mechanization improved quality of life and the River Daugava provided transportation of goods to and from ports on the Baltic Sea.

Just prior to World War 1 Latvia saw unprecedented economic growth and success. Their decline began when much of their equipment and machinery was moved to Russia during this time, never to return (though thanks to their strong agricultural sector they were able to weather The Great Depression). From that point onward, through World War 2 and the assumption into the USSR, Latvia saw periods of war and continued downward economic trends. Central planning by the USSR continued the devastation to the economy. The collapse of the USSR struck the final blow to Latvia and put it on a trajectory of continual economic crisis, never to fully recover.

When the USSR was dissolved in 1991, Latvia found itself again as an independent nation though with an economy and workforce in shambles. Hundreds of thousands of native Russians moved back to Russia causing an immediate working age population crisis. Later when Latvia joined the European Union in 2004 it again saw a significant outflow of working age males and families seeking better opportunities abroad. (latvia.eu)

Latvia’s population is approximately 1,893,000 people as reported by the Central Statistics Bureau (CSB) of Latvia as of May 28, 2021. This accounts for more than fourteen thousand fewer people from last year (LSM, 2021). Latvia has been on a steady and consistent decline in population as of two major events in their history (as referenced above): Exit from the USSR when it collapsed in the 1990s and hundreds of thousands of Russians moved back to Russia and when they joined the European Union (EU) in 2004, making it easier for citizens looking for a better job to move to other countries within the EU (Christian, 2015 and GRC, 2020). 

The Physiological Density of Latvia is approximately .01 Sq Km per person based upon the official population above and the reported arable land in Latvia of 19,380 Sq Kilometers as reported by the World Bank in 2018 (World, 2018). This is equivalent to roughly 2.5 acres per person. Latvia produces a limited amount of products through agriculture. These include: Wheat, oats, flax, barely, potatoes, onions, carrots, and sugar beets. Much of this is exported for sale while all other foodstuffs are imported. In addition to the above, about 1/10th of arable land is used to graze cattle for beef production. Ownership of farmland includes both privatized farms and state owned farms. (Britannica, 2021)

The 2021 Population Pyramid for Latvia reveals a couple of very important challenges to the economic future of this small nation: First, a shortage in the working age population. There are not enough working age people to replace retirees and those lost to a high age-related mortality rate. Secondly there are far fewer males than females which negatively impacts replacement birth rates forcing the nation to potentially need to rely on immigrants instead of natural births for population replacement.

While Latvia has seen intermittent periods of economic growth since Word War 1, by and large this small Baltic nation, formerly part of the Soviet Bloc, has been on an overall economic decline for roughly the last 110 years (Borgen, 2017). This economic decline has caused significant downward pressure on Latvia’s population that may be on course for complete collapse by 2050. The primary issue is that the main working population (15-35) continues to migrate out of the country to other parts of Europe and even the United States in search of better economic opportunities (Csmonitor, 2015).

Latvia is no stranger to resource scarcity. While they certainly have some limits in real resource availability, their main “scarcity” comes in the form of a lack of strong economic opportunity. Poverty in Latvia is significant and the income gap severe. While the Latvian government has attempted to put various repairs into place, including economic aid from the World Bank and IMF in the form of structured loans and capital injection, they have failed to create a sustainable recovery plan that is not vulnerable to severe market shifts (Intereconomics, 2014).

Further pressure on Latvia’s resource scarcity (the decline in working age population) isn’t just a result of a lack of available employment. Their health system is in crisis and there’s very little incentive for families that leave to return. Taxation is also very high, even on middle income families. The government has made several attempts to attract people back, including but not limited to: Allowance for dual citizenship, assistance with education, and even language classes (Politico, 2018). The main problem is that none of these attempts at repatriation of natural born Latvian citizens is enough to create a sustainable job market which would incentivize displaced Latvians to return to their country of origin. While some Latvians have taken advantage of the dual citizenship opportunity, it was more out of national pride and nostalgia than for a real reason to return. Living and working abroad has become the “new normal” for Latvians as a cultural identity.

Latvia has many things going for it. They have a market economy (even though it is weak), their citizens are some of the most well-educated people in Europe, and they have invested in modern technology, including high speed Internet (Latvia.eu 2021). 

Current economic recovery plans set forth by the Latvian government and approved and funded by the European Union (EU) are based on an assumption of an upward trending growth in GDP and economic recovery. The 1.8 Billion Euro grant from the EU is for the following: Public transportation improvements, investment in a "green" economy, energy efficiency improvements, digital upskilling (but only to a basic level), and investments in healthcare and education reform. Minimum income reform (to around 20% of median income) was also cited though no plan is in place on how to make that a reality and is in fact a measure not in line with what is traditionally thought of as a "market economy" but more in line with central planning (ec.europa.eu)

The main problem with the above plans is that none of them go far enough to address the core issues: Outflow of population and an inadequate natural birth replacement rate. All of the above measures have the potential to make some marginal improvements locally and for current workers but they will do little to raise wages (without accompanying inflation) or attract top tier professionals back to Latvia. Certainly none of those improvements, save investments in healthcare, have the potential to affect the low birth rate.

All is not lost for Latvia yet, but the government would need to take bold and decisive actions to help stimulate a strong and sustainable job market and economy which would encourage positive population growth. What might these actions look like? Where should the government focus their efforts? Primarily the government needs to focus on correcting their main resource scarcity: A productive working age population. This could be accomplished through improving the natural birth rate by addressing their healthcare crisis and incentivizing families to have children by providing affordable health insurance and tax relief for families with children. As well, the government needs to provide tax relieve for small and medium sized business hiring individuals to produce goods and services inside their borders. Short of these first steps, Latvia may very well disappear over the next 50-100 years.

• All cities in Latvia have fewer than a million people
• Two-thirds of the Latvian population live in and immediately around the capital city: Riga
• The first Christmas Tree was decorated in Latvia in 1510
• Blue jeans were invented by a Latvian tailor named Jākobs Jufess (and backed financially by Levi Strauss)

LSM.LV, Public Broadcasting of Latvia. Latvia’s Census Shows Sharpest population Decline Among Baltic States. 2021.  Retrieved on August 30, 2021 from: https://eng.lsm.lv/article/society/society/latvias-census-shows-sharpest-population-decline-among-baltic-states.a406618/

 Christian Science Monitor. How Latvia’s Shrinking Population Became a Security Threat. 2015. Retrieved on August 30, 2021 from: https://www.csmonitor.com/World/Europe/2015/0710/How-Latvia-s-shrinking-population-became-a-security-threat

 GRC Insights. Is Latvia Running Out of People? 2020. Retrieved on August 30, 2021 from: https://insights.grcglobalgroup.com/is-latvia-running-out-of-people/

 Worldbank.org Latvia Agriculture Land. 2018. Retrieved on August 30, 2021 from: https://data.worldbank.org/indicator/AG.LND.AGRI.K2?end=2018&locations=LV&start=1992&view=chart

 OECD. Improving Inequality in Latvia. 2017. Retrieved on August 30, 2021 from: https://www.oecd.org/latvia/Latvia%20-%20Inequality.pdf

 Transmango. National Report: Latvia. 2015. Retrieved on August 30, 2021 from: http://www.bscresearch.lv/content/projects_files/wp2-national-report_latvia.pdf

Borgen Magazine. Poverty in Latvia. January, 2017. Retrieved on September 10, 2021 from  https://www.borgenmagazine.com/poverty-in-latvia/ 

Intereconomics. How Great is Latvia’s Success Story? 2014. Retrieved on September 10, 2021 from  https://www.intereconomics.eu/contents/year/2014/number/4/article/how-great-is-latvias-success-story.html 

 Politico. Latvia, A Disappearing Nation. January, 2018. Retrieved on September 10, 2021 from  https://www.politico.eu/article/latvia-a-disappearing-nation-migration-population-decline/ 

 Latvia.eu. Economic History. 2021. Retrieved September 10, 2021 from  https://www.latvia.eu/economy/economic-history 

ec.europa.eu Latvia's Recovery and Resiliency Plan Fact Sheet. Retrieved on September 25, 2021 from https://ec.europa.eu/info/sites/default/files/latvia-recovery-resilience-factsheet_en.pdf