The Latvian NDC Scheme: Success Under a Decreasing Labor Force

Author(s)
Palmer, Edward
Stabina, Sandra
Date Issued
July 16, 2019
Subjects
Pensioni
Previdenza
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.
Citation
Palmer E., Stabina S. (2019), The Latvian NDC Scheme: Success Under a Decreasing Labor Force, Roma, INAPP, WP, n. 13 <https://oa.inapp.org/xmlui/handle/20.500.12916/450>
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Working Paper
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