Strengthening social dialogue in the local and regional government sector in the ‘new’ Member States and candidate countries

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3.6 Latvia

3.6.1 Background to local and regional governance26

Local and regional government in Latvia has a long tradition, the current administrative-territorial division originates from 1866. The current two-layer structure was re-established in 1989. The system consists of 26 districts (rajons) at the regional level of government, and 63 towns, 26 amalgamated towns and 444 rural municipalities at the local level. 26 amalgamated towns were created during the reform process in 1998. The size of local government units varies significantly; the smallest rural municipality has 346 inhabitants and the largest has 7,472,000 residents (Riga).
Local government reform started in 1993. The main principles are: democratisation and decentralisation of administration, local autonomy and independence of activities, establishment of independent local budget and use of market methods in management. But the local government expenditure as a percentage of total public expenditure has declined from 27.3 per cent in 2001 to 24.8 in 2004.
Local and regional governments have the following permanent functions: organisation of municipal services (water, sewage, transport, heating etc.), management and maintenance of local/regional infrastructure, establishment of rules for the use of public water and forests, education provision, support to cultural activities, health and social care, housing support, encouragement of economic activities, issuing permit and licences for trading activities, maintenance of public order, building and local/regional planning, protection of children, further education of pedagogical staff, organisation of elections, maintenance of the civil register, collection of statistics, and ensuring residents’ representation in the regional Sickness Insurance Fund.
There are no municipal taxes in Latvia. The revenue of local governments is generated from sources which include: a proportion of the State taxes including 71.6 per cent of the personal income tax and 100 per cent of the real estate tax; a proportion of state duties; duties imposed by local governments; grants allocated from the State budget; grants from the Self-government Financial Equalisation Fund; and finally, income is also gained from service fees.

3.6.2 Economic and labour market situation

The reforms accomplished in Latvia along with integration into the European Union are developments which have both had a positive impact on economic development. The Latvian economy has become one of the fastest growing in Europe, with GDP growth of 7.5 per cent throughout 2003 and 8.8 per cent in the first quarter of 2004.

Successful economic growth has recently made a positive impact on the main labour-market indicators. In 2003 the employment rate increased by 1.4 percentage points and the unemployment rate decrease by 2.1 percentage points compared with the previous year. However, there are still significant regional differences in the employment situation and exceptionally high unemployment rates amongst women.


Overall employment rate

61.8 %

Employment rate of women

57.9 %

Employment rate of older workers

44.1 %

Temporary employment rate (% total employment)


Rate of part-time employment (% total employment)



Overall unemployment rate

10.5 %

Unemployment rate – men

10.3 %

Unemployment rate – women

23 %

3.6.3 Industrial relations28

Industrial relations in Latvia

Trade union organisation rate

20 – 30 %

Employer organisation rate

30 – 35 %

Collective agreement coverage rate

< 20 %

The role of the Latvian social partners at intersectoral level is mainly limited to tripartite concertation29. The government participates in tripartite social dialogue through its role in the National Tripartite Cooperation Council (NTCC), which comprises representatives of Ministries and two intersectoral organisations: the Latvian Confederation of Employers and the Latvian Federation of Free Trade Unions. The NTCC is governed by the Agreement on the National Tripartite Cooperation Council of 1998, and is mainly operative as an advisory body. Bipartite social dialogue at intersectoral level in Latvia is poorly developed. All issues except legislation are addressed by collective agreements at decentralised levels, mainly at enterprise level.

In general, collective bargaining has become more widespread in Latvia, though coverage is still less than 20 per cent. The low coverage rate partly stems from high unemployment and weak collective bargaining due to fear of unemployment. Bargaining at company levels occurs mainly in large and medium-sized enterprises, state and local government enterprises, former state-owned service enterprises and industry. A small number of agreements are made at the municipal level, mainly in the education sector. Generally, small and medium-sized enterprises do not have trade unions and are therefore not involved in collective bargaining and sectoral level dialogue is almost non-existent, with only ten agreements having been made, mainly in the transport, energy, communications and forestry sectors. Meanwhile, 2018 agreements had been concluded at company level in January 2000. The individual employment contract is extremely important in industrial relations in Latvia and this is even the case where there is a collective agreement in place.
The unionisation rate currently stands at 20-30 per cent. Some 82 per cent of trade union members work in the public sector and as such, the unionisation rate in the private sector is very low. The high unionisation rate in public services has contributed to the advance of women in unions; women represent more than half of all union members in Latvia. There is only one trade union confederation in Latvia, the Latvian Free Trade Union Federation (LBAS), and while it represents only 16 per cent of the total workforce, its membership accounts for 90 per cent of unionised workers, 70 per cent of whom work in the public sector30. As a result, the union’s main partner is the government as an employer.
The organisation rate of employers stands at 30-35 per cent. The only intersectoral employers’ organisation is the Latvian Confederation of Employers (LDDK), whose member companies account for 30-35 per cent of the total workforce.

3.6.4 Social partners in the local and regional government sector

There are two trade unions active in the local and regional government sector:

  • LAKRS - The Latvian Public Services Employees Trade Union has around 16,000 members and is the fourth largest Trade Union in Latvia. The union is a member of EPSU and PSI, and is internationally linked with a number of independent trade unions and confederations.

  • Latvian Trade Union Energija (LTUE) operates at energy sector uniting energy workers from the country. Some union members are linked to the local and regional government sector (for example, Riga Heat employees are union members, and the company is owned by the local municipality). The Union was established in 1990. Current membership is 6,700 covering some 70 per cent of all energy workers in the country. LTUE is a member organisation of Free Trade Union Confederation of Latvia, EPSU and EMCEF but is not a member of any national bi-partite or tripartite bodies. LTUE is involved in collective bargaining in the energy sector.

In terms of employers’ organisations, the Latvian Association of Local and Regional Authorities represents local and regional authorities in Latvia but has not been mandated to negotiate wages and other terms and conditions in the sector. The Association originally initiated the most important trade union for the sector, LAKRS. The Association is a member organisation of CEMR and also collaborates with the Congress of Local and Regional Authorities of the Council of Europe and Committee of Regions.

3.6.5 Collective bargaining in the sector

As earlier mentioned, collective bargaining structure in Latvia is very decentralised. In 2000 there were 2018 company level agreements in place of which 249 agreements had been concluded between local and regional governments and trade unions. In most municipalities wages and other terms and conditions of municipal workers are set by collective bargaining between each municipality and LAKRS. LAKRS, however, is not active in all municipalities. In the regions where LAKRS is not active, municipalities determine wages and employment conditions unilaterally depending on their budgets and other circumstances. In some cases, where a municipal employee is a trade union member and there are some salary disputes, a trade union representative is called in to try and solve the dispute. On rare occasions the lawyers of the Latvian Association of Local and Regional Authorities also take part in discussions about wages and conditions of the staff in the sector but this is not a formal arrangement.
Wages of energy workers, mainly in the electricity sector, (some energy companies are still owned by municipalities but mostly owned by the state) are determined by collective bargaining at a local level with bi-partite negotiations.
Social dialogue in this sector is practically non-existent and a newly-emerging issue. The same applies to the rest of the country - sectoral dialogue is almost non-existent, mainly due to the low unionisation rates.

3.6.6 Key issues for the sector

The key issue for the sector is the lack of social partner involvement, due to low unionisation rate and institutional weaknesses. Trade unions are not involved in negotiations of conditions of employees in the local and regional government sector as the trade unions in the sector, as well as in Latvia in general, are still very weak.
Latvian municipalities are also constrained in their ability to borrow – they are barred from raising loans and they can only turn to the State Treasury.
Very weak fiscal autonomy of municipalities is also an issue for the sector. The local government expenditure as a percentage of total public expenditure has declined from 27.3 per cent in 2001 to 24.8 per cent in 2004.

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