The Latvian NDC Scheme : Success Under a Decreasing Labor Force
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...
| Main Authors: | , |
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| Format: | Working Paper |
| Language: | English |
| Published: |
World Bank, Washington, DC
2019
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/422531556878533144/The-Latvian-NDC-Scheme-Success-Under-a-Decreasing-Labor-Force http://hdl.handle.net/10986/31648 |
| Summary: | 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. |
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