Why Latvia cannot afford to live without gender equality

Take note – story published 1 year ago

Latvian central bank economist Krista Kalnbērziņa takes a deep dive into gender inequality and its economic consequences in this piece from the central bank's macroeconomics.lv website.

Latvia has experienced rapid growth since joining the European Union (EU). This rise has largely been driven by relatively cheaper and more available labour force. However, this growth driver is gradually fading. Latvia must develop new comparative advantages in order to become a developed country with a high quality of life – an appealing place to live and a favourable environment. Latvia now has the option of falling into the so-called "middle-income trap" or continuing to increase productivity in order to become a high-income country.

Investing in technology, digitalization and automation is one of the ways forward. However, human resources and their competence are required to do that. The country's ability to develop and harness the full potential of its population has significant growth possibilities, but one factor is currently holding it back: the professional growth potential of a large segment of society – women – is not fully developed, valued, and supported. In Latvia, 54% of the population is female. In 2021, 64% of university graduates were women, and 72% were employed; however, women hold only 19% of large company board seats and 30% hold legislative positions. 

How does gender equality affect growth?

The impact of women's equality on economic growth has received considerable attention in the research literature. Initially, research mainly concentrated on the positive impact of female labour force participation and educational attainment on economic growth (e.g., Duflo (2012), Cuberes and Teignier (2014) and others). However, with women's increasing labour force participation and representation at various levels of power, it is possible to quantify women's contributions in business management and public administration, improving the quality of decision-making and contributing to faster overall development.

The McKinsey Global Institute (2020) examined 1000 large companies from 15 countries, concluding that representation of women at the management level significantly improves corporate profitability and that the correlation between participation of women in management and better profitability has strengthened in recent years.

Dahlum et al. (2022) examine how women's participation in positions of power affects technological development and growth opportunities for the economy as a whole, using data from 182 countries. Involvement of women in decision-making has been found to significantly improve long-term growth potential. Women who are already professionally active are significantly increasing the pool of talent available for the labour market and politics. Women active in society also increase the representation of various development ideas, knowledge, experience and policy priorities. This, in turn, increases the diversity and improves the quality of policy debate and leads to more productive and beneficial policy and management decisions for the general public.

According to research, high levels of gender equality are increasingly associated with higher fertility rates in higher-income countries. For example, Doepke et al. (2022) conclude that improving gender equality, including women's employment and men's involvement in family care, is critical to improving fertility rates in high-income countries. The link previously observed in the 1980s between higher female labour force participation and lower fertility rates in higher-income countries is no longer valid. Today, in countries with greater gender equality, more women feel economically independent and more confident in their decision to start a family.

Women's economic independence in Latvia

Women's economic independence is shaped not only by their ability to find work and earn a living, but also by their working conditions, financial literacy, financial security, professional competences and opportunities to develop their potential.

In Latvia, there are differences in employment between men and women, but they are minor. Overall, 72% of women are employed, compared to 76% of men (aged 18–64). In general, women and men have similar levels of financial literacy (data from the 2022 Latvian Financial Literacy Survey). However, there are significant differences between men and women in their ability to support themselves financially, develop their skills and pursue a career.

Financial security

In Latvia, the share of women at risk of poverty significantly exceeds that of men. Furthermore, according to the previously mentioned financial literacy survey, women in Latvia are more concerned about their ability to provide for themselves.

Although throughout their lives women work almost as much as men do, their average income per hour is much lower. In 2020, Latvia had the highest average earnings gap between male and female hourly earnings in the EU. How is that possible in a country where women and men have equal legal rights?


Female and male sectors

One of the reasons for the stark differences in income is that the Latvian labour market is divided into "male sectors" and "female sectors". Among all European countries, this division is most pronounced in Latvia.



A high proportion of women work in the retail and educational sectors, where the average salary is relatively low. Men predominate in jobs with higher salaries, like in the fields of communications and information technology. Furthermore, there are significant income gaps between men and women in sectors where income is likely to be higher and the share of women is also relatively high, such as the health sector. These disparities are due to the fact that it is more difficult for women to obtain senior positions and that women are frequently paid less than men for the same job.


Without breaking it down by job group, the average gender pay gap is most pronounced in the financial and insurance services sector, where men earn 35% more than women on average. The gender pay gap is also significant in the health sector, which is relatively well paid, at 23%. When comparing income by job in these sectors (data available for 2018 only), the gap between men's and women's earnings is greatest at senior expert and managerial positions. The glass ceiling phenomenon should also be taken into account in relation to the income gap for managers: it is relatively easy for women to reach middle management positions, but top positions, company boards, and management positions are overwhelmingly held by men.



Education for girls and education for boys

Women's career options are significantly limited throughout their lives, a process that begins in childhood. It is no secret that girls excel in mathematics and science in school just like boys do. According to the PISA 2018 assessment, boys performed, on average, only slightly better in maths than girls. In science, on the other hand, girls were somewhat ahead. In general, the genders do not seem to have any special abilities or disabilities at school, depending on the subject. However, there is a significant difference when it comes to career choices. Only a small percentage of female university students major in science or mathematics.



What happens at this stage of life? Why such a distribution suddenly? Stereotypes, in my opinion, are the main reason. Stereotypes about gender roles that are ingrained in society influence children's upbringing. After completing compulsory education, in which the curriculum is the same for both boys and girls, a child must choose a career. These decisions are often influenced by adults and their perceptions of what is best for the child, which may be based on stereotypes of what is appropriate for women or men. 

In 2020, Providus conducted a study on the representation of women in the information and communication technologies (ICT) sector. It came to the conclusion that women who would like to specialise in ICT faced a relatively high level of social counter-pressure. 57% of respondents would fully support boys specialising in ICT, while the number of respondents strongly supporting girls would be nearly two times smaller (26%) (Chart 6). Furthermore, 6% of respondents would definitely not recommend it for girls, while 22% would probably not recommend it for girls, compared to 2.1% and 4.7% for boys, respectively. In contrast, boys who want to work in the education sector, where society would benefit from greater gender equality among teachers, are the ones who face counter-pressure.


Child care penalty

There is still a widespread belief (among both men and women) in society that a man's job is to earn money and a woman's job is to care for the children. Unfortunately, the fact that women have long demonstrated the same ability as men to enter a profession, pursue a career and thus earn a living is not enough for society's stereotypes to conform to this reality.

As a result, women receive an education which entails a goal to pursue a career, but leave the workforce once they start a family. The largest gender employment gap occurs between the ages of 25 and 44, when some women leave the labour force to care for their families (Chart 7). The employment gap between women and men with young children is even more pronounced: in 2021, the employment rate for women with young children was 75.3%, compared to 93.4% for men with young children. Despite the fact that both parents are entitled to parental leave in Latvia, only 17% of fathers took it in 2021.

Furthermore, according to the Central Statistical Bureau, the most common type of family in Latvia is a single-parent family with one or more minor children, with the mother as the most frequent primary carer. In Latvia, this indicator is one of the highest in the European Union.

Women often face the risk of poverty as the other parent frequently does not provide financial support for the child's upkeep, making it difficult for them to work full-time and care for their children. According to the Maintenance Guarantee Fund, which pays maintenance to those who are unable to collect it from the other parent, the total amount owed to the State currently exceeds 345 million euro.


While women are increasingly returning to the labour force as the years pass, and employment at 45–64 is not significantly different from that of men, the wage gap and career progression never again even reach the pre-25 level throughout the working life. It also explains why women are significantly less economically independent throughout their lives, which has an impact on pension levels since they are based on lifetime earnings.


Another significant but frequently disregarded factor that prevents women from advancing is violence. In Latvia, one in every three women has experienced intimate partner violence. Violence significantly reduces women's ability to participate in the labour market and provide for themselves financially, thereby fostering economic independence.

The negative impact of violence on women's ability to work, advance their careers, and support themselves financially has been extensively studied in the research literature. Bhuller et al. (2022) examine the impact of domestic violence on victims' mental health as well as overall well-being and conclude that, in addition to physical and mental trauma, a victim's financial situation is significantly harmed not only by the need to seek medical assistance, but also by their reduced ability to find and keep a job and earn an adequate wage.

Pillinger et al. (2019) surveyed 6639 employees in six large companies about the impact of violence on employees or their colleagues. Of those who reported experiencing domestic violence (16% in this sample), 75% reported difficulty concentrating at work, 68% reported increased fatigue at work, 68% reported health problems (depression, anxiety or other) and 19% reported physical injuries.


Gender equality is an important part of Latvia's development, and it should concern everyone in Latvia, not just women. First and foremost, gender equality is a matter of fairness. Despite the fact that we have long lived in a time when everyone is the master of their own fortune and women mostly need to provide for themselves, they continue to face significant obstacles to advancing their careers. Additionally, women are responsible for the overwhelming majority of household tasks.

Second, gender equality is essential for Latvia's growth. We can support women's full participation in the labour market by assessing young women's potential to be educated in fields currently dominated by men, reducing stereotypes of "female" and "male" jobs, sharing the burden of "housework" within the family and guiding women towards leadership positions. This will only benefit our economy.

Furthermore, by distinguishing between female and male professions and directing people to a specific job or field of activity solely on the basis of gender, we prevent people from developing their full potential, talents and sense of fulfilment. The result is not only a loss for the worker, whose job is not a good fit for them, but also for the economy, which loses talented scientists, engineers and teachers. Let us not forget that women's confidence in their professional future may enable them to decide to start families and finance their children's education, thus contributing to the development of Latvia in the future.

Third, women's participation in decision-making is essential for improving societal well-being. Women's participation in politics and business leadership results in a broader understanding of society's problems and a higher quality of decision-making debate.

With this article, I would like to promote the debate on gender equality, not only on 8 March every year, but also as a priority on the agendas of policymakers. Latvia has a relatively small population; therefore, we must do everything possible to help each person reach their full potential; prejudice only serves to impede this effort.

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