labor market for whom competition for jobs in the formal sector is very high. “New” education has higher market value, especially in the case of universities and general secondary schools.

The significant structural changes in the composition of the economy across and within sectors have also drastically changed the age profile of wages. Compared with the centrally planned period, returns to experience have declined and may be nonexistent for many adult workers without higher education. For these workers, maintaining a job or finding a new one in case of a layoff has become a major challenge.

The relative position of youths and women in the labor market, compared with prime-age men, is less unfavorable than in many other countries. But well-educated women tend to receive lower wages than men with similar characteristics, and gender wage gap has increased recently.

Unemployed representatives of ethnic minorities have lower chances to find a job within a year, other things equal, while the difference between genders is not significant. Neither ethnicity nor gender matter as long as transition from employment to unemployment is concerned.

Analysis of job search methods by the unemployed indicates that two target groups of state employment policy - the young unemployed and the long-term unemployed, appear to make relatively little use of the public employment service.

For Latvia, promoting human capital is a vital component of a successful long-term policy aimed at the 2010 Lisbon Strategy Targets for employment, competitiveness, and social inclusion, although major efforts are still required to improve the match between skills offered by the education system and those required in the market. Complementary policies should encourage labor force participation; improve skills for low wage unskilled workers; reduce the tax wedge on low-skill wages; and promote commuting as one of the most efficient (in the short and medium term) tools to reduce disparities and mismatch.

Substantial changes in labor market policies and institutions have been introduced in Latvia in recent years. Although these reforms have yielded good macroeconomic results and played an important role in stimulating job creation in services and export sectors, they have had limited success thus far in fighting unemployment. Using data from labor force surveys, this study has attempted a more precise understanding of the country’s labor force and its dynamics. These analyses should provide useful insights to policymakers for improving the functioning of Latvia’s labor market. This is particularly important given Latvia’s medium-term plans to adopt the Euro and to join the EU Pact on Stability and Growth, which will eventually leave labor market as the only effective economic tool to adjust to shocks.

# **REFERENCES**

Barrett, Alan, John FitzGerald and Brian Nolan (2000), Earnings Inequality, Returns to Education and Immigration into Ireland, IZA Discussion Paper No. 167.

Blanchflower, David G. and Andrew J. Oswald (1994). The wage curve. MIT press.

Brainerd, E. (2000), Women in Transition: Changes in Gender Wage Differentials in Eastern Europe and the Former Soviet Union, Industrial and Labour Relations Review, Vol.54, No.1, pp.138-162.

Brücker, Herbert and Parvati Trübswetter (2003), “Are East-West Migrants in Germany Favourably Self-Selected?” Mimeo, Berlin: _German Institute for Economic Research (DIW Berlin)._ Central Staistical Bureau of Latvia (2003a), _Latvia’s Regions in Figures._ Riga.

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