Long-term demographic trends are dividing Latvia into two contrasting halves. One, shrinking, half of the population lives in small towns and rural regions far from Riga, experiences higher unemployment, lower salaries and a rapidly ageing demographic. The other is younger, wealthier, urbanised and benefits from the greater professional and personal opportunities offered by living in and around the growing communities clustered by the capital city of Riga. The 700 year old town of Valka is situated on the Latvian-Estonian border some 160 kilometres from Riga and another 90 from Tartu. Valka was a major railway junction town for much of the twentieth century and the Latvian Provisional National Council proclaimed Latvia’s autonomy from the Russian Empire there in 1917. However, Valka’s long and distinguished history is no guarantee of future prosperity. In 2030 the Valka region will have the smallest share of working age population (55%) of any Latvian region and more than one-quarter (27%) of the population will be pensioners over the age of 65. Valka faces a rapidingly shrinking tax base at the same time as expenses related to old age rise.

In contrast Baldone, a historic spa town, is just over 30 kilometres from Riga and has a fast growing population. In the early 1990s the Baldone region had a population of just 4,900 (while Valka had more than 13,000 inhabitants). Over the next decade Baldone is projected to outgrow Valka. Moreover, in 2030 two-thirds (65%) of Baldone’s population will be working age and the number of young people 15 and under (17%) will be almost the same as those aged over 65 (18%). Baldone’s municipal authorities can plan for the future with confidence.

As these two cases show, the familiar doom and gloom narrative of Latvia’s post-1991 demographic change is far too simplified. It is certainly true that Latvia has experienced a sharp demographic decline with the total population decreasing from 2.67 million in 1990 to less than 2 million (1.97 million) in 2016. Indeed, most demographic projections assume that Latvia’s population will continue to contract, with the United Nations (UN), for example, estimating a fall to 1.59 million by 2050 and then just 1.28 million by 2100.

However, Certus’ demographic projection presents a more nuanced portrait of Latvia’s demographic future. In contrast to projections made by Eurostat and the UN, Certus models the declining economic disparity between Latvia and the rest of the European Union (specifically Germany, the European Union’s economic powerhouse) and its effect on emigration. It specifically models the change in net wages in Latvia and the EU (using the average German wage as a proxy) when estimating external migration flows, largely because the main driver for emigration has been the disparity between Latvian and European Union average net wages. Thus, the model (1) projects the net wage increase for Latvia, (2) estimates the relationship between emigration (share of emigrants) and the net wage differential with Germany for Latvia, Lithuania and Estonia, and (3) applies this relationship between future wages to potential emigration levels.

Similarly to Estonia’s experience in 2015 and 2016, Certus’ projection sees migration from Latvia slowing and then levelling out, halting Latvia’s steep demographic decline and seeing a reasonably stable population size throughout the 2020s. Indeed, the UK’s Brexit from the European Union is likely to both encourage some return migration to Latvia as the largest country of migration for Latvians over the last decade and a half shuts the door on the free movement of labour from the EU. Even as the population stabilises, Latvia in the 2020s will be an older, greyer and more urbanized country with far flung effects on the budget in terms of infrastructure, pension, health and long-term care expenditures. The median average age of the population will rise by one year from 42 to 43 by 2030. While gains in life expectancy are to be celebrated, ageing creates new challenges for policy-makers, particularly because it will have a pronounced regional affect, as much of the elderly will be concentrated in rural regions experiencing demographic decline while the ambitious, young, working age population relocates to urban areas, particularly in and around the capital city Riga, in search of greater education, professional and social opportunities. This policy brief gives an overview of global and domestic demographic trends. It sketches in Latvia’s long-term demographic decline and ageing as well as the growing disparity between Riga and the region around the capital city and the rest of Latvia. However, it also sounds an optimistic note, projecting that as incomes gradually merge with the European Union average migration away from Latvia will slow down and eventually be reversed.