The Euro-Soviet Dance (with the uncertain state of Latvia playing the fiddle)



Even though Latvia is an economy that traces itself back to the Hanseatic League at the end of the Middle Ages, it had to reaffirm its independence from the Soviet Union in 1990. The country had been under Soviet control since it was annexed in 1940, a relationship which not only forced a significant amount of the population to emigrate, but also injected an alien population that remained after the last Soviet solider left.

In the decade and a half after Latvia’s independence, the influences of the Soviet as well as European Union would play itself out in Latvia’s labor market. We will not be trying to determine over the length of this paper who the winner nor who the loser among affected populations is- both groups have been deprived superior employment.

We will ask ourselves how the most recent generation of external power has orchestrated Latvia’s labor market- specifically affecting the availability of high-end jobs to Latvian residents. Through exclusion from education, citizenship, and mobility- as well as the pervasive language barrier- both ethnic Latvians and others living within the borders have been denied access to the higher end of the job market.

These restrictions alternated between the populations in Latvia- the Latvians were more oppressed under Soviet rule, which probably accounted in part for the later backlash against ethnic Russians, Ukrainians, and Georgians living in the newly-independent state. It is possible that both methods of restriction are being phased out, as the old Soviet scars fade and Latvia has been made to reform in order to join the European Union. We will be examining if such a claim is true, to what extent, and if there is a possibility to expediate a more equal labor market- an imperative that has become more relevant as the market of the greater European Union is opened.

The problem of determining “original nationality” or ethnicity is a decidedly thorny one. Instead, we will be focusing on the divisions in the labor market based on language- a distinction that has played an especially prominent role in Latvia’s history. How does one’s language affect one’s access to higher-level education and employment?

Memories of Moscow

To understand the opportunities presented by Latvia’s entry into the European Union, we must first examine the conundrum of Latvian citizenship. 22.4% of the residents within the country’s borders are not citizens of Latvia; moreover, they are a stateless population with no citizenship at all (Gelazis, 2004). Due to the nature of Latvia’s independence, the Soviet-era immigrant population was denied naturalization.

In 1990, Latvia proclaimed- as the international community would agree- that they were always a nation, but one that had been illegally annexed by the USSR for over fifty years. They readopted their constitution from 1922 and their 1919 citizenship laws. These laws granted citizenship to all pre-1919 permanent residents and any of their descendants. As the new government tried to restore the old concepts of the Latvian citizen, it excluded a huge amount of their own domestic population- in Latvia’s first election (1993), only 64% of residents were eligible to vote (Gelazis, 2004). At the same point, the government accepted as citizens a large population who lived in the diaspora.

Between 1934 (the beginning of the Ulmannis dictatorship) and 1959, 169,000 Latvians vanished from the census (Gelazis, 2004). This number was surely distorted by WWII, but it was also largely a result of Stalin’s policies of retaining central power. Those seen as a threat to the Soviet status quo were sent out, if they were lucky enough to remain alive. Ethnic Russians, Ukrainians, and Georgians were sent into Latvia, to help transform Latvia into a proper satellite.

The concept of centralization of power still holds in Latvia. The modern government charges its people an insupportably high tax (25%) and its firms less so (15%, after recent legislation) (Vanags, 2007). Evidence of the inappropriate level of taxation is the fact that payment “in the envelope’- a practice akin to the American “under the table”, in which a large amount of an employees’ money is paid in secret (“in the envelope”)- is common (Vanags, 2007). This also speaks to the Latvian people’s distrust of the government, a remnant of the Soviet occupation, but widespread illegitimate means of payment implies a deeper flaw in the labor market.

There is a gap between Latvian labor and government. Current tax law favors firms over people, and the people have very little power over the firms. As only 18% of Latvian workers are in unions (Vanags, 2007), it is hard to believe they have a large degree of agency. Ericsson, in his qualification of Soviet Socialism, lists arbitrary control by superiors and hierarchical structure as two of his nine characteristics- others include central economic planning, rigid price control, lack of legal alternatives, and formal means of production (1991, found in Campos & Coricelli, 2002). Before 1989, when the USSR was faced with problems like the wage gap in Latvia, its response was higher investment in military technology and an accompanying movement towards accumulation, as opposed to reorganization or making production more efficient (Campos & Coricelli, 2002). In Latvia we see an effort to retain the Soviet structure, even after its independence. Hopefully, its integration with the European Union will keep it from a similar fate as the USSR.

Looking Westward

Countries like the United States accepted the newly independent state of Latvia with no question- they had always refused to acknowledge the USSR’s annexation. In the same vein, the European Union invited the Baltic States to accession negotiations in 1999 (they had signed the European Agreements in 1995) (Caaser & Schrader, 2004). The European Union did a lot to ease the transition from Soviet satellite to participant in an international alliance. Although they could not prevent an initial decrease- or “transitional recession”- of 40-50% of the real GDP in the early 1990’s, Latvia’s real GDP increased by 59% between 1996 and 2003 (Vanags, 2007).  Of this, imports and investment were larger than exports (Caaser & Schrader, 2004).

As the countries opened their markets, the European Union dealt with Latvia and the other Baltic States more gently than otherwise the case. In 1991 Russia was still the major trading partner, but the EU soon opened their markets for free trade of Baltic exports, with major trading partners including the UK and Germany. The Baltic States were allowed to tariff European exports, but Estonia opened its market completely at the same time. She also received huge amounts of FDI- especially in the fields of radio and communication technology (Caaser & Schrader, 2004).  

In the early 2000’s, Estonia experienced what is referred to as the “Estonian IT Revolution”, beginning with Kazaa in 2001 and Skype in 2003. Although neither of the two founders, Janus Friis nor Niklas Zennström, are natives, they chose to launch both websites from Estonia. Skype was bought by the American corporation, Ebay, in 2005, but before that it was funded primarily by the Draper Investment Company, a Swiss investment firm ( About half (200/420 full-time) of the Skype workforce is still in Estonia, and executives claim there are “thousands” others in the country that help Skype along the way (Thomann, 2006). The door to Skype is open for innovators to submit developments that, if compatible, are added to the Skype catalog. While Latvia has failed to have a high-tech home-run like Skype, its youth is active on the network- Latvia has one of the youngest Skype populations (average age of 21) ( This is largely a measure of employment success, as will be discussed later in this paper.

Originally upon the withdrawal of Soviet power, Latvia’s industry was primarily “traditional” products (e.g. furniture, paper, wood). During the Soviet era, there had been more technological- and capital-rich production, but the Soviet Union removed the necessary infrastructure (Caaser & Schrader, 2004). Employment subsequently dropped- 29% between 1990 and 2002 (Vanags, 2007).

The push towards European integration demanded social and labor reform. Latvia’s producers had been organizing itself since independence- forming a Chamber of Commerce in 1990 and the Latvia Employers Confederation (LEC) in 1993. In 1999, Latvia, along with other candidate countries, committed to the European Employment Strategy (EES). The Strategy’s overarching objectives include full employment, social cohesion and integration, and an increase in the quality and productivity of work (Vanags, 2007).  The EES worked with the LEC to develop Latvia’s National Action Plan, whose innovation included the New Labor Law and Law on Labor Protection in 2002 and the establishment of the State Employment Agency , which is responsible for training and qualifications, employment for temporary public works, job clubs, increasing competences, providing aid to the disabled and unemployed elderly, as well as functioning as an employment agency (Vanags, 2007). Aided by the establishment of such an infrastructure, employment began to grow- 2% annually from 2001- as did the per capita GDP of those employed- from 5.7% between 1993 and 1995 to 21.9% between 2003 and 2005 (Vanags 2007, The World Bank WDI Database). All in all, although she began as the poorest in the European Union at the time, Latvia’s GDP is growing at the highest rate of any country in the E.U. (World Bank).

The E.U. also demanded Latvia and other ex-Soviet states deal with their non-citizen resident population. Latvia became the only Baltic State to sign the 1997 European Convention on Nationality. Article Ten of said Convention said that if a state secedes, citizens of the former state have the right to remain, even if they do not assume a new nationality. Included in this guarantee is also the right to equal social and economic rights, including employment in the public sphere (Gelazis, 2004). As new states in the E.U. must normally abide by the highest regulations, regardless of level of development, a commission was established to examine the potential member states’ enforcement of the Convention on Nationality. The Regular Reports by the Commission began in 1998, and in that year Latvia passed new laws relaxing their naturalization laws. Now resident aliens had avenues towards citizenship, with special attention paid to stateless children and elderly and children born in Latvia. The law also relaxed the restrictions on non-nationals, allowing them to work as firefighters, airline personnel, pharmacists, and veterinarians (Gelzis, 2004).

A huge barrier to citizenship in Latvia, as well as the other Baltic States, has been and remains to be the language requirement. To be naturalized as a citizen, one must prove proficiency in the native language. Although significantly decreased in severity, the restriction still holds. The E.U. has used its influence to change Latvia’s mind, but such a rule does not violate treaties against discrimination based on ethnicity or religion. Latvia argues that the stateless’ situation is not dire, as Russia has offered all of them citizenship, their language standard is not any human violation (Gelazis, 2004). This is largely a response to the Soviet period, in which Latvian speakers- while allowed to attend school in their native language- were unable to attend higher educational institutions without speaking Russian.

Now, Russian speakers are held back from higher education and therefore better jobs. Even if Latvia’s economy is improving overall, what does that mean for those who are held back from opportunities within the economy- both older Latvian speakers who are without degrees as well as younger Russian speakers? Beyond this, one must also consider that Communism left the workforce with skills that are too specific to compete in the larger market- for example, secondary education in Poland resulted in over 700 specializations, while Western Germany had less than 20 (Campos & Coricelli, 2002). Moreover, these specializations were in the technology (and especially military technology)-emphasizing avenues of production of the USSR, rather in skills useful after independence. In the words of Campos and Dabuśinskas, there were “too many rocket scientists, too few market experts” (2001, found in Campos & Coricelli, 2002).

Campos and Coricelli outline four principal components that combine to an economy’s initial condition: initial distortion (i.e. industrialization, policies, black market), natural characteristics (i.e. climate, natural resources), legacy of past regimes, the level of market mechanisms in place (2002). Obviously, the past regime left a low level of market mechanisms, as well as a population that lacked the education necessary for skilled employment. The E.U. would step in to redefine and strengthen the market mechanisms and increase Latvia’s industrialization, as we see occurring today. It would be hard to determine which actually helps the Latvian economy more, however: the institutional liberalization brought from European economics or the opening of the European market to Latvia. 

Despite having a GDP PPP ranked 93rd in the world (, Latvia has made impressive strides towards the latest energy technology. Ranked 8th in the world according to the Environmental Protection Index, Latvia has evolved into a more environmentally efficient economy than the more “developed” United States, Japan, Russia, or Germany ( Ability to and initiative given to establishing environmentally responsible ways of living are indicative of a population finding ways to education, resources, and innovation.

Energy may, however, be the latest battleground between the E.U. and Russia. Latvia, along with Austria, Germany, Ireland, Norway, and Italy spoke against the E.U. President Barroso’s endorsement of a nuclear energy plan for Europe, claiming it will only lead to proliferation (Reed Business Information, 2007). Until an alternative is found, Europe will still be dependent on oil, which largely comes from Russia. The E.U. has contracted Nabucco to build a pipeline from the Caspian/Central Asian region to Europe through the Balkans, in an attempt to cut Russia out of the process (Economist, 2008). Meanwhile, Germany began, under Schröder, building a pipeline under the sea directly from Russia to Germany. Once he retired, Schröder went to work for the contracting company, Gazpram (Larrabee, 2006).

In the midst of this frenzy for the European energy market, Russia has taken steps to ensure its dominance. When Latvian firms did not allow it enough control over Ventspils (one of the few ice-free ports on the Baltic Sea), Russia’s state-controlled oil company cut it off. While claiming it was in response to a sudden need to redirect the shipment to Finland, the common belief was that this was a move to make the Latvian firm sell. This belief was probably strengthened by the Russian firm buying huge portions of the Latvian one after the oil cutoff (Larrabee, 2006). As before, Latvia’s growth is being stymied by Moscow, but has it really been that encouraged by the Europeans?

What are We Measuring?

Thirteen years after the implementation of the European Employment Strategy, how much has it accomplished? Its goals, refined in the Lisbon European Council (March 2000), include 1) job creation, 2) the curbing of long-term unemployment, and 3) a decrease in taxation of low-wage jobs, and 4) equal and available learning and education. It plans to accomplish these goals through full employment, increasing the quality of work and social cohesion, and meeting new, quantifiable goals (i.e. lifelong learning) (European Commission, 2007). According to the Commission, overall skilled work is growing throughout the E.U., from 36% in 1997 to 40% in 2006 in high-skilled, non-manual labor.

We will be examining the degree to which both the Latvian-speaking population and the Russian-speaking populating residing in Latvia are involved in education, high-technology work, or leisure. A simple way to test that is these subject populations’ activity on Skype. The three socioeconomic factors that determine internet usage are education, occupation, and income (Wellman, 2001). Using this and common sense, we can assume that anyone who is logged into Skype during normal business hours is a student, technology worker, or person of leisure yet of enough wealth to have access to the internet. This person of leisure can either be unemployed, underemployed, or not a member of the work force- it doesn’t matter. For our purposes, the fact that they still have the means to have access to the Internet suffices to prove a kind of entry into the high-tech world.

What makes Skype so well suited to research is the search function- one can search active users by language or country of residence (see Appendix A). This allows us to search for both Latvian speakers as well as Russian speakers within Latvia. Also, the search reveals who is online at a given time, so searching at key times gives us a precise list of whose account is active. Because Latvian is only habitually spoken by Latvians- either emigrated or not- anyone listing ‘Latvian’ as a language should have a strong tie with the country. Considering the naturalization laws, it is a safe bet that someone who speaks Latvian is a Latvian citizen, or was at an earlier point.

This test will allow us to test for two independent variables: location and language. These variables result in three situations: Latvians who have emigrated, Latvians who have remained, and ethnic Russians living in Latvia. The Skype Test will show us how many of each population have access to a computer in a personal capacity during normal working hours. To satisfy the need for points of comparison, the same searches will be run in the evening.

Other countries, Germany, Russia, Norway, Lithuania, and Estonia will also be included to examine the uniqueness of the Latvian results. Probably, Latvia’s results will be most like Estonia, which has a similar naturalization policy as Latvia. Russia is included as the ex-regime that is also struggling with capitalism. Although with an undoubtedly stronger base, Russia has been able to develop its economy at a remarkable speed since the breakdown of the Soviet Union. Germany stands in this experiment as a developed member of the E.U. that is part of the traditional Hanseatic League and remains a close trade partner. Norway is a relatively neutral control- having already been rather developed in industry and education upon joining the E.U. Of course, the other two Baltic States are to examine whether what is occurring in Latvia is a regional or state-specific phenomenon.

Judging by the fact that older Russian-speakers and younger Latvian-speakers had access to higher education, I would expect those two populations to be more present on Skype. With regards to younger Latvians who have immigrated to another part of the E.U., there is very little literature available. I would assume the data would follow a similar pattern- young Latvians in positions of relative leisure and wealth, older Latvians signing on to Skype in the evenings, if at all. Unfortunately, most Russian-speaking Latvians do not have the option to emigrate, unless the E.U. accepts them as third-country citizens. Beyond that, there is no way to test for this population within the parameters of this study.

If young, Russian-speaking Latvian residents can access Skype during business hours, it would indicate a higher level of social cohesion than we normally credit Latvia. It would show the latest generation’s ability to infiltrate higher education and possibly find a degree of equality in employment.

Also, by examining Latvian speakers in the diaspora, we’ll be able to see the effect of the E.U. and its freedom of mobility. If a large number of people with access to Skype have emigrated to other European countries, it would show the opening of the higher job market as a result of Latvia’s membership in the E.U.


This study is easy to undertake, merely time-consuming (literally). After obtaining a Skype account, which is free from, the researcher will search at various times on subsequent workdays and the evenings following. After searching for Latvian speakers and noting their countries of residence and ages, the researcher will then search for users who list their language as Russian and country as Latvia. The process will be repeated with each of the countries listed above. The data will then be noted in the chart (see next page), on chart per country, and averaged. The experiment can be carried out for as long as the experimenter wishes, but the minimum time span is one month. If this experiment is to be long-term, data can be taken every few days or once a week.

Conclusions and Significance

The first immediate outcome of this study will be a look at the success of third-party integration on dealing with domestic social and economic inequality. If those who were discriminated against can find an level of equality with the other group, if there is a tendency towards equity in the workplace, we will be able to examine what did and did not work in the Latvian Model.

We will also have a view of Russia’s role in the European integration. If many Latvians move to Russia in search of work, it will be a two-fold discovery: first, the strength of imperialism roots the conquering country has over the economy of the satellite, even after they withdraw. This has significance for the former Soviet bloc, as well as possible (hopefully) other withdrawals across the globe- such as Basque country and Kurdistan, to name two in the current or potential E.U. As Latvian higher education prior to 1990 was provided by the USSR (a parallel to Basque country and Kurdistan), we can examine the role of education as well as the educators’ subsequent responsibility.

The second discovery we will find if Russian immigration from Latvia is high is the upcoming role of Russia in the global economy. After the breakup of the USSR, many emigrated- if Latvians immigrate and find high-end jobs, it would signify a renovation of Russian industry.

If Latvians are able to find high-technology jobs and higher education in Europe, it will speak directly to European integration and its success. If a significant number of Latvian emigrants can make a better life for themselves in E.U. countries, this study will speak positively to integration and possibly motivate further impetus towards freedom of movement. If a study can be made to examine the host country’s population and immigration’s effect upon them, the findings will be useful- especially in the United States and European Union as native populations are decidedly prejudiced against newcomers.

Finally, if the study reveals Russian speakers with leisure, wealth, education, or high-technology work, this study will show the success of the European control over Latvian naturalization. Unfortunately, there are several instances of statelessness throughout the world, and if the E.U.’s actions are proven effective, it will show us ways in which a third party can instigate social, economic, and political equality in another country’s borders.


Appendix A

latvia i
latvia ii
Appendix B








Skype Usage by Language, Country of Residence





Workday 1

avg. age

Evening 1

avg. age

Wkday 2

avg. age

Eve. 2

avg. age

Total Wkdy Users

avg. age

Total Eve. Users

avg. age

Total Users

avg. age

Latvian-speaking, in Latvia















Latvian-speaking, in E.U.















Latvian-speaking, out of E.U.















Russian-speaking, in Latvia















Total Users, avg. age



















*note: ages are skewed, as listing one's age is not mandatory and many do not to avoid discrimination, targeting, etc.


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