One in six people of economically active working age cannot find a job in Latvia, yet business owners are still complaining about labour shortages. Apparently Latvians have got used to living off welfare and this is the reason why workers have to be brought in from other countries. Re:Baltica journalists experienced what it’s like to do unskilled labour to get a deeper understanding of what is really missing in Latvia — diligent employees or good jobs?
«The main thing is not to lose your rhythm,» I repeat to myself quietly on a chilly January morning, sitting by a sprat packing conveyor belt in a fish factory. My eyelids are still a little heavy from getting up at 5.30am. Outside the temperature is a little below zero, but about 15 degrees in the factory. I’m wearing a thick winter jacket with a hood, but the cold is still slowly creeping through my body from my galoshes, until it finally reaches my fingertips. They are wet from the frozen fish and oil.
«Remember the rhythm» I remind myself as I take the next empty can. I try to lay the sprats in the can using both hands as I was shown by my team leader Aina* — in two rows, at an angle and stomach-up. I weigh the can (138 — 142 grams are required) and put it in a box. When there are 30 cans in the box, Aina registers it and gets the loader to take it away. And I start again.
I lose my rhythm. The fish fins stab my fingers. I cut my fingers three times on the edges of the cans. The blood flows freely, and Aina comes over and places a rubber sleeve-like “cap” on my finger. «When it’s full, come over and I’ll give you another,» she tells me. You’re not allowed to use band-aids.
About 10am, just like every morning, Ivars Pūciņš, the director of the company — a grey-haired man in a blue jacket and a baseball-type cap — walks past us. Against the background of the loud droning of the factory, he says «Good day!», looking more at the fish than at the workers.
Pūciņš also provoked me, a Re:Baltica journalist, to try out what it’s like to work as a fish packer. More to the point, it was what he said during an interview shortly after the New Year on Latvijas Radio. The director talked about how Latvia’s largest fish processing factory, Gamma-A, where he’s in charge, couldn’t find workers, even with its turnover of 19.6 million lats (28 million euros). According to him, the average wage at the factory is 240 lats (341 euros) per month, with free accommodation in dormitories and with free lunches provided. But even with this, only one person from the city of Rēzekne, where they’d placed an advert in the local paper, rang and expressed interest. Out of the total number of 600 workers at the factory, about 50 had already been brought in a while ago from Bulgaria and Rumania to assist with the expanded business.
Pūciņš and the President of the Fish Farmers’ Association, Inārijs Voits, who were interviewed on the radio programme, have no doubts as to why it’s so hard to find local workers. Even though Latvia spends almost the smallest percentage of GDP on social welfare programmes in the European Union, both businessmen blamed supposedly large social benefits for the shortage of workers.
Re:Baltica often heard a similar assertion from politicians and employers whilst undertaking research on social inequality last autumn. While Prime Minister Valdis Dombrovskis was presenting Latvia’s «success story» to the world, the research by Re:Baltica uncovered a dark side to it — the largest wage inequality in the EU, because our tax system provides more advantages to the richest residents.
Even now, the government continues to boast about economic development, which was the most rapid in the EU last year, with GDP growing 5.5%. The Prime Minister emphasized that 30,000 new jobs had been created. But the growth of a nation’s economy doesn’t automatically mean that everybody’s life improves. Last year 17% of people of economically active working age in Latvia were still without a job.
If there’s labour available, why are business owners complaining about a shortage of workers? To find out, Re:Baltica’s journalists went to work at the Gamma-A fish factory and at Latvia’s largest employer, the Maxima supermarket chain, as part of its continuing research into social inequality.
Three lats a day
It’s the middle of the day. My back hurts so badly that I’m barely able to stay seated. The only break which I’ve used was the half an hour for lunch at about 11am. Today there are cinnamon rolls and pearl barley and potato soup for lunch. «If you want something tasty then you have to pay for it,» responds the cook in a husky voice to a worker who reproaches her for making terrible soup.
The other female workers having lunch are friendly, just like my other colleagues at the factory and in the dormitory. An older lady with blue eye-shadow calms me down — eventually you’ll be able to work faster and you’ll get used to the back pain. Later as she passes me on the factory floor, she encourages me: «With both hands, use both hands, working like this you won’t earn anything». I turn my head to the side and I’m amazed how quickly the hands of the women alongside me move.
I finish my shift at about 3pm. I scrub down the table, take off my white coat and head for the dormitory. It is located in a former yacht club next to the factory territory, which is surrounded by barbed wire. Seagulls shriek in the air, and the smell of fish is noticeable.
I have a small clean room where there are four beds with bedside cabinets and a large wardrobe for our coats and overalls. On the first evening, when I sit down on the bed, it sinks right to the floor. With the help of my roommate Vita, we push a plywood sheet, which we found in the corridor, under the mattress. A little later, I take a shower to try to wash off the stench of fish. I don’t shower for very long as there’s only one shower cubicle for the 38 residents of the building. The shower door, covered in mould and lime, is broken. There are two toilets for the lot of us. There is also a kitchen with a stove, a microwave, two refrigerators and a washing machine. There’s a black and white cat living in the kitchen as well, which has a soft blue abode set up there. I don’t feel like dinner tonight.
I bind my cut fingers with some band-aids that I bought myself, and lie down on the bed. My back hurts, but Vita calms me again — you’ll get used to it. She is about fifty years of age, just like my other roommate Inita. Both of them came to work at Gamma-A from the town of Cēsis, where the unemployment level is 12% and where they couldn’t find work. One day the women in the smoking room are discussing how they’d be better off working at a supermarket, if only they’d take women of their age there. People in the pre-pension years are the biggest group of unemployed in Latvia — nearly a third of the unemployed are aged between 50 and 59 years.
Vita’s and Inita’s lives are now spent at the Gamma-A factory and in the dormitories. Inita visits her apartment at Cēsis twice a month on weekends. One of her daughters is working in England while the other has just completed her studies in Rīga and is looking for work. Most of Inita’s wages go towards paying the utilities for her Cēsis apartment, in which she hardly lives. She doesn’t have a television or the internet — she can’t afford them. Although the director of Gamma-A said that accommodation was free in the dormitories during his interview on Latvijas Radio, we have to pay 25 lats (36 euros) per month for our place there.
Nobody wants to talk about the monthly pay at the factory. But I estimate that, by working more than one shift, a fish packer can earn about 200 to 250 lats (285 to 356 euros) post tax a month. This coincides with the average wage in fish processing in Latvia, which last year was 212 lats (302 euros) post tax, 6.5% more than the year previously. The workers don’t feel these increases in their purses, as the costs of food, transport and maintaining an apartment have at the same time increased nationally by 12%.
Gamma-A pays 2 santims (2.8 euro cents) pre-tax for each can of fish packed. Aina the team leader tells me the rate because the monthly wage according to my employment contract is supposed to be 240 lats pre-tax, working an official 40 hours per week. The contract mentions «aggregated working hours», which means shift work. Usually the first shift is from 7am to 3pm, with the second shift after that working till 11pm. Specific working hours are not mentioned in the contract and in reality you have to work for as long as there are fish to pack. The State Labour Inspectorate later informs me that the specific working hours and rate should be provided in the Gamma-A employment contract so that I know what my working hours will be and how much I’ll earn.
As Latvijas Radio 2 plays continually in the background, I calculate what I’ve earned on my first day. I’ve packed three boxes with 30 cans in each. In total — 1.80 lats (2.56 euros) pre-tax. I got faster in the following days and improved to five boxes or 3 lats per day. The women around me would each pack 12 boxes a day. Therefore, by working faster, one can earn over 7 lats (10 euros) per day pre-tax for packing fish. I calm myself with the thought that my job is still relatively easy. My colleagues next to me tell me that the cutters find it much harder. You get paid four lats (5.70 euros) for cutting the heads off of 100 kilograms of sprats.
(To read more about this journalist’s experiences at the factory, read: One day in a fish factory.)
Country people are more frugal
I had to wait two weeks to get a place at the Gamma-A dormitories, as many of the female workers come from the country. City people aren’t in a rush to work at the factory at Mangaļsala, a place by the sea an hour by bus from Rīga. The «abnormal welfare system», which the Fish Farmer’s Association’s President Inārijs Voits referred to in the Latvijas Radio interview, is to blame for this. But it’s «abnormality» is not in the size of its benefits, but rather in its inequity
Contrary to the World Bank’s recommendation, the welfare system in Latvia was not centralized, leaving each local council to pay what it can afford. The richest ones pay more, and that’s another reason why people in Rīga, unlike country people, are not ready to work 12 hours a day packing fish in cold conditions for 200 lats (285 euros). In 2011, the average sum paid to recipients of benefits in Rīga was 279 lats (397 euros), while in Roja county it was 109 lats (155 euros), and in Sēja county only 38 lats (54 euros).
On the day I began work at Gamma-A, Inese also moved into the dormitories. She was a young woman from Mērsrags, a village on the Gulf of Riga, wearing above the ankle boots with stiletto heels and carrying a faded Oriflame bag. There were apparently no jobs at the local factories, and that’s why she had returned to Gamma-A. You can earn more at Gamma-A also, she explained — not because the rate of pay is better, but because there is more work. Working on multiple shifts, you can make more than 200 lats (285 euros).
Wages are lower in the countryside. Workers at fish factories in Rīga earn around 320 lats (455 euros) post tax while at those in Kurzeme, the western region of Latvia, about 207 lats (295 euros), according to data from the Central Statistical Bureau.
«It’s not easy, but which job is easy? You have to work while there’s a job available,» says Mārīte from Kurzeme, in a conciliatory way, about the low pay. She is of pre-pension age.
Officially Mārīte is supposed to be a fish processor, but, like most workers here, she ends up doing whatever she is told to do: she packs fish, strings them for smoking in the oven, and packs them into boxes. The women like packing most of all because it is done in a warm area, but it also pays the least. The fish stringers are the best paid but the job is hard — your hands are cold and wet all the time, and you have to stand in your rubber boots for a minimum of eight hours.
Each morning Mārīte gets up before five o’clock so she can get to work on time at the Sabiedrība IMS factory at Mērsrags. The factory bus collects those residing locally early, so that everyone can be ready at work on time before 6am. Workers from places further away must get up much earlier; those in the village Strazde, for example, must wake up before 3am.
Egita, another woman from Kurzeme, adds that during the economic crisis when her husband lost his job, she didn’t even earn the minimum wage working at the fish factory, so now she’s glad to receive even that.
It’s illegal to pay below the minimum wage in Latvia, but the workers provide some oral evidence: it has been a regular practice, particularly during the crisis period. «You get paid for the volume of work you produce. If you don’t produce the minimum, then you don’t get even that,» explains Egita’s husband, who has also worked at a fish factory.
Egita’s family, with a number of school-aged children, basically survived the crisis on her small wage and a 170 lats (242 euros) invalid pension. The local council gave her a one time benefit of 60 lats (85 euros) for firewood one winter. There were also humanitarian aid packages of oatmeal and clothing. “It’s true that I’ve worked in a variety of jobs. I’m not afraid of work. I’ve worked on the 100 lat benefit programme (editor: a state employment scheme paying 142 euros a month) and swept streets, but I really want to earn a decent wage. After spending my day in damp and cold conditions, I want to at least be able to buy some more expensive cream to rub into my hands. But with those wages it’s just impossible. I have children to support,” explains Egita. She’s never received the large benefits which are often mentioned in the media.
“I can only speak about myself, but when I hear that people receive some sort of money, and live off benefits alone, I don’t know who they are talking about,” says Egita.
Forthcoming World Bank research could for the first time provide the facts to dispel the myths about this growing generation of welfare recipients. Based on the first survey data from the World Bank, in April the Minister of Welfare, Ilze Viņķele, announced that talk of the abuse of the benefit system had been exaggerated. The opinion that welfare benefits were being widely abused had become prevalent due to statements of local council employees, but these statements were not based on sufficient evidence. This is new rhetoric coming from the minister. In recent years, the media has also been spreading unsubstantiated assertions about large benefits to welfare claimants.
Against the recommendations of international lenders, and based on assertions by local council employees, and often from businesses as well, the government significantly reduced the 100 lat benefit program this year. Every sixth participant in this program subsequently found a permanent job within six months. The government also reduced the GMI (Guaranteed Minimum Income) benefit and made the municipalities solely responsible for providing it. This GMI program supplements the incomes of the poor to make sure that each person receives a minimum income of 35 lats (50 euros) a month.
«A very large amount of my pay goes in taxes, and sometimes I get really sad,» sighs worker Mārīte, «you earn about 300 lats (427 euros) and then nearly half goes in taxes.»
In Latvia, tax policy is disadvantageous to those receiving low wages. According to the International Monetary Fund’s calculations, after various changes in the laws on tax, tax on low wage earners increased by 7% in 2009. The Value Added Tax, which affects the poor most directly, was also increased from 18% to 21%.
Even last year, the Saeima (the Latvian parliament) once again acted against the interest of the working poor. The Ministry of Finance offered to raise the tax free income threshold from 45 (64 euros) to 90 lats (128 euros) a month and in the coming three years to reduce the individual income tax rate. After pressure from the Reform Party, however, the Saeima adopted only the individual income tax rate reduction. Low wage earners benefit least from this. Economic experts consider that it would have been more socially just to support both — businesses as well as employees.
The Unity Party’s Minister for Finance, Andris Vilks, told Re:Baltica that he lost the political fight last year on this issue. As a compromise, the Ministry will be offering to raise the tax free threshold from next year to 84 lats (120 euros) for recipients of a minimum wage. For larger wages, this will be reduced to 45 lats (64 euros) according to a special formula. If the Ministry of Finance’s reform is implemented, minimum wage recipients will get 26 lats (37 euros) more in hand. Currently, they gain only 1.33 lats (1.89 euros) from the reduction in the individual income tax rate.
Invest or buy a Porsche?
“Do you know how many attacks I have had to listen to for bringing in the Bulgarians? You can’t employ our drunks in Latvia for more than a week or two. They get drunk again and disappear,” angrily says the Gamma-A Director, Ivars Pūciņš, when we arrive at the factory with a camera to do some filming. Having pointed out that the benefit system should be changed, he agrees with the journalist that “wages should also be increased, but that investments are required. You understand, one has to keep continually investing to maintain one’s place in the market and to survive the unrelenting competition.”
The need to invest in production and the tough competition is the standard response for why businesses don’t increase these low wages. There is some basis — Latvian businesses have the greatest tax burden in the Baltics. An employee with a wage of 200 lats (284 euros) after tax will cost an employer in Estonia 319 lats (454 euros), in Lithuania 325 lats (462 euros), but in Latvia 347 lats (494 euros).
However, Re:Baltica’s calculations overturn the assertion that wages cannot be increased due to business owners having to invest in production. In 2011, of the eight largest fish processing businesses in Latvia, only half of them invested in equipment and the sums were comparatively small — six businesses had a positive result earning a total of 1.9 million lats (2.7 millon euros), but during this period 233,000 lats 332,000 euros) were invested in equipment. Gamma-A is among these companies — their profit was 1.14 million lats (1.6 million euros), with 50,000 (71,000 euros) being invested in equipment. Plus, the company has also attracted EU funding in recent years to improve production — 266,000 lats (378,000 euros), and an application for another half a million is currently being assessed.
Gamma-A is the largest fish processing business in the nation. The most recent Lursoft data available reveal that the company rapidly increased its production in 2011. The volume of processed fish conserves doubled and metal packaging production of cans and lids increased. The proportion of conserves sold in Latvia, 549,000, forms only a small part of the 19.6 million lat turnover. The biggest markets were the USA, Russia and Belarus.
This picture reflects the fish processing sphere as a whole. Nearly all of the fish products produced in Latvia are exported around the world to some 40 countries, forming a turnover of 50 million lats (71 million euros).
Gamma-A spent 9% of its 2011 revenues on wages for its 600 workers. Including administrative employees, the average monthly wage at the factory was 188 lats (268 euros) pre-tax. Comparing it with the other large fish factories in Latvia, one sees that lowest wages in 2011 were paid here. Annual reports show that at the Karavela company, the average wage was 320 lats, at Sabiedrība IMS 195, and at Brīvajs vilnis — 321 lats. This data does conflict with what fish factory workers say, that it’s specifically at Gamma-A where one can earn more than in the factories in the regions.
The Chairman of the Salacgrīva company Brīvais vilnis, Arnolds Babris is of the view that half of the fish processing companies in Latvia cheat on paying taxes, but he doesn’t provide specific names. «I can clearly see that companies are proficient at paying more than half in envelopes, optimizing and also operating schemes with respect to VAT,» says Babris, who was earlier a high ranking employee in the Constitution Protection Bureau. The pistol under his jacket is evidence of some nostalgia on his part for his former profession. «You can never know who your enemy is,» he laughs, when asked about the need for the gun.
Brīvais vilnis is the only fish processing company where there is an active trade union. It regularly organizes excursions, for which the company provides the bus; everyone is reimbursed for their annual health check up; and the factory chairs have been changed to ones that can be adjusted. Currently, discussions are taking place about paying for fitness exercises. Babris agrees that wages are not high, but points to the importance of how you treat people. The locals stand in line to get a job at Brīvajs vilnis.
Meanwhile, Gamma-A is making plans on how to bring in more guest workers, «so that the factory can keep operating, if we want to survive». In the current situation, it looks as if it’s more opportune for Gamma-A to pay low wages than improve productivity. Packing sprats in cans is done by hand throughout the world, but other jobs can be mechanized — the stringing for smoking in the oven and the processing, for example. Gamma-A co-owner Aivars Lejietis, did not provide substantial answers to Re:Baltica’s questions about the opportunities for productivity improvements even after intensive communication by telephone and in person over a number of days. Lejietis’ view was that the aim of this article is to blacken his company’s reputation.
Gamma-A brings in Bulgarians who are even poorer than Latvians. As EU citizens, they don’t have to be paid any more than Latvians. But even the Bulgarians can’t handle the rough conditions. A proportion has already left after a few months. Life in the Bulgarian dormitories is even tougher than for the Latvians. The windows of each landing in the stairwell are grimy from cigarette smoke in the multi-storey building in the factory territory. There are up to eight beds in some rooms which are partitioned by cloth curtains to provide a modicum of privacy. Cockroach baits have been placed in the corners of the rooms.
However, last year the company was able to purchase an exclusive PORSCHE CAYENNE-S car.