Course THE GOVERNMENT ROLE IN THE MARKET ECONOMY

Essay The Government Role in The Day Care Services Development in Latvia.

professor Andrejs Skaburskis

Laima Lоpace , 3SEA2, BizVB96018

Evita Noriete, 3SEA2, BizVB96410

Ildze Voita, 3TVV2, BizVB96074

Rodюers Jвnis Grigulis, 3SEA1, BizVB96062

Riga, 1999
Latvia is a country that is moving from the Soviet style of socialism to ademocratic government and a market-based economy. The country ratified itsparticipation in the United Nations Convention on the Rights of the Childin 1992. Activities connected to the ratification by the Latvianlegislature has created an impressive database on current conditions for
Latvian children. The change from socialism has been difficult whenmeasured by the availability of services provided to children in need. Thefollowing information is taken from the 1998 Alternative Report to the
United Nations by the Latvian Save The Children organization.

The number of families below the minimum subsistence level has risen to 85%in 1996 compared to 15% in 1991. This decrease in family incomes hasaffected the quality of family life in Latvia. In 1996, only 20% of thechildren are in good health. Such diseases as tuberculosis, rheumatism,diphtheria and tick encephalitis have spread rapidly. Juvenile crime,alcoholism, narcotic drug addiction and prostitution have risen sharply. Asa result, more and more children are abandoned, physically or sexuallyabused, become pregnant or homeless.

Services to support children who are at risk are virtually non-existent.
The government of Latvia is under tremendous pressure to balance itsbudget. It is a struggle to maintain existing human services and it isimpossible for the government to fund new services. The existence of asizable population of abandoned, abused, handicapped and homeless childrenis only now beginning to be officially recognized.

The network of social services that Canadians take for granted does simplynot yet exist in Latvia. The government is working to develop theseservices, but the pressures of the national budget and difficult economicsituation have brought any progress to a standstill.

The government budget is made from private sector taxes and it is divertedto municipal governments and then channeled to social services. Every yearamount which is channeled to the social services is different, because ofpressures of the national budget and difficult economic situation. Thesesocial services are merit good when society members are refusing to havesome amount of their own money for giving it to preschool and other
Latvia's children. This leads to situation where people who are usingprivate day care services instead of municipal are paying again.

Also current situation in Latvia is that you have to wait on a line for ayears to get officially in a municipal day care center, at the same timemunicipal government are abolishing existing day care services because ofmoney shortage. This leads to situation where people have to use theirprivate money and they are having two choices whether send their childrento private day care centers or have a baby-sitter to look after them.
Practically it means that our social service system is not able to maintainexisting amount of children who are in need for day care.

Customers of day care services are parents that have preschool age childrenand that want to work in daytime and therefore or for other reasons want toleave their children in a professional care.

Output mix of day care services is:
. education and safety of the children;
. less bother and "peace" for their parents.

As these social services are having technological externality effect andneighbourhood effect government role is make people understand that solvingday care services problem they will have better environment and moreeducated people around. It also affects crime because most criminals arethose people who were left unattended while they were kids. This also meansthat community has to be more informed about current situation in thecountry and given more information about problem in day care services.

Also current government problem in this situation is whether they have todecide to make these services into completely private social services orcompletely public social services or maybe find something between them --make a mix of both. This means that there is a market for each ofproduction/distribution sectors.

. Sector one - public production/public distribution will be forced to use those high risk families which should be given with gift voucher which can be spend only for day care services.
. Sector two - public production/private distribution is sector where market is families with an income more than minimum, when they can afford to make choice themselves for taking their children into public day care services
. Sector three - private production/public distribution is sector where private day care service companies will provide day care services and government will enforce to use them through its channels of distribution.
. Sector four - private production/private distribution is sector which is most common for high income people who can afford to use private day care services with higher quality.

Private sector in production can provide wider range of options (morespecified preschool education including different sports, language andarts). Competition within private sector can ensure higher quality of thisservice and faster response to demand change. At the same time governmentshould be controlling day care services as proper children care is veryimportant for society and the future of nation.

We can see that all of these sectors have its specific market andgovernment goal is to determine through the analysis which of this marketshould be most supported and what kind of support programs should be used.

Some solutions which government can be using for proper children care aregiven below:

1. regulation - some kind of legislative regulations which prescribe attend day care services for a certain age children. Here we can not forget cost factor which is very important. To implement this regulations government will have to have an institution which has to ensure correct implementation.

2. standards - setting up different kind of social standards, such as income level at which one should be provided by a certain amount of a gift voucher which can be used for day care services. This has to be integrated with an analysis of a regional day care services infrastructure imperfection.

3. compensate those families which are using private day care services instead of public day care services as they want to have a greater quality. Municipalities should provide subsidies for children from high-risk families to attend those day care services free of charge or for partly payment.

4. voluntary action

. direct - when someone understands that he can help society with helping and educating these children at day care service institutions

. indirect - this can also be brought under section regulations where we mean by making appropriate legislation where one will be completely tax deductible for amount of money which one donate to a day care service field. We want to call this as voluntary action instead of tax or regulation action because those companies have to make their own voluntary decision whether they will be using tax deduct or appropriate law.

And finally I have to mention that solving problem with day care servicesyou have to always look in overall situation in the country. Because youhave to measure other social and financial factors of the country.
Governments role is make decisions considering overall situation and findthe most suitable decisions.