Course THE GOVERNMENT ROLE IN THE MARKET ECONOMY
Essay The Government Role in The Day Care Services Development in
proffesor Andrejs Skaburskis
Laima Lipace, 3SEA2, BizVB96018
Evita Noriete, 3SEA2, BizVB96410
Ildze Voita, 3TVV2, BizVB96074
Rodthers Janis Grigulis, 3SEA1, BizVB96062
Latvia is a country that is moving from the Soviet style of socialism to
a democratic government and a market-based economy. The country
ratified its participation in the United Nations Convention on the
Rights of the Child in 1992. Activities connected to the ratification by
the Latvian legislature has created an impressive database on current
conditions for Latvian children. The change from socialism has been
difficult when measured by the availability of services provided to
children in need. The following information is taken from the 1998
Alternative Report to the United Nations by the Latvian Save The
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 has
affected the quality of family life in Latvia. In 1996, only 20% of the
children 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.
As a result, more and more children are abandoned, physically or
sexually abused, 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 its
budget. It is a struggle to maintain existing human services and it is
impossible for the government to fund new services. The existence of a
sizable population of abandoned, abused, handicapped and homeless
children is only now beginning to be officially recognized.
The network of social services that Canadians take for granted does
simply not yet exist in Latvia. The government is working to develop
these services, but the pressures of the national budget and difficult
economic situation have brought any progress to a standstill.
The government budget is made from private sector taxes and it is
diverted to municipal governments and then channeled to social services.
Every year amount which is channeled to the social services is
different, because of pressures of the national budget and difficult
economic situation. These social services are merit good when society
members are refusing to have some amount of their own money for giving
it to preschool and other Latvia’s children. This leads to situation
where people who are using private day care services instead of
municipal are paying again.
Also current situation in Latvia is that you have to wait on a line for
a years to get officialy in a municipal day care center, at the same
time municipal government are abolishing existing day care services
because of money shortage. This leads to situation where people have to
use their private money and they are having two choises whether send
their children to private day care centers or have a babysitter to look
after them. Practicaly it means that our social service system is not
able to maintain existing amount of children who are in need for day
Customers of day care services are parents that have preschool age
children and that want to work in daytime and therefore or for other
reasons want to leave 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 and
neibourhood effect government role is make people understand that
solving day care services problem they will have better environment and
more educated people around. It also affects crime because most
criminals are those people who were left unattended while they were
kids. This also means that community has to be more informed about
current situation in the country and given more information about
problem in day care services.
Also current government problem in this situation is whether they have
to decide to make these services into completely private social services
or completely public social services or maybe find something between
them – make a mix of both. This means that there is a market for each of
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 choise 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
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 (more
specified preschool education including different sports, language and
arts). Competition within private sector can ensure higher quality of
this service and faster response to demand change. At the same time
government should be controlling day care services as proper children
care is very important for society and the future of nation.
We can see that all of these sectors have its specific market and
government goal is to determine through the analysis which of this
market should be most supported and what kind of support programms
should be used.
Some solutions which government can be using for proper children care
are given below:
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
standarts – setting up different kind of social standarts, 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
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.
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
And finally I have to mention that solving problem with day care
services you have to always look in overall situation in the country.
Because you have to measure other social and financial factors of the
country. Governments role is make decisions considering overall
situation and find the most suitable decisions.
The Government Role inThe Day Care Services Developmen in Latvia, Essey,
DATE 01/30/99 , Page PAGE 4
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