This paper shows system dynamic model of labour market and labour migration in Latvia. The hypothesis of the research is: labour migration is determined primarily by the payment level in the countries under consideration and the indicator derived from it – payment differences in the countries compared; as well as employment level, unemployment level, number of work places (market capacity) and number of vacant work places. Secondary factors influencing migration may be costs connected with labour migration, formal legal barriers to migration and personal propensity to migrate. Statistics on the labour market in Latvia are not complete; there is also no common view of experts on determinant processes. In such circumstances market forecasting with quantitative methods is problematic. One approach is to simulate indicators and to estimate their influence on national economy. The model has three parts: growth (expansion) of labour force, division and migration sub models. The sub model for growth of labour force is based on division of population in various categories during transition to a working age population. Division by level of education is further used in labour market analysis in which worker groups are formed according to the education level. The paper represents mutual interaction of groups of workers as well as labour migration. The results show sensitivity of the model factors to propensity of personnel for labour migration.