€68 million in wages moved out of the black market in Lithuania last year

Data gathered by SoDra, the state social insurance administrator suggests that wages in Lithuania may be moving from the black market

The data indicates that the state manged to moved up to €68 million in wages from the black market and that €27 million of this sum was not related to natural wage growth.

In 2015, a list was formed of almost 40,000 companies which were selected based on a number of criteria, the primary one being whether those companies had workers on their payrolls receiving less than minimum wage. All of the companies received letters notifying them of potential investigations, and some also received questionnaires regarding why they had been unable to raise their workers’ wages.

Senior Swedbank economist Nerijus Mačiulis said that Lithuanian citizens’ and companies’ participation in the black market was an old and well-known problem. “I am glad that we have recently observed positive trends. Unfortunately, it is not always understood that the use of illegal products, the hiding of income or the avoidance of taxes hurts not just society and the government but, eventually, even those who tried to gain some sort of temporary advantage,” said Mačiulis.

Mačiulis said that many believe that regulatory or administrative institutions simply create a bureaucratic burden and prevent companies from working more efficiently. However, Mačiulis also noted that these institutions, more and more, are looking to lead companies to the right path rather than limit or punish them.

“Accelerating official wage and employment growth shows that more and more companies are choosing to work transparently. Accelerating Lithuanian economic and export growth show that many companies can be competitive while paying taxes and social insurance payments,” said Mačiulis.

Lower wages mean lower pensions

“Fighting the black market is important not just for the state – it also affects every individual’s life. When people agree to receive wages lower than the minimum wage, they also agree to receive less money towards their pensions. A year of pension is earned only if the sum one earned over a year was no less than 12 times the minimum monthly wage. If you only make, let’s say, 9 times the minimum monthly wage over 12 months, you only receive 9 months towards your pension,” the State Labour Inspectorate explained.

Last year, a quarter of the almost 17,000 people who applied for senior pensions lacked the mandatory 30-year minimum of work to qualify.