Calls on employers to increase wages and look for workers in Lithuania, not abroad

A worker
DELFI / Mindaugas Ažušilis

Labour market experts urge employers to raise salaries and look for employees in Lithuanian regions rather than abroad. According to them, this is the only way to increase the country’s middle class, i.e. workers earning more than EUR 1 000, Vilija Mačiulskytė writes at the news portal.

Vytautas Šilinskas, Deputy Minister of Social Security and Labour, said at this week’s Association of Personnel Management Professionals forum that he wanted to dispel the myth that employers do not share money with employees.

“Salaries in Lithuania have increased significantly over the last 20 years. So the problem is not sharing the cake, but how that cake should be grown,” he said.

It is also not true that raising the minimum monthly wage (MMA) increases unemployment.

“It seems that if labour becomes more expensive, demand should fall, and employers should reduce their workforce. But in fact, this has never been the case in Lithuania. Workers are also buyers. Therefore, when their wages are raised, they have more money to buy certain goods and services from the business. This way, the business gets more income.

In addition, when the minimum wage is raised, more people enter the labour market. For example, if a person cannot find a job in Šilutė and does not have a car, they can use public transport to go and work in Klaipėda,” V. Šilinskas listed the reasons why the minimum wage should be increased.

According to him, raising the minimum wage has almost no impact on inflation, i.e. on price growth.

“The number of MMA recipients in Lithuania is small, about 25,000. When Sodra says that 100,000 people earn the minimum wage, it does not consider the number of full-time jobs. The Statistics Department counts how many people earn the MMA on a full-time basis, and there are very few of them.

The increase in the minimum wage also raises other wages, especially those up to EUR 1 000. Higher wages are not affected by the MMA,” commented the Deputy Minister.

He added that in order for workers to be in demand and to receive higher salaries, they need to be constantly trained.

“However, Lithuania ranks last in terms of the number of hours spent on learning at work. This is a disappointing result because workers are motivated by training. It has been found that employees are motivated by three things at work: meaning, development and autonomy. Companies should therefore invest more in training.

Investing not only in training but also in production tools is important. That is why we are lagging behind other countries. Demographics are not in our favour, so businesses need to automate as many processes as possible,” Šilinskas believes.

He assured that the government is trying to help businesses and workers in this area. However, any financially available help is actually paid for with taxpayers’ money.

“Businesses that have faced energy price challenges have been able to defer social security contributions. And thus have working capital.

There was also training for the employed. Most of the training is for IT professionals. We also encourage employers to employ people from the Employment Service. There is talk of bringing in foreigners, but in terms of costs, it is cheaper to bring in workers from Lazdijai than from Kazakhstan,” Šilinskas suggested.

Expectations of business and population were falling

Indrė Genytė-Pikčienė, Chief Economist at INVL’s Investment Management and Life Insurance Group, pointed out that the country’s economy is dependent on consumer and business expectations, which program behaviour and decisions, such as the willingness to either save or spend.

“Expectation indicators are currently skewed downwards. This means that people and businesses are taking a cautious view of the future. Uncertainty is high because of the war in Europe. Businesses are therefore taking small and cautious steps.

We started to feel the difficulties even before the war when Putin declared an energy war.

However, the energy shock has been weathered quite successfully. This winter, even nature has taken the right side. It has been warm, which has allowed the whole of Europe to keep its gas storage facilities full. Commodity prices have also fallen,” said the economist. However, she noted that consumer inflation is still very high.

“Central banks are seeking stability. That is why interest rates are rising to bring inflation back to normal levels. The European Central Bank is expected to raise interest rates to 3.5%. Naturally, the cost of borrowing will rise.

Despite the rise in interest rates, interest rates on deposits have also risen. Therefore, the population is prepared and has financial reserves,” commented I. Genytė-Pikčienė.

According to her, all European countries are flirting with zero.

“No growth is expected. In some places, we can see a recession.

The crisis of 2009 was a key lesson. We had inflated consumer, credit and real estate bubbles. The authorities did not live within their means. It took the economy 5 years to dig itself out of the hole. It made us realise that we need to rebalance the economy to be resilient to external shocks”, explained the economist.

According to Ms Genytė-Pikčienė, the domestic market depends on purchasing power and wages.

“Last year’s inflation affected purchasing power, and wage growth turned negative. Inflation has started to affect people’s choices and behaviour.

The labour market has remained healthy, with low unemployment rates. The shortage of certain professionals is forcing employers to retain talent even in the face of uncertainty”, commented Ms Genytė-Pikčienė.

She noted that Lithuania’s middle class has grown stronger in recent years.

“A strong middle class with critical thinking is the foundation of all democracies. The middle class in Lithuania is growing and getting richer. The number of people earning up to €1,000 is declining, but the share of the population earning more than €1,000 is growing.

However, salaries are growing mainly in the big cities, but not in the regions. The situation is worse there. Businesses there do not have the capacity to expand and grow, so they cannot increase wages. A solution would be for manufacturing or IT companies to move to more remote areas,” said the economist.

Improving sentiment in labour markets

The labour market barometer is sending positive signals for the second month. In February, the leading indicator on the labour market of the European Network of Public Employment Services and the Employment Research Institute (IAB) increased again and reached 101.1. Compared to January, it increased by 0.6 points.

“The outlook for European labour markets has clearly improved since the beginning of the year,” said Enzo Weber, head of forecasts at the IAB.

The unemployment component rose by 0.7 points to 99.9 in February. It is already close to the neutral 100-point threshold. No further rise in unemployment is forecast. The employment component rose by 0.5 points to 102.3, indicating a positive outlook.

Lithuania’s labour market barometer also increased for the second consecutive month. It now stands at 101.8, 0.7 points above the European average. The unemployment (101.1) and employment (102.6) components have also reached the positive territory.

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