Significant discussions have arisen in the public sphere – if the Lithuanian GDP is growing, are the people reaping the benefits of it? Economists assure that economic growth has been a positive impact on most citizens because the number of low earners is declining.
So is life in Lithuania improving or not? This question has been raised constantly, sometimes sparking greater discussions. Some are convinced that economic growth has not brought Lithuanians any benefit, others assure that wages rose and people live better.
Economists have an answer. Lithuanian economic growth is felt in both incomes and prices. Unfortunately there is a downside – while prices rise for everyone, some have not experienced wage growth.
Percentage of lowest earners declining
Swedbank chief economist Nerijus Mačiulis presents a table that shows that the portion of lowest income earners has declined. In 2010 64% of those employed were earning less than 600 euro a month, last year this number had decreased to 45%. According to the economist the number of those earning under 400 euro has declined from 41% to 15%. As such he is convinced that economic growth has been positive to a major portion of those working in Lithuania.
Nevertheless, this does not halt income inequality. He points out to the tv3.lt news portal that if we look at the income of all citizens, it doesn’t mean that income inequality has declined. However looking based on the incomes of hired employees, income inequality declined compared to last year because wage growth was the highest in the lowest income bracket.
“The positive process is partly linked to constant increases in the minimum monthly wage (MMW) over the past few years, but it is also linked to a clear decline in off the books payments. The efforts of the VMI [State Tax Inspectorate] and Sodra in effectively monitoring and warning companies that pay their staff minimum or lower wages. We can see that in recent years this has been ever less prevalent, more and more employees receive only the official wage,” the economist said.
That said he stresses that despite these positive changes, overall income inequality is on the rise in the country.
“The main reason is that the incomes of those receiving welfare payments and pensions remain low. This is the main source of rising income inequality, but looking at wages we can see a decline in income inequality,” the economist mused.
Meanwhile chief analyst for the DNB bank Indrė Genytė-Pikčienė also points out that life should have improved for most citizens.
“After interviewing IT sector representatives I believe that a number would point out that more employers have appeared, wages are on the rise. Since the average income size is rapidly growing, we can claim that for most wages are on the rise.
At the same time if you ask a factory worker in a small town, or a public sector employee, the situation has certainly not gotten better,” the analyst told the tv3.lt portal.
In the end the main reason why Lithuanians believe they are not living better is rising prices.
N. Mačiulis: nobody says that all Lithuanians are living better
While wage growth was not equal for everyone, price increases apply to all. Due to this reason some may feel they are worse off. N. Mačiulis claims that even in the richest countries there are people whose circumstances are getting worse, whose incomes decline, lose their jobs and end up impoverished. Lithuania is no exception.
“More than 100 thousand citizens who do not have work, hundreds of thousands who earn only a little more than the MMW, who work in the public sector and their wages rise either only a little or not at all. Those problems exist, but we must admit that for most of Lithuanian citizens there was tangible wage increases in recent years and it was faster than price increases. We cannot ignore this, but at the same time we have to resolve the problems of regional segregation and poverty. By just denying the benefits of economic growth, saying that nobody is experiencing it, we will solve no problems and will only support a negative psychological climate,” N. Mačiulis thinks.
Based on the data of Statistics Lithuania he points out that since the adoption of the euro, income growth in Lithuania has significantly outpaced price increases. From tables presented by the economist we can see that only leisure service prices rose faster than the average wage.
“We can always find services that gain in price faster than the income of a regular citizen, but such services are in the minority. Goods of primary importance – food, living expenses, transport – price growth in these brackets was lower than that of wages. As such the purchasing power of most citizens rose,” he summarised.
The economist predicts that bar any external shocks and crises, wage growth in Lithuania will outpace price growth.
Suggests changing living location
In her comments, the DNB chief analyst proposes two alternatives for those who earn less than the country average or even less than the MMW so that they could improve their livelihoods.
According to her it is difficult for them to find work and negotiate better wages.
“This part of society is not impacted by GDP growth. For them a way out would be to seek an alternative living location. Trying to integrate in the cities and find work there. Even without qualifications or a specific profession it is more likely to realise oneself there than a small town.
Another alternative is to not fear lifelong learning and seeking one’s calling. You can requalify. Lithuania has a mentality of benefit receiving, after facing difficulties in the job market people are afraid to try and depend on state support and that is really small,” I. Genytė-Pikčienė points out.
The Lithuanian GDP rose 3.9% in Q2 this year, compared to the same period in 2016, removing the influence of the number of working days. It reached 10.339 billion euro in 2016 prices.