Reforming Lithuania’s Labour Code: The battle between capital and labour over shrinking profits

DELFI / Mindaugas Ažušilis

In a Lithuania where, during the global financial crisis, hundreds of thousands of Lithuanians left their jobs “voluntarily” without any sort of severance pay and threats from employers have become the rule rather than the exception, the ruling coalition led by the Social Democratic Party is planning to pass a new Labour Code.

The new legislation will make it easier for employers to let go of workers, reduce notification periods, shorten annual holidays and increase the amount of overtime allowed. What has been offered in exchange? Larger salaries at some point in the future and more jobs – also in the future, though employers are currently complaining about how they cannot find the right workers. According to Charles Woolfson, professor emeritus at Sweden’s Linköping University, the purpose of the Labour Code is clear – to determine who will pay for the crisis and who will bear the risks.

Woolfson, together with US University of East Carolina professor of sociology Arūnas Juška, analysed the discussion in Lithuania on labour relations and the Labour Code reform – part of the so-called New Social Model pushed by the governing Social Democrats – and concluded that Lithuania has become an excellent example of how capital is dealing with a new problem after the global economic crisis – slow growth and less competition.

This demands a new relationship between labour and capital: to increase economic growth and achieve greater profits while controlling labour costs and transferring risk to the labour force. “It’s hard to see this Labour Code as anything other than direct support for employers in the Lithuanian labour market,” Woolfson told DELFI.

Primary arguments

In a still-unpublished study entitled “The Moral Post-Crisis Neoliberal Discourse: Lithuania’s Labour Code Reform” that the authors shared with DELFI, Juška and Woolfson observe how advocates of the reform and its opponents argued their positions. Supporters of the reform primarily argue by saying there is a need for labour relations liberalisation and the need to increase economic competitiveness and modernisation. Many tried to use Denmark’s “flexicurity” (flexible security) as an example, although the term is a far cry from Lithuania’s context.

Prime Minister Algirdas Butkevičius always emphasised that the current Labour Code did not protect workers because they were often forced to leave their jobs “voluntarily” anyway, without getting the severance pay they are entitled to according to the law.

In other words, it was proposed to make the law a closer match Lithuania’s uncomfortable reality. Labour unions resisting the reforms emphasised that the changes would leave workers without any rights and would doom them to serfdom. The unions also discussed how the new labour code looked at society through an economic prism and seemed to suggest that employers’ interests served the greater society, unlike workers’ marginal interests.

“Throughout the post-industrial world, we are seeing the tendency to limit workers’ rights and reduce their legal protections. These are things that were fought for over many years or even decades based on democratic procedures. We are now stepping into a new phase in which attacks against the established behavioural norms and workers’ rights have reached an unprecedented scale. This is happening across the world – from Vilnius to Paris to Seoul. In South Korea, we are also seeing narrowing workers’ rights,” said Woolfson.

– So the reduction of workers’ rights is being discussed globally and Lithuania is no exception?

– Yes. Juška and I wanted to identify the primary discourses through which the ruling elite and businesses seek to reduce workers’ rights. Our goal was to show the main terms that reform supporters and opponents use. If we’d step back for a wider look, we’d see that the business class around the world is using similar arguments. They talk about flexibility, modernisation, attracting investments, how workers must accept responsibility for their fates and how businesses are looking to cut back on unnecessary costs – like severance pay or security for parents with children. Lithuania’s attempts to reform the Labour Code only illustrate these tendencies.

– Could you show me the primary reason why businesses are, as you say, looking to reduce workers’ rights and reduce their security?

– I think that this is part of a global process that began after the 2008 economic crisis, which Lithuania felt very acutely. Over two years, the country’s GDP fell by 17%, which was one of the largest drops in the world. Later, there was a recovery, but there was always the question of how durable it was.

It seems that the answer is simple: the recovery is not that durable. GDP growth slowed over the last year, though it is above the average of the European Union and the Euro zone. However, it is slowing down. Besides, there are problems with foreign investments as well. There is only one outcome: smaller profits or smaller labour expenditures. That’s what this Labour Code is about – it’s about the reduction of the share of the pie for workers and its increase for capital. The rush is related to falling productivity and the lack of foreign investments.

– What do you think about the fact that the Social Democrats, who are the axis of the centre-left government, are the staunchest supporters of the new Labour code?

– It’s a paradox that it is best to pass unpopular reforms through socialist, social democratic political forces or left-leaning governments. We saw what happened in Greece with Syriza, which was broken by the Troika and forced to pass draconian labour right restrictions. It’s the same in France, where the socialist government and socialist president Francois Hollande made similar changes. In France’s case, they even stopped the debates in parliament and are looking to implement the changed with the parliament’s agreement based on article 49.3 of their Constitution.

So it’s paradoxical, as you can see, but it is often socialist governments that make these changes, often only minimally following democratic rules. In my opinion, this is one of the most worrying aspects. This is why there is social unrest among the French regarding Labour Code reforms throughout France. Currently, there is a massive resistance in France, and there are similar processes in South Korea – though the Western press doesn’t cover this much. In Lithuania, you know the whole story: Butkevičius is pushing the government to make these reforms even with the president’s disapproval.

– Every side’s position was supported with arguments with moral aspects – that one thing is wrong and the other is right. Why? Isn’t it simpler to present rational economic calculations?

– To put it simply, everything revolves around who pays into the system when it recovers from an economic crisis. Who – capital or workers? However, so everything wouldn’t seem over-simplified, it has to be cloaked with good arguments. The best way to justify these reforms is to use moral arguments that say that the reforms are necessary, right and suitable for the current situation. I think that, to some extent, this argument is correct, serious and important. How all of this works depends on the balance of interests, though the workers often come out the worse for it. I believe that this Labour Code was crated to be useful to employers. It will unavoidably increase social inequality and reduce worker security. That, in turn, will probably increase the emigration of the country’s labour force.

– One of Prime Minister Butkevičius’ primary arguments for the Labour Code was that, after the reform, there will be more jobs. However, employers are already complaining that they are having trouble finding qualified workers. What do you think about this argument?

– That is correct. Wherever similar reforms were implemented, it was emphasised that more jobs will be created. However, I see no basis for this. All of the numbers being used are a myth, pulled out of nowhere. 85,000 new jobs? I haven’t seen data that would support such numbers.

– However, as far as I understand, in this whole discussion on the Labour code, you see the germ of some sort of labour solidarity.

– Yes, that is correct. This is very important. Businesses and employers can try to restrict workers’ rights and security, but there is always a reaction, even in Lithuania. There is always an unavoidable resistance based on the fact that people, in their everyday lives, notice that their jobs lack social justice and that their rights have been restricted. This usually makes them angry. How they express that anger depends on the national context. In Lithuania, the labour unions are not strong.

But you know, you can scold employers, pressure them, and they won’t be happy without good, productive, dedicated workers. In amny cases, workers will decide to leave, resign – perhaps they won’t be able to leave for another job in Lithuania, but they will always be able to go abroad. The atmosphere in the work place, the work conditions, and the 8-hour work day are fundamental things for people, and insulting or authoritarian management styles cannot be tolerated these days. It’s hard to see this labour codex as anything other than direct support for employers in the Lithuanian labour market. And that’s a real problem.

Bielskis: the Social Democrats are digging themselves a hole

Andrius Bielskis, a professor at Mykolas Romeris University, believes that if the Social Democrats manage to pass the Labour Code in the Seimas, this will hurt them in the long run because their voters are often workers who will be negatively affected by these changes. “The social democrats are digging themselves a hole with this project,” he said.

Bielskis claims that the Social Democrats’ falling ratings, which represent a long-term trend, could be related to their decisions regarding the Labour Code. According to a Spinter Tyrimai public opinion survey, the Social Democrats’ rating fell from 20.9% in February to 15.5% in May. “If the Government bulldozes the Seimas’ ruling coalition into voting, it will be yet another minus for the Social democrats. This is obvious. I see no election logic here,” said Bielskis.

He also emphasised that the reduction of workers’ rights also has little to do with the Social Democrats’ values. In any conflict between businesses and workers, the Social Democrats ought to support the weaker party – which would be the workers, or whomever their slogan, “People are the most important thing,” was aimed at. In labour relations, the worker is considered a weaker link, which is why democratic countries pass laws that effectively protect workers from employer abuse.

From the employer’s perspective, said Bielskis, there was an existing Labour Code, but employers complained that the code made it almost impossible to fire workers.

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