Two Lithuanias and solutions to the puzzle of inequality

Social and economic inequality is a painful topic for any society facing the effects of globalisation. In recent years inequality has separated the Lithuanian capital from the rest of the country. Potential solutions were discussed during a discussion titled “Two Lithuanias: How to wade out of inequality?” which was organised on March 8 at the Martynas Mažvydas National Library by the Global Lithuanian Leaders international network of professionals and law agency Triniti.

Definitions, concerning figures and live examples

Advisor to the Minister of Social Security and Labour, doctor of social science Romas Lazutka was invited to the event to discuss different types of inequality, ranging from income, to economic, to social, and their potential interactions. He outlined the key features, noting that income inequality is basically a facet of unequal incomes, economic inequality being a plethora of figures related to wealth gathered over a long time and social inequality being related to access of social resources such as contacts with individuals from certain circles of society.

Lazutka notes that the concept of inequality is often confused with that of segregation, with the latter meaning exclusion from society. He explains that this is not intentionally malevolent on part of society, just that such is its composition because individuals of specific ability are needed for the smooth functioning of society.

Meanwhile economist R. Grajauskas warns that current statistics only shows a portion of real world circumstances, with an active black market economy, he notes that a quarter of a million Lithuanians work for under the minimum wage, basically working part time and this, according to him, is related with tax evasion. Furthermore, he adds, the less tax is gathered due to matters such as off the book payments, the less the state can spend to support the public and seek progress overall.

Manifold problem

The discussion’s participants had varying opinions on the roots of growing inequality in Lithuania, but several key factors met with consensus. Among these was the perception that inequality issues are strongly linked with issues in the education sector, including a lack of encouragement for lifelong learning and lack of adequate guidance for students from poorer social strata in choosing their further education.

Among the issues discussed, R. Grajauskas pointed out that there is little mutual trust in the Lithuanian public and little trust in the government and its ability to effectively redistribute funds and provide quality services. He links the strength of the black market economy to such distrust.

Exiting the labyrinth

What solutions for reducing inequality in Lithuania were proposed and who should take the steps – the public itself or government institutions? E. Mildažytė who is known for initiating various social projects noted that birth rates need to be encouraged among the social strata who will be able to bring up active civic participants, not only enabling, but also nurturing responsibility.

Meanwhile the head of the Lithuanian branch of the Maltesers stressed the role of communities and NGOs, pointing out that “The government needs to change its perception of these groups. We are currently only receivers of aid, but we should be partners and should resolve this problem together.“
Overall the specialists agreed that there is need to adjust the tax system so as to make it both more effective in gathering tax revenue, encourage entrepreneurship and trust in the state. R. Lazutka noted that it may be beneficial to apply Western good practice, focusing on the importance of redistribution, distributing support based on capacity to deal with tax pressures.

“We really should increase tax progressivity, but not in order to drain those earning even more, but in order to aid those in poverty. This could be achieved by adjusting the untaxed income size system. Let us have no illusions – we lack capital. By raising taxes we would discourage investment and shoot our own leg,” R. Grajauskas shared his concerns over developments in progressive tax implementation.