While sociologists are painting a dark scenario for Lithuania because of massive emigration, talks in society are still going on about how to bring back emigrants. However, what would happen if all emigrants, about half a million of Lithuanians were to come back suddenly?
What would happen to Lithuanian economy, how pay would change, real estate prices and prices in stores. Famous Lithuanian economists agreed to think about some utopian scenarios.
Chief economist at “Swedbank” Nerijus Mačiulis was open: if emigrants suddenly returned, it would cause serious problems.
“The unemployment would jump to 30 per cent, transactions from emigrants would disappear – we would lose about one billion euros per year, which would be a challenge for state finances – we would need to pay unemployment benefits and social benefits. It’s fortunate that sudden migration changes like that don’t happen” he sighs.
Chief analyst at “SEB Bank” Tadas Povilauskas raises a similar question: “Where would the half a million of people work? Naturally, unemployment would suddenly increase because it’s impossible to create jobs in the short term.”
Chief economist at Bank for the Baltic States Danske Rokas Grajauskas agrees that at first it would be stressful for the state.
“Unemployment would increase a lot but not because of the decrease of busyness, and the labour force would grow, we’d need to pay higher benefits for unemployed. It would be a strain to public finances in short term, probably we would need to borrow, because the cost would increase very quickly and the income wouldn’t be so quick to grow.
But after a few years, the situation would stabilize, people would find jobs, create businesses” he says.
Economists predict that the flow of returning emigrants would raise the level of economy, would give a basis to create a small business.
“According to this scenario, if you a large number of people return over a short time, all of them can’t immediately find a job. This forces them to do something, and often they are forced to create their own businesses.
And since they would have seen a lot of things seen, expanded their horizons, there would be a lot of business ideas” said R. Grajauskas.
Chief economist at Nordea Žygimantas Mauricas states that emigrants are our best assets, so this a scenario would be fun.
“They like a calm swamp, and as soon as it is made into a flowing river – economic growth would be the fastest in the whole central Europe.
If at least one-third of them would return, it would be even better than if they hadn’t not gone anywhere. They use the opportunities, see the world. It’s like in the book “Panama is very beautiful” about a tiger cub, bear cub, where all of them went. Those, who come back, are usually happier, we would have a less depressed society” laughs.
The price of real estate would skyrocket
T. Povilauskas emphasises that if the population increased by nearly half a million, real estate and rental prices would shoot to the top, especially in Vilnius, where most emigrants would go.
“A scenario like this is fantastic, these things don’t happen but the question is whether it would be possible to “absorb” so much people in one time. You see, Lithuanians tend to live comfortable, not crowded – this is the question of if it’s possible to find accommodation for people to live, not where there is housing” he said.
Communications manager at Lithuanian Innovation Centre Alexander Izgorodinas says that if emigrants would return now, it would be good news for the construction market:
“According to data, the construction boom is slowly ending, so in the short term the prices wouldn’t rise so much since now a number of objects have been built and they haven’t been sold yet. But in the long term, up to 5 years – it could lead to another wave of construction and another price increase” he says.
What would happen to commodity prices?
When we talk about what would happen to the price of goods in shops, economists disagree.
“It would be a huge burst in consumption: food, clothing, etc. Of course, it would be good for shopping centres, all traders, food and drink establishments.
It’s logical that there were 10 buyers earlier and now there are three but they want to earn the same – the overcharge increases and if there are more buyers, then prices are reduced. But, looking 5-10 years forward the prices would begin to grow again” said T. Povilauskas.
Ž. Mauricas notes the scale of economy: “It would be a fresh gust of wind in economy, so the prices shouldn’t rise, it would be the opposite. The less people – everything is becoming more expensive like in Iceland, check out the high prices in there. I think this should be a positive change, although the commodity prices wouldn’t decrease because prices in general are growing constantly but not as rapidly when compared with the current situation.”
A. Izgorodinas says the opposite – the prices would rise quite quickly.
“Emigrants have accumulated a lot of money and this is seen in bank statistics, that about 4 per cent of GDP is from emigrants. Just from the British transfers we get 1 per cent of our GDP. So if they came back, they would increase consumption but the question is if it be good.
Statistically yes, our economy is highly dependent on consumption but not on prices. Users will start to consume, prices will grow and the wheel will start spinning, it will be hard to stop. A lot like before the crisis, when the economy was growing due to high expectations – the companies hoped to increase consumption, consumers expected higher prices and because of that consumed more. No economy in the world economy solved the problem” he says.
Salaries would decline
T. Povilauskas says that the salaries would cause an interesting situation, since returning emigrants are used to higher pay:
“For them it would be to adjust to lower wages. There might be disappointment, as the unemployment would not do anything for the salaries. The labour market would increase competition straight away and it would put pressure on salaries, at least in the short term.
“R. Grajauskas thinks the same: “This would heat the wages”. If everyone returned, labour supply would increase and this will reduce wages. In short term it would be good for business, to others – not so much.
A. Izgorodinas thinks that in short term it would only slow down the wage increase.
“Just in the industry over the last 6 years, wages increased by 37 per cent, not only because the production is growing but mainly due to the fact that there is a real struggle between the workers and now the negotiating power is on the side of workers.
If the supply of employees increased, the bargaining power is in the hands of the companies. They would have more to choose from, so salaries wouldn’t increase.
They would, when everyone would be employed instantly, which I doubt they would increase only in economic growth” explained A. Izgorodinas.
Two Lithuania’s would separate even more?
Sudden flow of returning emigrants could affect the regions. However, the economists don’t agree that they would help them flourish or just cause the two Lithuanian to separate even further.
“It would be a shock to Vilnius, Kaunas and Klaipeda because I think that if the emigrants do return, some would come back to those places where they used to live but a large part would like to return to the regions where economy is the strongest.
We should encourage them to return at least in cities as Marijampolė and Utena. It is also good and we would have not two in Lithuania’s, but Vilnius as the main one, Kaunas, Klaipeda and well living smaller cities” says T. Povilauskas.
A. Izgorodinas is almost sure that most of them would move to major cities: “Nearly all would go to Vilnius, I personally doubt that a large proportion of people would settle in regions.
I think that this will happen, they go where there are better living conditions and prospects. Foreign investors prefer investing in major cities. If I was an emigrant and thought where to return, I’d only think about Vilnius” he admits.
R. Grajauskas wasn’t as categorical and stated that there’s a lot of chances that most would return to the region, smaller towns, where they grew up.
“If everyone would go to one or more place, it would become very cramped so maybe a part could try to settle down in smaller towns, real estate might be cheaper and there could be more opportunities for self-fulfilment.
It would raise the economy of towns and regions as they are the most affected by emigration. So, I think that the ones that return would have the opposite effect, unless everyone goes to one place but I doubt it would happen” he says.
Ž. Mauricas thinks that some of the emigrants probably seriously consider the idea of not returning to the big cities.
“The likelihood of them going to small towns is little but why do people go to large cities because the financial insecurity is high, they want adventure, etc., and they after returning, they’ve experienced the adventures so could take more risks and maybe try and return to their hometowns.
I’m not saying that they’ll go to the villages and small towns like Kupiškis but maybe to Panevežys, Druskininkai, that are moving in the right direction” he says.
Currently we are creating a “non-welfare state”
According, to N. Mačiulis Lithuania in general would look significantly different: pensions would increase and everyone would feel significantly better. He invited to imagine a scenario in the course of five years where all emigrants would return, as it would be even more interesting.
“The increasing population, would also send a positive signal to the investors – one would expect an increase in foreign direct investment, as without the fear of a decline in demand and a lack of workers local companies would also invest more.
There would also be an increase the demand for real estate, and a possibility that regional isolation would lessen, as GDP growth would increase to at least 5 per cent. Furthermore, several problems in the public sector would solve themselves – as there would no longer be a dramatic lack of high school and university students, thus there would be no need to close half of the universities in the country. The increase both in the work force and the number of taxpayers would result in a quarter increase in pensions. In short, this would be a dream scenario, regrettably the probability of it coming true is close to zero…” – regretted the economist.
Furthermore, Ž. Mauricas is convicted that while such a scenario is realistic, but the need to act is now. Otherwise, the state will be at the risk of collapsing.
“The scenario is quite realistic. However, while the probability of it happening in Lithuania is small, it can be achieved if all attention is given to this issue.
The government needs to prioritize and try to end this vicious cycle, in order for it to change direction because the reality is that most people would like to return to Lithuania. The only question is whether we are going on the right path. There is no reason to think that this is something historic and uncontrolled, thus continuing to go down.
I, myself am fearful that we may become an experimental state, as there is a chance that emigration will not be stopped, than the question will become if we pay pensions at all, not how large they will be.” – the future is painted in dark colors.
The economist claims, that currently everything is done backwards, people are almost incentivised to emigrate. Details such as posters in the airports stating: “Make sure to check if you are not indebted to “Sodra”, enrage the economist.
“We are almost making it so that those people would never return here, instead of returning. We are not going in the right direction. We are creating our own model, the model which I refer to as an “non-welfare “state, in which crooks and bribers are tolerated, and we cannot even manage to do basic things” – firmly stated Ž. Mauricas.