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Lithuania is a rapidly shrinking nation. Right after seceding from the Soviet Union in 1990, the country’s population was 3.7 million. A census one decade later returned a figure of only 3.5 million. The negative balance between births and deaths and exorbitant emigration flows after the European Union’s borders opened up for Lithuanians melted the country’s population even further. According to Statistics Lithuania, there are a little under 2.9 million people living in the country at the end of 2015. Should these trends prevail, everyone agrees that Lithuania is sitting on a demographic time bomb that has the potential to explode its social services, stall economic growth and make infrastructure unsustainable.
Accepted wisdom suggests that, with local salaries unable to compete with those offered in Western Europe and low barriers to movement, emigration will continue until Lithuania can offer financial incentives to stay or come back comparable to those in the old EU member states. The government keeps raising the minimum wage and has slightly elevated the tax-deductible income level, presenting these measures as, among other things, ways to rein in emigration. The Lithuanian economy is expected to grow even more next year, accompanied by growing wages and employment. Economists say, however, that all of this is not enough to reverse the demographic trends.
“I really do not think that Lithuania’s population will return to 3 million. The politicians’ target of 3.5 million by 2025 is pure utopia,” says Nerijus Mačiulis, a chief economist at Swedbank. “I think it would be a success story if we could stabilize the population at its current size. For that, however, we will need both higher birth rates and repatriation and stronger immigration policies. Without these three factors, the population will continue to shrink.”
Unless there are radical changes, the population of Lithuania is more likely to be 2.85 million in 2025, says Žygimantas Mauricas, an economist at Nordea.
“If we continue to go with the flow, the best we can hope for is stabilization, when net migration is not that high. But it’s highly unlikely that it will turn positive, that we’ll have more immigrants than emigrants. We will certainly not top 3 million,” Mauricas says.
The 3.5 million target is an ambitious plan, he adds, as plans should be in order to inspire radical action. “It is not entirely utopian, but we need to do something to make it happen. If we go with the flow and stick to such ambitious plans, it will be ridiculous. We must make decisions and work towards this goal,” according to Mauricas.
Surge in birth rates
One of the decisions that need to be made is how to boost birth rates. In the European Union, the average fertility rate (the number of children a woman is expected to have during her childbearing age) is 1.6, while in Lithuania it was 1.59, according to 2010-2014 data. Preliminary data for 2015 suggest that this has been the most fertile year since 2000, with 33,000 births (the average of the last several years has been 30,200). This has been extrapolated from 31,500 births recorded from January to November.
Even though the data give ground for optimism, Mačiulis says that birth rates in the country are not sufficient by far: “Even if Lithuanians stopped emigrating, low birth rates will still bring the population size to 2 million within the coming decades, according to the European Commission’s estimates. Obviously, if we want to reverse the trend, we need make tangible efforts and measures – more than just plans and declarative slogans.”
Mauricas says, however, that birth rates are not Lithuania’s main concern: “Fertility in Lithuania is not that low. It is well above the EU average. This year, it can reach 1.8 children per woman. We are almost approaching the countries with the highest fertility rates in the EU.”
This is the result of policy efforts, he adds: Lithuania offers longer maternity or paternity leave than most other EU countries, and generous benefits. Mačiulis, in turn, says the problem is inadequate infrastructure for raising children: there are not enough kindergartens and a lack of access to extracurricular education.
Higher minimum wages will not attract expatriates
Both economists stress that emigration is a far more pressing problem than low fertility. Some 43,600 people left the country between January and November this year, while only 19,600 arrived.
To sum it all up: from January to November this year, 31,500 babies were born in Lithuania, 43,600 people emigrated, 19,600 immigrated and 38,200 passed away. This amounts to a net loss of 30,700 people.
Mačiulis says that the only hope for stabilizing Lithuania’s demographic situation by the end of the 2010s is repatriation. “This year, the indicator (of repatriation) went down several percent, which suggests that there are not enough pull factors to bring back expatriate Lithuanians. The minimum wage is definitely not the solution here. These people who have accrued experience, made some capital, learned foreign languages, perhaps made important contacts, would not be coming back for the minimum wage, but for entirely different opportunities,” he says.
According to Mauricas, Lithuania should adopt radical measures to restructure its economy and make it competitive with other EU countries. “As things stand now, we are not competitive in the European Union. Lithuanians will not return from Western Europe, let alone Western Europeans coming to Lithuania for €300 a month,” he insists.
Ireland or Moldova?
Mauricas, of Nordea bank, points to Ireland as a good example for Lithuania to follow. In 1987, the country was facing massive emigration to the United Kingdom and the United States.
“Two giant countries with massive markets and strong economies were the competition Ireland was facing. […] The Irish realized that unless they raised work compensation and improved financial conditions, people would continue to leave. They rejected populism, gave up the practice of planning election to election and adopted a long-term economic strategy. The main point was to raise compensation for labour in exchange for lower taxes for businesses. The state took on all the costs,” Mauricas says.
The fact that Ireland now has one of the biggest Lithuanian expatriate communities in the world attests to the success of this strategy. “Although taxes were cut, higher wages and investments meant more revenue for the state. Two years later, migration was more or less balanced and five more years later, immigrants started coming to Ireland: first Irish expatriates and then everyone else. Eventually, immigration became a bigger problem for Ireland than emigration,” the economist says.
Meanwhile, Moldova presents a cautionary tale, Mauricas adds. According to various estimates, between 50 and 60 percent of the country’s labour force emigrated, mostly to Russia. “They fell into a vicious circle of poverty, deprivation and budget deficit. In no way would I wish anything like that for Lithuania,” he says.
Still, Lithuanian politicians are unlikely to make substantial changes before the situation becomes unbearable, Mačiulis, of Swedbank, adds, “It will not be before the beginning of the 2020s that Lithuania will start thinking about encouraging immigration from other countries – when the demographic situation is grave enough, when there are too few working-age people and much of the population have reached retirement age. This is when serious problems in balancing welfare and paying pensions will start. Only then will we start considering solutions to our migration problems more earnestly.”