Lithuania: Evolution of Wages during the Crisis

  • Observatory: EurWORK
  • Topic:
  • Published on: 08 July 2012



About
Country:
Lithuania
Author:
Inga Blaziene
Institution:

Disclaimer: This information is made available as a service to the public but has not been edited by the European Foundation for the Improvement of Living and Working Conditions. The content is the responsibility of the authors.

Trends and relations with other working conditions

In general, average wage in Lithuania is very low comparing to other EU countries – close to LTL 2,000 (€ 580) per month; moreover during 2008-2010 it decreased by almost 8% on average. In some sectors (e.g., manufacturing) the crisis has affected more the number of employees, while in other sectors (e.g., public administration and defence; compulsory social security) it has rather hit the level of wages. Yet, the construction and HORECA sectors appear to have been affected most of all (both in terms of employment and remuneration for work). Although there have been no surveys conducted in Lithuania to give grounds for objective assessment of the relationship between wages and working conditions, some examples demonstrate that wages cuts enabled, at least to a certain extent, preservation of jobs and maintenance of other working conditions at the same level.

Block 1: Wage trends 2006-2010

1.1.a Please provide annual statistics on average gross monthly earnings or yearly average wages by gender, occupational category (ISCO), part-time/full-time in your country from 2006 to the latest available year.

Average gross monthly earnings in Lithuania in 2006-2010
Average gross monthly earnings in LTL (EUR 1 = LTL 3.45)
 

2006

2007

2008

2009

2010

Total

1,496

1,802

2,152

2,056

1,988

By gender          
1. Male

-

-

2,387

2,205

2,151

2. Female

-

-

1,928

1,924

1,844

By ISCO occupational classification          

1 Managers

.

-

-

-

-

-

2 Professionals

.

-

-

-

-

-

3 Technicians and associate professionals

.

-

-

-

-

-

4 Clerical support workers

.

-

-

-

-

-

5 Service and sales workers

.

-

-

-

-

-

6 Skilled agricultural, forestry and fishery workers

.

-

-

-

-

-

7 Craft and related trades workers

.

-

-

-

-

-

8 Plant and machine operators, and assemblers

.

-

-

-

-

-

9 Elementary occupations

.

-

-

-

-

-

By contract type          
1. Full-time

-

-

-

-

-

2. Part-time

-

-

-

-

-

Notes: Lithuanian Statistics provides comparable annual data on wages by gender since 2008 only. Lithuanian Statistics does not provide data on wages by ISCO occupational classification and contract type.

Source: Lithuanian Statistics, Labour Statistics

1.1.b Please provide the following methodological information on the provided statistics:

  • Definition of the earnings (what components are included or excluded?): Gross earnings refers to remuneration in cash covering the basic wage and bonuses, payable by the employer to the employee directly, including state social insurance contributions and individual income tax payable by the employee.

  • Coverage (sectors excluded, if any; type of employees): all sectors and all types of employees.

  • Constant or current prices (real or nominal terms): current prices (nominal terms)

  • Source data (for example administrative data; national accounts or specific survey): Annual indicators of labour statistics are calculated by the Lithuanian Statistics (STD) using mathematical methods. For the calculation of indicators, data obtained from the results of the sample quarterly survey on earnings and the State Social Insurance Fund Board (SODRA) are used. The results are supplemented with data on earnings of employees of individual enterprises, calculated based on SODRA information.

1.2.a Please provide for the selected sectors, when available the following annual trend statistics on average gross monthly earnings and important context variables. The time period is 2006 until the latest available year.

Table –Sector Manufacturing
Average gross monthly earnings in LTL (EUR 1 = LTL 3.45)
 

2006

2007

2008

2009

2010

Annual average gross monthly earnings

1,387

1,721

2,028

1,952

1,929

Annual average gross monthly earnings, Male

-

-

2,360

2,246

2,203

Annual average gross monthly earnings, Female

-

-

1,642

1,611

1,611

Total employees (thous.)

-

231,7

218,0

175,0

164,9

Total full-time equivalents (thous.)

-

211,6

197,5

151,4

146,1

Average weekly working time (hours)

-

35,00

34,83

35,27

35,76

% Productivity yearly increase

6.9

2.5

2.0

3.0

16.3

Collectively agreed pay yearly increase in percentage

-

-

-

-

-

<Measure of wage dispersion>

-

-

-

-

-

Source: Lithuanian Statistics

Table –Sector Construction
Average gross monthly earnings in LTL (EUR 1 = LTL 3.45)
 

2006

2007

2008

2009

2010

Annual average gross monthly earnings

1,674

2,179

2,430

1,862

1,728

Annual average gross monthly earnings, Male

-

-

2,455

1,855

1,731

Annual average gross monthly earnings, Female

-

-

2,254

1,910

1,710

Total employees (thous.)

-

117,1

119,8

86,6

74,5

Total full-time equivalents (thous.)

-

105,7

106,5

68,3

61,4

Average weekly working time (hours)

-

35,56

35,28

35,12

36,40

% Productivity yearly increase

16.1

10.1

3.2

-23.3

19.8

Collectively agreed pay yearly increase in percentage

-

-

-

-

-

<Measure of wage dispersion>

-

-

-

-

-

Source: Lithuanian Statistics

Table –Sector Horeca
Average gross monthly earnings in LTL (EUR 1 = LTL 3.45)
 

2006

2007

2008

2009

2010

Annual average gross monthly earnings

828

1,034

1,243

1,155

1,112

Annual average gross monthly earnings, Male

-

-

1,482

1,369

1,292

Annual average gross monthly earnings, Female

-

-

1,183

1,102

1,065

Total employees (thous.)

-

36,2

36,6

30,8

28,3

Total full-time equivalents (thous.)

-

30,9

31,5

25,4

22,5

Average weekly working time (hours)

-

36,21

36,02

36,00

36,60

% Productivity yearly increase

-9.8

13.8

-13.5

-4.7

-3.5

Collectively agreed pay yearly increase in percentage

-

-

-

-

-

<Measure of wage dispersion>

-

-

-

-

-

Source: Lithuanian Statistics

Table – Financial and insurance activities sector
Average gross monthly earnings in LTL (EUR 1 = LTL 3.45)
 

2006

2007

2008

2009

2010

Annual average gross monthly earnings

3,092

3,597

4,133

3,999

3,776

Annual average gross monthly earnings, Male

-

-

5,944

5,718

5,333

Annual average gross monthly earnings, Female

-

-

3,444

3,320

3,128

Total employees (thous.)

-

19,2

19,8

18,2

16,8

Total full-time equivalents (thous.)

-

16,6

17,7

16,5

15,3

Average weekly working time (hours)

-

35,13

35,15

35,30

35,65

% Productivity yearly increase

9.2

-20.0

13.9

-18.7

7.0

Collectively agreed pay yearly increase in percentage

-

-

-

-

-

<Measure of wage dispersion>

-

-

-

-

-

Source: Lithuanian Statistics

Table –Sector Public administration*
Average gross monthly earnings in LTL (EUR 1 = LTL 3.45)
 

2006

2007

2008

2009

2010

Annual average gross monthly earnings

2,288

2,491

3,069

2,776

2,613

Annual average gross monthly earnings, Male

-

-

3,185

2,891

2,725

Annual average gross monthly earnings, Female

-

-

2,946

2,654

2,491

Total employees (thous.)

-

83,7

84,6

83,8

80,7

Total full-time equivalents (thous.)

-

79,2

80,3

79,1

76,4

Average weekly working time (hours)

-

33,79

33,86

34,03

34,26

% Productivity yearly increase

9.5

-6.6

1.7

-6.9

4.3

Collectively agreed pay yearly increase in percentage

-

-

-

-

-

<Measure of wage dispersion>

-

-

-

-

-

Note: * “Public administration and defence; compulsory social security sector”.

Source: Lithuanian Statistics

1.2.b Please provide again the following methodological information on the provided statistics:

  • Definition of the earnings (what components are included or excluded?): Gross earnings refers to remuneration in cash covering the basic wage and bonuses, payable by the employer to the employee directly, including state social insurance contributions and individual income tax payable by the employee.

  • Coverage (sectors excluded, if any; type of employees): all sectors and all types of employees.

  • Constant or current prices (real or nominal terms): current prices (nominal terms)

  • Source data (for example administrative data; national accounts or specific survey): Annual indicators of labour statistics are calculated by the STD using mathematical methods. For the calculation of indicators, data obtained from the results of the sample quarterly survey on earnings and the SODRA are used. The results are supplemented with data on earnings of employees of individual enterprises, calculated based on SODRA information.

  • Definition of the labour productivity data: Labour productivity – gross value added per hour worked (increase/decrease (%) comparing to the previous year).

1.3 Please provide for your country the available statistical insights/studies on the following wage-related trends, briefly commenting: the period 2006-2010.

In Lithuania there is no information (statistical insights, studies, etc.) on the wage drift,as there is no information on collectively agreed wage increases – neither average in the country, nor by sectors. The main reason of such situation – there is neither national, nor sectoral level wage bargaining in the country.

In Lithuania there are no (at least – publicly available) statistical insights/studies on wage inequality or dispersion. The only data source available is information collected by the STD on distribution of employees by wage class. Data available is presented in the table below.

Table – Percentage of full-time employees by gross earnings class in the whole economy and selected sectors
in October, all employees – 100%

Sector

Year

Employees by gross earnings class in LTL (EUR 1 = LTL 3.45)

MW

801-1000

1001-1200

1201-1500

1501-2000

2001-2500

2501-3500

3501-5500

5501 and more

Whole economy

2008

7.2

9.1

9.8

10.9

16.2

13.2

18.5

11.0

4.1

2009

9.7

11.6

10.8

12.0

16.8

13.1

15.3

7.9

2.9

2010

9.3

11.7

10.7

11.7

17.0

12.6

15.6

8.3

3.2

Manufacturing

2008

7.8

8.9

8.5

12.7

18.4

14.2

16.4

9.5

3.6

2009

9.7

12.7

9.9

13.8

18.8

12.1

13.1

7.4

2.6

2010

9.8

13.4

9.5

12.9

19.0

12.1

13.1

7.6

2.7

Construction

2008

5.0

7.3

5.8

8.4

14.9

14.1

23.3

16.0

5.1

2009

14.5

13.5

11.4

12.9

18.0

12.0

11.2

4.8

1.8

2010

14.1

12.5

11.4

14.9

17.5

11.7

11.1

5.4

1.5

HORECA

2008

21.7

26.0

13.3

14.4

11.8

5.7

4.8

1.9

0.5

2009

25.1

28.0

13.2

12.8

11.2

4.4

3.2

1.6

(0.7)

2010

25.0

30.4

13.3

10.8

9.7

4.5

4.3

(1.5)

(0.5)

Financial and insurance activities

2008

2.7

3.2

1.7

3.8

12.6

15.3

20.6

20.7

19.4

2009

(2.6)

2.4

(2.5)

4.0

12.0

16.4

22.8

21.3

16.0

2010

(3.0)

(2.6)

2.0

4.2

17.0

15.3

19.6

20.3

16.0

Public administration and defence; compulsory social security

2008

0.9

(3.3)

4.1

4.8

9.5

14.0

33.0

23.5

7.0

2009

1.8

4.4

5.2

5.3

14.3

22.1

30.2

13.9

2.8

2010

(1.9)

(3.6)

4.9

5.0

15.1

20.3

31.7

14.3

3.2

Notes: MW – minimum monthly wage, equal to LTL 800; ( ) – insufficient accuracy of statistical estimate

As one can see from the Table, significant differences in the wage distribution by sector exists in Lithuania – among the aforementioned sectors highest wages are recorded in Financial and insurance activities sector, where almost 60% of full-time employees earn more than LTL 2,500 (EUR 725) per month, whereas in HORECA sector share of employees earning more than LTL 2,500 during 2008-2010 was close to 6%.

Unfortunately there is no information (statistical insights, studies, etc.) on the use of variable pay and financial participation in Lithuania – neither in the whole economy, nor by sectors.

The only available survey indirectly evaluating the role of variable pay and financial participation in Lithuania is a survey conducted by Consulteam Baltics (CTB) in January 2011 regarding the objectives of the systems of remuneration for work applicable in the country. The CTB’s survey covered HR managers and wage experts from 35 business companies operating in Lithuania. The respondents were asked to rate, on a five-point scale, the successfulness of the remuneration systems currently applicable in their companies in satisfying different objectives. The best-rated answer was low costs of management of the corporate remuneration system. Answers reflecting employees’ prospects in the existing remuneration systems were given the lowest rates:

  • a statement that the existing remuneration system ‘ensures a clear link between wage and employee’s contribution’ was given 3.23 points on average;

  • a link between wage and motivation was also rated just slightly above satisfactory by HR management experts: a statement that the existing corporate remuneration system ‘promotes employees to work better’ was given 3.29 points on average.

Block 2: Studies on the relationship with working conditions

2.1.a Please provide information on relevant studies or statistical findings which show how trends in employment creation or destruction explain possible negative wage trends during the current crisis in the country. Is there for example playing a composition effect: higher paid industry jobs are cut and partly replaced by lower-paid service jobs? Is it a question of shorter working hours, less overtime?

There are no relevant studies or statistical findings which show how trends in employment creation or destruction explain possible negative wage trends during the current crisis in the country. The only information available is surveys conducted by STD on wage and employment developments in the sectors (for more details see Chapter 1.2a).

From the information, collected by the STD it is visible, that there where few sectors suffering the most both in terms of employment and remunerations. Those were construction and HORECA (see Table below).

Table – Annual average gross monthly earnings and employment in Lithuania, 2008-2010
2008=100%
 

2008

2009

2010

Annual average gross monthly earnings
Manufacturing

100,0

96,3

95,1

Construction

100,0

76,6

71,1

HORECA

100,0

92,9

89,5

Financial and insurance activities

100,0

96,8

91,4

Public administration and defence; compulsory social security

100,0

90,5

85,1

Total employees
Manufacturing

100,0

80,3

75,6

Construction

100,0

72,3

62,2

HORECA

100,0

84,2

77,3

Financial and insurance activities

100,0

91,9

84,8

Public administration and defence; compulsory social security

100,0

99,1

95,4

Source: Lithuanian Statistics; author’s calculations

On the other hand manufacturing suffered in terms of employment, however decrease in wages and salaries was relatively not significant (less than 5% during 2008-2010), whereas public administration and defence; compulsory social security sector suffered in terms of remuneration (15% decrease during 2008-2010), however remained rather stable in terms of employment (there was a reduction of less than 5% during 2008-2010).

2.1.b If there is no negative wage trend, please provide information on relevant studies or statistical findings which explain why wages in the country did not reacted in a negative way to this economic shock of the current crisis? Are trends in working conditions and employment included in these explanations?

Not applicable.

2.2 Please provide information on relevant studies or statistical findings (current or from the past) on what effect a change in wages (increase, freeze or cut) has on the working conditions in the country or their outcome (job security, well-being at work and job satisfaction).

Unfortunately there are no studies or statistical findings on the relationship between changes in wages and working conditions in the country or their outcome.

The current processes have resulted in a situation where unfavourable economic and labour market situations in the country lead to wage reductions in some companies and organisations, while the problematic labour market situation seems to worsen employees’ situation (inter alia, in terms of working conditions). For example, during 2009-2010 average gross wage in the country was decreasing by 3-4% a year. In 2009, participation in LLL (in the age group 25-64) decreased by 0.4 percentage points and, in 2010,by 0.5. However, such wage reduction and worsened working conditions have been determined by the unfavourable economic situation, and it would be inappropriate to look for a relationship between these two processes.

2.3 Please provide information on relevant studies or statistical findings showing a trade-off effect between wages and other working conditions in the crisis. Possible other working conditions are other forms of rewards, job security, working time revisions, changes in work organisation, and training opportunities.

Unfortunately there are no studies or statistical findings showing a trade-off effect between wages and other working conditions in the crisis.

According to the information provided in previous EIRO, ERM and EWCO reports (LT1010029Q, LT0907029Q, LT1106019Q), in order to survive under the crisis conditions, some enterprises and organisations had to decrease wages and salaries by means of shortened working hours, unpaid working days, decreased bonuses, etc. Interviews with the social partners undoubtedly confirm that employees of the companies that faced difficulties and reduced wages during the period of crisis also experienced other forms of poorer working conditions, such as reduced job security, limited training opportunities, working time revisions, etc.

2.4 Complementary to question 2.3, we have included in annex data of the EWCS 2010 for your country that compare access to training, feelings of job security and changes in working time for employees that have been experiencing a wage decrease, increase or no change in the year prior to the survey. These data are indicative for possible trade-off effects. Could you please have a brief look to these data and comment?

From the data of the EWCS 2010 for Lithuania it is rather difficult to draw straightforward conclusions regarding possible trade-off effects. From the data presented we may see that Lithuanian employees experienced the highest wage cuts in the EU (together with Latvian and Estonian employees) – as much as 66% of employees indicated that their salary or income decreased comparing to the January 2009 (in Latvia this share was equal to 71%, in Estonia – to 53%), whereas the EU average was equal to 16%.

Accordingly in Lithuania the highest shares (close to 70%) of employees thinking that they may lose their job in the next 6 months were recorded (in Estonia and Latvia this share was equal to 64% and 72-76% respectively).

Moreover, data shows a clear relationship between the job security and changes in salary/income: those who reported on the decrease of salary or income more often indicated that they might lose their jobs in the next 6 months and vice versa.

Block 3: Relevant policy practices

3.1 Please identify and describe 3 key company or sector examples where a trade-off has been realised between wages and other features of the employment contractual arrangements during the crisis.

Example 1

As a result of the crisis and financial difficulties in the public sector, the highest-ranking civil servants were exposed to salary reductions. Since May 2009 salaries of the 10 highest grades of civil servants have shrunk by 4% to 12% (subject to the level of earnings). As the remuneration of civil servants in Lithuania is regulated by the Law on Civil Service, these changes were introduced through the amendments of the Law. In general social partners positively accepted the decrease of wage inequality in the public sector. In addition, this saved employees from being dismissed from civil service. It is expected that the reduction of salaries will last till the end of year 2012.

Example 2

In order to adapt to different financial conditions, remuneration for work was correspondingly reduced in other areas of public administration. For example, during year 2009-2010 local government institutions received reduced financial allocations, therefore employees were forced to take unpaid leaves, some payments agreed in the collective agreements were decreased or suspended (LT1106019Q). Although neither employees nor their representatives were satisfied with these reductions, we can nonetheless say that the measure prevented group redundancies of employees in local government institutions.

The situation described in the Example 1 and Example 2 is very well visible from the data, presented in the 2.1a Chapter – as one can see from the Table, presented in the Chapter 2.1a, the decrease in annual average gross monthly earnings in the public administration sector in 2008-2010 was one of the highest (earnings decreased by 15%), whereas the decrease in employment was the lowest (5% only).

Example 3

In the framework of saving policy undertaken by the Government of the Republic of Lithuania (LRV) in 2009, JSC ‘Lithuanian Railways’ (LG) was urged to make larger contributions into the national budget. As a result, the company has, inter alia, reduced wages for its employees: in 2009, the LG administration reached an agreement with the trade unions for reducing a variable part of wage to the employees from 50% to 25% in addition to reducing other payments for employees (e.g., bonuses). In 2010, as the situation in the country started getting better, the trade unions successfully negotiated increases of the variable part of wage from 25% to 30% and in 2011 – up to 35% (LT1109039Q).

However we should emphasize, that in a such ‘negative’ context other employment and working conditions (such as health and safety, training, etc.), according to the social partners, remained on quite a high level – workers are provided with necessary work safety tools; the company pays great attention to workers’ qualification improvement, etc.

3.2 Please identify policies recently put in place to support vulnerable groups of workers who have been possibly most affected by the recent wage trends. Priority should be given to policies and measures put in place to support low-wage workers, working poor and women. Additional attention could be paid to young workers, elderly workers and migrant workers.

When speaking about the policies recently put in place to support ‘vulnerable groups of workers’, especially those ‘most affected by the recent wage trends’ first of all we should mention the debates that take place in Lithuania for almost two years on the minimum wage increase (LT1011019I, LT1102019I, LT1105029I). The minimum wage was last increased in Lithuania in January 2008 and currently is equal to LTL 800 (€ 232) and is almost the lowest in the EU-27. Trade unions claim to increase it for almost two years, however without any success.

To the wage policies recently put in place to support vulnerable groups of workers, particularly – the low wage earners, we have to attribute increased tax exempt amount of income and amendments of the Law on Cash Social Assistance aimed at increasing work incentives.

With a view to protecting low-income people, a new tax exempt amount of income was introduced in Lithuania on 1 January 2009. From 2009, the tax exempt amount of income is applied individually subject to gross income from work. The larger is the income from work, the lower is the tax exempt amount of income. Currently, an individual whose monthly income from work is LTL 800 (€ 232) or less is applied the tax exempt amount of income of LTL 470 (€ 136) per month (note: people with children are applied slightly higher tax exempt amount of income). No tax exempt amount of income is applied to people whose monthly income from work exceeds LTL 3,150 (€ 913) (as compared to LTL 320 (€ 93) tax exempt amount of income applicable before 1 January 2009 irrespective of the amount of income from work).

On the 1 December 2011, the amendments to the Law on Cash Social Assistance were adopted by the Parliament of the Republic of Lithuania (LRS). Among other things, the Law provides for a measure of ‘supplementary social benefit in case of employment’. The Law stipulates that a 50% higher social benefit may be granted to a person who gets employed if he/she:

  1. got employed for a wage that is not lower than one minimum monthly wage and not higher than two minimum monthly wages;

  2. was registered at the local public employment service for a minimum period of 12 months prior to the employment;

  3. received social benefit at least once during the last three months; and

  4. has children.

This amendment to the Law is expected to ensure motivation of working-age people – especially, low wage earners – to get integrated into the labour market, actively look for a job and to reduce long-term dependency on the social assistance system.

Commentary by the NC

In Lithuania, the level of gross and net wages is very low, being one of the lowest in the EU-27. In 2010, average gross wage in the country amounted to LTL 1,988 (€ 576) per month. Net average wage was even lower, totalling LTL 1,552 (€ 450) per month. The minimum wage is equal to LTL 800 (€ 232). It should be underlined that such a low level of minimum wage is insufficient to ensure minimum funds required for subsistence, does not promote employment, contributes to growing emigration, increases social exclusion, etc.

We have to admit to the absence of actually any representative and freely accessible surveys in Lithuania providing with analysis and generalisation of the situation of remuneration for work in the country, particularly with regard to the period of crisis. Moreover, there are no surveys addressing the relationship between wages and working conditions. Some scarce available information suggests that in some instances (in the public sector in particular), wage reductions helped to reduce the number of likely redundancies. However, as regards most of private-sector undertakings, companies facing financial difficulties went bankrupt or had to dismiss majority of their employees. According to the Lithuanian Labour Exchange (LDB), as compared to 2007, the number of employees warned about dismissal doubled in 2008 and tripled in 2009.

Inga Blaziene, Institute of Labour and Social Research

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