As highlighted in the OECD Action Plan for Youth, successful engagement of youth in the labour market is crucial not only for their own personal economic prospects and well-being, but also for overall economic growth and social cohesion. Therefore, investing in youth is a policy priority in all countries, including Lithuania, and requires concerted action to develop education systems and labour market arrangements that work together well.

Lithuanian youth were hit hard by the global economic and financial crisis and, despite notable signs of progress, the unemployment rate continues to be higher than it was at the beginning of the crisis. A key priority for policy makers is to address long-standing challenges, which are manifest in a fundamental problem of poor quality of jobs, implying that many youth are trapped in low-paid, informal jobs, which prevent them from developing and fully utilising their skills and capacities.

Lithuanian youth (aged 15-24) were hit hard by the global economic and financial crisis, with the unemployment rate increasing sharply and peaking to over 35% in 2010. Despite notable signs of progress, at 16.7% (in Q2 2015) the unemployment rate continues to be higher than it was at the beginning of the crisis (around 10%) and there are signs of building labour markets pressures, fuelled by long-standing challenges. These are manifest in a fundamental problem of poor quality of jobs, which means that many youth are trapped in low-paid, informal jobs, which prevent them from developing and fully utilising their skills and capacities. There is a link between these tensions and the market propensity of Lithuanian youth to look for better job opportunities abroad and migrate.

This chapter provides an overview of youth in the labour market in Lithuania and highlights some of the key challenges faced by policy makers in the country. Lithuanian youth were hit hard by the global economic and financial crisis, with the unemployment rate increasing sharply and peaking to over 35% in 2010. Despite signs of progress, the unemployment rate continues to be higher than it was at the beginning of the crisis. One key concern relates to the continued underrepresentation of the youth in the Lithuanian labour market, manifested by both low employment rates and high inactivity rates. Even when young Lithuanians are in employment, they are frequently in poor quality jobs. Indeed, they often hold low-paid jobs, they face a high risk of unemployment and have lower income protection in case of job loss. Furthermore, the job of a young worker in Lithuania typically offers few possibilities for career development.

This chapter analyses demand-side barriers to youth hiring in Lithuania, such as the cost of hiring (as determined by non-wage costs and minimum wages), and employment protection legislation. It also discusses policies currently in place to tackle such barriers (including hiring incentives) and offers a range of policy options to create more favourable conditions for employers to hire youth. The key challenges identified in this chapter include: high non-wages costs, particularly on low-wages earners; a flat minimum wage, which does not reflect the productivity of young workers; and overly strict employment protection legislation on both permanent and temporary contracts.

This chapter discusses the role of labour market and social policies in supporting the employability of youth in Lithuania. In particular, the chapter reviews the unemployment and social assistance benefits available to provide adequate income support to youth; the public employment services to assist youth (re-)enter the labour market; the vocational education and training (VET) systems to help young people obtain the skills needed in the labour market. The chapter finds that although generosity of unemployment and social assistance benefits is relatively low and should not distort work incentives, more efforts are needed in providing youth with tailored support in finding employment. Public employment services lack the capacity to provide personalised support. Furthermore, there is room for more generous and effective spending on active labour market policies (ALMPs) and continuing the efforts to modernise the Lithuanian VET system.