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OECD Reviews of Labour Market and Social Policies: Lithuania

image of OECD Reviews of Labour Market and Social Policies: Lithuania

Lithuania has undergone major economic and social change since the early 1990s. Despite an exceptionally deep recession following the global financial crisis, impressive economic growth over the past two decades has narrowed income and productivity gaps relative to comparable countries in the OECD. But Lithuania faces a massive demographic challenge, mostly as a result of large and persistent emigration driven primarily by low wages and poor working conditions. Income inequality is also very high, and households at the bottom of the income distribution have recently benefited very little from the recovery. Major reforms of the labour code, the unemployment insurance system, employment policies and pensions were recently undertaken within the New Social Model to improve labour maket adaptibility and income security. This report provides comprehensive analysis of Lithuania’s policies and practices compared with best practice in the field of labour, social and migration from the OECD countries. It contains several recommendations to tackle key challenges facing Lithuania. This report will be of interest in Lithuania as well as other countries looking to promote a more inclusive economy.

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High outmigration raises challenges for Lithuania

Lithuania’s population is declining at a rapid pace due to ageing and very high emigration. Emigration peaked during the economic crisis, but remains at a high level, exceeding natural population decrease and higher than in any OECD country over the past decade. The working-age population has also been shrinking faster than in any OECD country, and the old-age dependency ratio is expected to increase by some 20% over the next decade. Approximately 10% of Lithuanian-born people now live abroad, with little sign of a large scale inclination to return. Lithuania should invest additional efforts to strengthen links with all Lithuanians abroad – especially those with medium skill levels or employed below their education level, better use labour migrants, and increase retention of international students.

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