Republic of Lithuania: Selected Issues

IMF Staff Country Reports, July 31, 2019

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Republic of Lithuania: Selected Issues

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Bibliographic details

• Published: July 31, 2019
• Series: IMF Staff Country Reports
• DOI: https://doi.org/10.5089/9781513509242.002

Summary

• This Selected Issues paper investigates skills mismatch and active labor market policy in Lithuania.
• Wage flexibility is underpinned by one of the lowest densities of trade union and employer organization and the rare occurrence of collective bargaining.
• Wage setting largely happens at the firm level.
• Real wages and productivity have been traditionally closely linked and temporary deviations have been self-correcting.
• Structural unemployment has been traditionally high, although it appears to be gradually falling.
• Lithuania suffers from relative labor shortage for high-skilled workers and surplus of low- and medium-skilled workers.
• There are labor shortages in skill-intensive sectors.
• Lithuania has shown a sharp rise in skills mismatch for the country in the aftermath of the crisis.
• Vacancy rates and wage growth by sectors suggest an excess supply of lower skilled workers and shortage of high-skilled ones.

Major findings

• Wage-setting framework:
  • Low densities of trade unions and employer organizations and rare collective bargaining support firm-level wage setting.
  • Real wages and productivity exhibit a close historical relationship; temporary deviations tend to self-correct.
• Labor market structure and dynamics:
  • Structural unemployment has been traditionally high but appears to be gradually falling.
  • Large structural unemployment can have a significant long-term impact on potential growth and, therefore, on employment.
• Skills mismatch:
  • Relative labor shortage for high-skilled workers.
  • Surplus of low- and medium-skilled workers.
  • Sharp rise in skills mismatch in the aftermath of the crisis.
  • Sectoral vacancy rates and wage growth point to excess supply of lower skilled workers and shortage of high-skilled ones.

Policy implications and themes addressed

• Active labor market policies (subject focus) are central to addressing skills mismatches and structural unemployment.
• Improving alignment between skills supply and demand is implied to support potential growth and employment.
• The analysis is relevant to topics including Active labor market policies, Labor, Labor markets, Output gap, Production, and Unemployment.

Publication and metadata

• Publication date: July 31, 2019
• Pages: 29
• Volume: 2019
• Issue: 253
• Series: Country Report No. 2019/253
• DOI: https://doi.org/10.5089/9781513509242.002
• Stock No: 1LTUEA2019003
• ISBN: 9781513509242
• ISSN: 1934-7685
• Subject: Active labor market policies, Labor, Labor markets, Output gap, Production, Unemployment
• Keywords: Active labor market policies, CR, Eastern Europe, Europe, Global, interest rate gap, ISCR, Labor markets, Lithuania, open economy, Output gap, statistics Lithuania, The Market, transmission mechanism, Unemployment, wage growth, Western Europe

IMF Staff Country Report: Republic of Lithuania: Selected Issues (2019), Country Report No. 2019/253

Content in this bundle

• Republic of Lithuania: Selected Issues; IMF Country Report No. 19/253; July 12, 2019
  • Republic of Lithuania: Selected Issues; IMF Country Report No. 19/253; July 12, 2019 (Markdown version)
  • Republic of Lithuania: Selected Issues; IMF Country Report No. 19/253; July 12, 2019 (PDF)