The Lithuanian Economy - May 2017
Rising wages mask widening income inequality
  • Rapid wage growth, but not for everyone
  • Income inequality has picked up – action required
  • Main culprits - weak social safety nets and changing economy

Rapid wage growth, but not for everyone

Average wage growth has been rapid, and wage inequality has declined over the past five years in Lithuania. However, public sector workers were among those who benefitted least from the economic recovery. Their wages have been growing less rapidly than those in the private sector for quite some time. There is plenty of room for bringing more efficiency to the public sector, which, in turn, would make more resources available for wage increases in that sector.

Income inequality has picked up – action required

The income of those at the top of the income distribution has been growing considerably more rapidly than that of those at the opposite end. As a result, the income inequality indicators have been trending upwards for the past few years. The Gini coefficient of disposable income is now at the highest level in the country’s history and one of the highest in all EU countries. The progress in bringing down poverty has stalled as well. The situation requires attention.

Main culprits - weak social safety nets and changing economy

One of the main factors contributing to high and rising income inequality is related to weak social safety nets, including for the elderly. The large employment gap between high- and low-to-medium-skilled workers is another important factor. The latter is an outcome of the ongoing structural transformation in the Lithuanian economy, which, given the technological development, is unlikely to be reversed anytime soon. Not only redistributive but also educational and regional policies need to be pursued to lower the inequality of income as well as the inequality of opportunity.

PDF The Lithuanian Economy - May 2017

For more information about this report, please contact Mrs. Laura Galdikienė, +370 5 258 2275, Laura.Galdikiene@swedbank.lt

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