In the labor market – a structural problem
On July 1, registered unemployment in Lithuania reached 7.7 percent and decreased by 0.7 percentage points over the year. In June, 17.4 thousand Employment Service clients found jobs, and the total number of insured persons increased to 1.47 million.
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There is certainly no labor market crisis in the country. A much bigger problem is a structural mismatch: jobs are created not where employees live, or they require completely different skills than those people possess.
We may have a surplus of textile sector workers and at the same time a shortage of programmers, teachers, doctors, or welders. According to the Employment Service, in June, the most in-demand professions included salespeople, cooks, drivers, cleaners, welders, construction workers, and various equipment operators.
Some of these positions are poorly paid, and employee turnover is usually very high. Furthermore, some of these specialties require very specific skills and qualifications (doctors, construction workers). At the same time, artificial intelligence seems to be taking jobs from lower-skilled office workers (accountants, assistants, etc.). This is a typical problem of structural unemployment.
In practice, however, a person who has lost an administrative job in a region cannot become an electrician in Vilnius the next morning. Retraining takes time, relocation costs money, and housing price differences between major cities and regions turn mobility into another problem for some people, not a solution.
Changes in the unemployment benefit system are welcome
From July, the unemployment benefit system is also changing. To be eligible for benefits, one must now have at least 12 months of unemployment insurance seniority within the last 24, not 30, months. The full benefit can only be received again after accumulating a new 12-month seniority period. At the same time, the minimum monthly benefit has been increased to 370 euros, and for the first three months, its variable part will be 45 percent of previous insured income, later decreasing to 35 and 25 percent.
Thus, the system becomes more generous in the first months of unemployment and better protects the lowest earners, but it more clearly requires that a person has genuinely returned to the labor market between two periods of unemployment.
However, it should not be expected that new rules alone will eliminate unemployment. Studies show that a longer duration of benefit payments can prolong the period of unemployment, but the outcome is also determined by labor supply, qualifications, mobility, and job search requirements.
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Changes do not solve the problems of the elderly
The situation is particularly difficult for older people. At the beginning of July, individuals aged 50 and over constituted 39.5 percent of all registered unemployed, and 26.1 thousand people were long-term unemployed. Older workers more often face health limitations, are more reluctant to change professions, and cannot always relocate for a job.
Therefore, for people of pre-retirement age, benefit payments can now be extended by a total of six months if they have at least 20 years of pension social insurance seniority. This is a logical solution in a country where the employment rate of older people is already high, but some of them work not out of desire but out of financial necessity.
The problem of youth is different
At the beginning of July, 14 thousand young people aged 16–24 were registered with the Employment Service. They lack experience, but their expectations are also changing: some do not want heavy physical, shift, or poorly paid work, but expect flexibility and good remuneration from day one.
At the same time, artificial intelligence is beginning to reduce the demand for simple entry-level office positions. Tasks previously performed by interns and assistants – preparing summaries, managing documents, or correspondence – are increasingly being automated. Thus, it may become more difficult for a young person to enter the white-collar labor market, even with a diploma.
Labor gaps are increasingly filled by foreigners, especially in transport, construction, and manufacturing. This is simultaneously a sign of economic strength and demographic weakness. However, the import of cheap labor cannot become a long-term productivity policy: if an employee can always be brought in, it is less profitable for a company to automate processes, raise wages, or invest in employee competencies.
Therefore, Lithuania’s most important task is not to reduce benefits as much as possible or force people to accept the first available job. Faster retraining, better regional connectivity, housing mobility measures, and greater investment in automation are needed.
Otherwise, for some people, work will indeed become not a choice but a dilemma: to choose an unsuitable and poorly paid position or to lose financial security, even though their skills could be needed elsewhere in the economy.
