Youth unemployment andthe decent work deficit

MAKING INDUSTRIAL RELATIONS WORK FOR DECENT WORKBRIEFING ON THE SITUATION IN LITHUANIA 44

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Introduction Unemployment and precarious employment

Changes in labour relations and the introduction of the flexicurity model in Lithuaniahave worsened labour conditions and altered employers’ attitude towards employees.Young persons, the least educated in workers’ rights and the least represented by tradeunions and works councils, were affected the most by these changes. According to thoseinterviewed by LLES, young workers are usually paid less because of their limited workexperience and working skills, yet they have a higher work load and are hired on shortterm contracts. This leads to a lack of stability in their personal and professional lives.

Youth unemployment in Lithuania grew rapidly during the crisis. In the third quarter of2011, according to Eurostat, Lithuania had one of the highest unemployment rates in theEU for the under-25-year-olds (after Spain, Greece and Slovakia), reaching 31.1 per cent1.The high level of youth unemployment is due also to the country’s overall economicsituation, unemployment and employment levels, retraction of services and industrysectors, inability to cope with technological changes, low investment and standards ofliving. Further, educational programmes do not take into account the needs of the labourmarket. Each year, university graduates and thousands of new specialists hit the labourmarket, and many of them turn to the Employment offices for help to find a job.

Overview Rising youth unemployment and poor working conditions

The statistics illustrate the difficulties facing Lithuanian youth. There is some confusionwhen it comes to evaluating the real unemployment level however. Three sourcesprovide data on unemployment, Eurostat, the State Employment Office and theDepartment of Statistics.

The unemployment rate given by the State Employment Office is usually the lowest, asit shows the number of people of employment age registered at the territorialemployment offices. Such data collection omits many unemployed persons who are notwilling to register at the office.

The Department of Statistics collects data by using surveys of the active workingpopulation, usually resulting in a higher unemployment rate than that of theEmployment Office (Lithuanian Labour Exchange). According to the Department ofStatistics of Lithuania Youth (aged 15 to 24) the unemployment rate in the third quarterof 2011 stood at 31.7 per cent. In comparison, the Employment Office (Lithuanian LabourExchange) recorded a 7.1 per cent unemployment rate among young persons (aged 16-24) in October 2011.

Before 2009 the difference between the two unemployment rates, from the Departmentof Statistics and from the Employment Office (Lithuanian Labour Exchange), was evengreater. Since 2009, the government has imposed mandatory health insurance and onlypeople who are unemployed and registered at the Employment Office (LithuanianLabour Exchange) have the right to health insurance coverage paid by the State, while

1 http://epp.eurostat.ec.europa.eu/statistics_explained/index.php/Unemployment_statistics

“Industry restructuring and bankruptcies limit jobopportunities, especially in theless developed regions. Jobshave declined also in theservices and tourism sector.Higher fees for commercialactivities patents (businesslicenses) and the introduction of cash registers forced manyindependent retailers, vendorsand market workers to quittheir businesses. As registeredunemployed persons they get ahuge discount in obtainingannual business licenses. Suchindividual business activitiesare highly promoted in order to keep the unemployment rateas low as possible.”

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those who are not registered have to pay it on their own (72 Lithuanian Litas (LTL) permonths.1 Euro = 3.4528 LTL). As a consequence, in order to avoid the expense of healthinsurance, young people apply to the Employment Office (Lithuanian Labour Exchange)after graduation, increasing the number of registered unemployed and leading toseasonal fluctuations in the unemployment rate.

Unemployment, 2010–2011 Q3

Source: Department of Statistics of Lithuania, 20112

Job opportunities for young people declined during the crisis. In 2007 Eurostatcalculated that the unemployment rate for young persons (15-24 year old) was equal to8.2 per cent, progressively increasing in 2008 to 13.4 per cent, in 2009 to 29.2 per cent,and in 2010 to 35.1 per cent3. This age group has a higher unemployment rate than allother age groups, with higher unemployment among men than among women, dueprincipally to the crisis in construction and industry.

Industry restructuring and bankruptcies limit job opportunities, especially in the lessdeveloped regions. Jobs have declined also in the services and tourism sector. Higherfees for commercial activities patents (business licenses) and the introduction of cashregisters forced many independent retailers, vendors and market workers to quit theirbusinesses. As registered unemployed persons they get a huge discount in obtainingannual business licenses. Such individual business activities are highly promoted inorder to keep the unemployment rate as low as possible.

Young people in employment interviewed by the LLES confirmed these trends,highlighting a worsening of working conditions, increasing workloads, temporarycontracts, insecurity and low/decreasing wages, sometimes unpaid wages and unclearwage calculations. According to Grazina, 24 years old, “It is hard to find a decent jobwhen you have no work experience. After graduating university I had no job offers.Finally I got a job at the supermarket as cashier. I get the minimum monthly salary andmy work duties besides the cashier’s job sometimes include cleaning, take care ofproducts on the shelves, slicing and packing cheese for no additional pay”.

Young people are often obliged to sign temporary contracts as there are not many otheralternatives offered by employers, who do not propose long-term employment to youngpeople. These short-term contracts give employers the flexibility to fire employeeswithout a formal reason. This also creates a situation where banks are not willing to

2 http://www.stat.gov.lt/lt/news/view/?id=8931&PHPSESSID=.

3 http://epp.eurostat.ec.europa.eu/statistics_explained/index.php/Unemployment_statistics

290,4

53,1

292,0281,9 277,6

255,6 239,8

297,2

51,3 54,9 51,7 48,0 46,3 44,6

35,9

18,1

6,1 7,4 7,58,5 8,7 8,0 8,0

18,3 17,0 17,1 17,215,6 14,8

37,1 35,532,4 34,1 33,6

31,7

300 40

35

30

25

20

15

10

5

0

250

200

150

100

50

0

Thousand

The unemployed, thousand

Per cent

Youth (aged 15-24) unemployment rate, per cent

The unemployed aged 15-24, thousand unemployment rate, per cent

Long-term unemployment rate, per cent

2010 2011

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provide financial loans to people in temporary employment. The young peopleinterviewed said they found having a temporary contract had a huge impact on theirborrowing ability. Moreover, when employers need to cut the workforce, young peopleare the first to be fired, since because they have worked for a shorter time theirredundancy payments will be lower.

What is unacceptable for young people is the extremely low minimum wage of 800 Litas(232 Euros) which has remained unchanged since January 2008. The discussion onincreasing minimum wages from 800 Litas to 900/1,000 Litas (by January 2012) wasraised by trade union representatives at the National Tripartite Council many times in2010-2011. A preliminary agreement to raise the minimum wage was reached andhearings took place in the national Parliament. However, the worsening economicsituation and the promise to repay the pensioners previously penalised by public cutsresulted in the government to offering an increase to only 850 Litas by July of 2012 orlater. Many youngsters interviewed by the LLES said their income from only one job wasinsufficient. According to Vidas, “it is very hard to survive on my salary. Rent and thecost of heating leaves me with little money for food and transport, I cannot affordanything”. Lina, 24, earns additional money by selling used books and schoolbooks.Mindaugas, 23 years old says “I receive just above the minimum wage. My girlfriend isstill studying, so we both have to work additionally on weekends”. Some of them areforced to live at home with their parents in order to save on rent, some of them try tocontinue their studies. As most of those interviewed do not see better opportunities inimproving their living and working conditions in Lithuania, they soon choose to migrateto other EU countries.

The legal framework

When Lithuania regained its independence, the Law on Employment of the Populationwas drafted, and passed on 13 December 1990. Since 15 June 2006, this law has beentitled the Law on Support for Employment. In the summer of 2010, the Law wasamended by adding youth under 29 years of age to the group of persons to be supportedin the labour market. The law gives the Lithuanian Labour Exchange under the Ministryof Social Security and Labour and its local offices a key role in implementing theemployment support policy.

To support youth employment, the Lithuanian Labour Exchange has establishedbranches called Youth Employment Centres. The main task of these centres is topromote young people’s integration into the labour market, to assist them in gaining abetter understanding of the social environment and the labour market. Its services arefree of charge, and registration is optional. In brief, Youth Centres operating throughoutLithuania:• provide information and counselling for young job seekers;• organise informative events and practical training• assist in preparation for job interviews, how to be motivated in searching for a job • promote entrepreneurship• provide professional orientation tests• provide information about admission to higher education institutions

“It is very hard to survive on mysalary. Rent and the cost ofheating leaves me with littlemoney for food and transport, I cannot afford anything”.

“I receive just above theminimum wage. My girlfriend is still studying, so we both have to work additionally on weekends”

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4 Economic and Social Development inLithuania November 2011

5 http://www.ldb.lt/jaunimui/naudinga/Puslapiai/bed_portretas.aspx

6 International migration of the LithuanianPopulation 2010. Publication ISSN 2029-3623.http://db1.stat.gov.lt/statbank/selectvarval/saveselections.asp?MainTable=M3020103&PLanguage=0&TableStyle=&Buttons=&PXSId=7371&IQY=&TC=&ST=ST&rvar0=&rvar1=&rvar2=&rvar3=&rvar4=&rvar5=&rvar6=&rvar7=&rvar8=&rvar9=&rvar10=&rvar11=&rvar12=&rvar13=&rvar14=

7 http://www.grafton.lt/images/stories/lt/GlobalSkillsMobilityLR.pdf

In November 2011, 31,900, or 15 per cent of all unemployed persons registered with theLithuanian Labour Exchange, received unemployment insurance benefits4. The problemis that only about 1 in 10 young people receive unemployment benefit as they don’t meetthe requirement of long-term employment (at least 18 month of employment within thelast 36 months). According to the Lithuanian Labour Exchange, as of 1 January, 2012only 54 percent of the young unemployed haven’t previously worked5. Additionally, thosethat qualify for the benefit receive lower amounts than before. The governmentdecreased unemployment benefits from 1,041 Litas to 650 Litas per month. Moreover,due to strict Employment office rules, young people often lose their “unemployment”status, if they do not return calls, show up for appointments, or when they refuse towork for a minimum salary, travel too far to work, or accept unskilled “dirty” jobs.

According to the Minister for Social Security and Labour, D. Jankauskas, manygovernment programmes have been created to increase youth employmentopportunities. In 2010 about 2,000 young persons were employed thanks to subsidiespaid to the employers. Others were employed through subsidies under the “first jobprogramme”, which covered some of the employers’ expenses through activeemployment support programmes.

What is important to outline here is that unstable economic conditions and little supportfrom the State force many young people to migrate. The main target countries are theUnited Kingdom, Ireland, Spain, Norway and Germany. The emigration rate fromLithuania is the highest in EU.

Lithuanian emigrants and population by age group, 2010

Age Emigrants Population0-14 10 % 15 %

15-24 24 % 15 % 25-34 37 % 14 % 35-44 16 % 14 % 45-54 10 % 15 % 55-64 2 % 11 % 65+ 1 % 16 %

Source: Department of Statistics of Lithuania6

Even though most of the young Lithuanians working abroad have low skill jobs, as theirlocal language skills and job finding abilities are low, the wages received in the foreigncountries are sufficient to survive. According to a Grafton Recruitment survey, astunning 95.5 per cent of Lithuanians surveyed in 2011 (76.1 per cent in 2010) would bewilling to work abroad.7

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Industrial relations The need to strengthen social dialogue and organise young workers

Given the lack of decent work for young people in Lithuania, is there a role for industrialrelations to play in improving their working conditions, if any, and promoting qualityjobs? First of all, social partners could improve labour legislation and thereforeemployment conditions through discussions and decisions at the Tripartite Councils,on different levels. The Tripartite Council is a body advising parliament and thegovernment on socio-economic and labour matters8. It was set up in May 1995 followingan agreement on tripartite partnership between the government, trade unions andemployers' organisations to resolve social, economic and labour problems and promotesocial harmony.

From January 2003, social dialogue and social partnership in Lithuania have beenregulated by the Labour Code. However, at the moment, no branch collectiveagreements (which are described in the Labour Code) are signed between the partners,as collective agreements are signed only at the company level. The following issues arethose addressed in most company-level collective agreements in force in Lithuania9:

• terms and conditions for entering into, amending or terminating employment contracts;• working and rest time;• pay;• social issues;• health and safety at work;• guarantees of trade union activities.

Within this context, the low level of trade union membership, about 13 per cent, makesit difficult to bargain with the employers. The youth structures of Lithuanian nationaltrade union centres believe that working conditions can be improved by better workerrepresentation and recognition of workers’ rights, but the reality is that young people’spresence in the trade unions is even lower than the average.

Moreover, the national agreement signed in 2009 to tackle the economic crisis was laterdenounced by trade unions as the government failed fulfil its promises to boost theeconomy, create jobs and reduce unemployment. Trade unions were refused permissiontwice by the authorities to organise demonstrations in 2011. This created distrust amongthe social partners and stalled the discussion on the minimum monthly wage.

The current government agenda is unfortunately more oriented to benefitting businessand making savings at the workers’ expense. Wages have declined during the economiccrisis and haven’t returned to pre-crisis levels. According to many social partnersinterviewed there should be a multi-faceted approach (by boosting the economy,increasing wages, monitoring labour market needs, establishing new work places,ensuring good working conditions and decent pay) to create a more secure and stableeconomic and working environment to show the State cares about young persons andto create trust in young people. The suggestions discussed by the social partnersregarding governments’ position usually are only guidelines and recommendations andhave little impact in the current situation.

8 http://www.lrtt.lt/en/about.html

9 http://www.eurofound.europa.eu/eiro/country/lithuania_4.htm

“According to many socialpartners interviewed thereshould be a multi-facetedapproach (by boosting theeconomy, increasing wages,monitoring labour marketneeds, establishing new workplaces, ensuring good workingconditions and decent pay) tocreate a more secure and stableeconomic and workingenvironment to show the Statecares about young persons andto create trust in young people.The suggestions discussed bythe social partners regardinggovernments’ position usuallyare only guidelines andrecommendations and havelittle impact in the currentsituation”

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Good Practice Start-up loans and job opportunities for youth

On 30 December 2009 the Ministry of Social Security and Labour (MSSL), Ministry ofFinance (MF) and the UAB “Investicijų ir verslo garantijos” (INVEGA) - a businessorganisation - signed the trilateral Agreement on the Establishment of theEntrepreneurship Promotion Fund. The purpose of this measure was to create appropriateconditions for micro/small enterprises and natural persons to start their own businessand for social enterprises to develop their business using financial engineeringinstruments, promoting entrepreneurship and self-employment and creating new jobs.The implementation of this measure (loan granting and (or) subsidies) is combined withtraining and consulting as well as assistance in preparing and implementing businessplans for business start-ups. These business loans are available in amounts of up to86,000 litas and with an interest rate of 5.5 to 9.5 per cent. Statistics show that 40 per centof those taking up the business loans were young persons under 29 years of age.

Further, the recent National Youth Policy Development Programme for 2011-2019 shouldassist in preparing competent specialists to work with youth. According to the YouthAffairs Department (JRD) director Mindaugas Kuliavas, the programme will increase jobopportunities for young people, giving them more experience and improving their skills.10

Conclusions Too much flexibility, too few jobs

Despite some of the programmes created the situation of youth employment remainsdifficult. The government’s strategy is in transition from providing jobs or creating agood environment for jobs to the requirement that young people find the job themselves.The government’s (flexicurity) strategy is to motivate young people to look for jobswithout providing them the necessary infrastructures, and to create self-employmentopportunities instead of creating quality jobs. Authorities make young peopleresponsible for finding a job with limited government assistance in terms of informationand counselling services.

Employers tend to sign temporary contracts with young employees in order to have theflexibility to fire them if needed. Job offers are only available in part time, temporary andagency related jobs or via internships. The amount of free choice youngsters exercisewhen signing this kind of labour contract is therefore questionable. Supply and demandof labour have changed in a qualitative way and the political promotion of flexibility hasstimulated this process. As a consequence youngsters end up with a curriculum vitae thatlooks like a chain of flexi-contracts, creating uncertainties and difficulties for young peopleand young families to plan their life (e.g. limiting their ability to apply for bank loans).

Youth job centres that are limited to only the bigger cities and towns provide counsellingand information, but in fact they can help very little in finding a real job or are able tosuggest only low quality employment. Further, the government’s position towards youngpeople creates a negative view of role of the state and the activities of state institutionsamong young people. Last but not least, the limited and declining number of workplacesin Lithuania, the lack of alternatives and business opportunities is a big factor in therelatively high rate of emigration among young people compared to other age groups.

10 http://www.alfa.lt/straipsnis/11567652/Ministerija.imasi.spresti.jaunimo.uzimtumo.ir.migracijos.problema=2011-06-08_10-22/

Author: Kestutis Salavejus (LLES)

Responsible editor: Conny Reuter

Editor: Sara Hammerton

Project Coordinators:Adeline Otto and Francesco Zoia Bolzonello

Publication Coordinator:Abigail Goundry

Printed on recycled paper©SOLIDARMarch 2012

This publication has been produced with theassistance of the European Union. The contentof this publication is the sole responsibility ofSOLIDAR and can in no way be taken to reflectthe views of the European Union.

About the project“Making Industrial Relations workfor Decent Work” is a one-yearproject which looks to intensify thecooperation and mutual learning ofrelevant actors - employers, unions,NGOs, think tanks and workers – toidentify the role as well as the toolsand models needed for effectiveindustrial relations, with the ultimateaim of combating precarious employ -ment and realising decent workingconditions and quality jobs for all.

This briefing, coordinated by SOLIDAR,was produced by SOLIDAR memberLithuanian Labour Education Society(LLES)

All “Making Industrial Relations workfor Decent Work” pilot studies areavailable on www.solidar.org

SOLIDAR is a European network of 56NGOs active in over 90 countriesworking to advance social justice in Europe and worldwide. SOLIDARvoices the concerns of its memberorganisations to the EU and inter -national institutions across the policysectors social affairs, internationalcooperation and lifelong learning.

Supported by DG Employment, Social Affairs and Inclusion.

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Recommendations

To national governments

• Adjust active labour market policy to encourage youth employment by subsidisingretraining and securing potential job placements or encouraging employers to providemore training at their enterprises, and match vocational education programmes withthe needs of the labour market. The priorities should be annually reviewed andmonitored.

• Provide youth counselling in Labour Exchange Offices in all 60 municipalities (not only11) to increase youth participation in the decision making process, taking into accounttheir needs and proposals for improving their working conditions.

To social partners

• Improve the basis for collective bargaining and relax the requirements for taking strikeaction. The state authorities should promote social dialogue and social responsibilityby encouraging trade unions and especially employers to start the bargaining process.Enterprises with collective agreements could get additional support or enterpriseswith no social dialogue could be given more restricted access to bidding for publicprocurement.

• Involve social partners and experts in developing training programmes, wherebyemployers’ organisations make projections on what type of employees they need in thefuture, and then closely participate in the education and training process. Nevertheless,workers’ rights and workers’ representation issues should also be addressed invocational education programmes.

decent workdecent life