192 ď ź
Lithuania While the GDP gap per capita relative to the upper half of OECD countries remains large, owing to relatively low productivity, its convergence towards high-income countries continues steadily. Income inequality, as measured by the Gini coefficient, is well above the OECD average and has increased in recent years. The income share of the poor remains low. Per capita greenhouse gas emissions are below the OECD average. The government increased the non-taxable income threshold and introduced more generous unemployment benefits under the New Social Model. Modernised curricula and other initiatives aim to enhance the labourmarket relevance of vocational education and training system. Governance reforms have increased the independence of the boards of state-owned enterprises and introduced a better separation between operation and monitoring functions. In the health sector, the government has been promoting healthy lifestyles and granted pay rises for physicians in rural and remote areas to reduce regional differences. A reform underway in the reimbursement for drugs aims at incentivising the use of generic drugs. New provisions in 2017 helped reduce co-payments by around 20%. Improved business-research collaboration on innovation and a more efficient insolvency regime that facilitates early restructuring, and where necessary, firm exit, would boost productivity growth. Further fostering inclusive growth hinges upon making the education system more responsive to skills needs and improving the employability of low-paid workers through lower social security contributions and more effective activation programmes. Growth performance, inequality and environment indicators: Lithuania A. Growth Average annual growth rates (%) GDP per capita Labour utilisation of which: Labour force participation rate Employment rate1 Employment coefficient2 Labour productivity of which: Capital deepening Total factor productivity Dependency ratio
C. Convergence in GDP per capita continues Gap to the upper half of OECD countries5
2002-08 9.0 1.3 -0.3 1.5 0.1 7.2 2.4 4.7 0.3
2012-18 4.3 2.6 1.3 1.3 0.0 2.0 0.7 1.3 -0.3
Level
Annual variation (percentage points)
-40
2016 37.8 (31.7)*
2013-16 0.9 (0)*
-50
5.8 (7.6)*
-0.3 (0)*
-60
2016 4.1 (10.9)* 0.2 (0.3)* 0.0
Average of levels 2010-16 4.3 (11.3)* 0.2 (0.3)* 0.0
Per cent 0 -10 -20 -30
B. Inequality and environment
Gini coefficient3 Share of national disposable income held by the poorest 20%
GHG emissions per capita4 (tonnes of CO2 equivalent) GHG emissions per unit of GDP4 (kg of CO2 equivalent per USD) Share in global GHG emissions4 (%) * OECD simple average (weighted average for emissions data)
GDP per capita -70
GDP per hour worked
-80
Source: Panel A: OECD, Economic Outlook Database; Panel B: OECD, Income Distribution and National Accounts Databases; United Nations Framework Convention on Climate Change (UNFCCC) Database and International Energy Agency (IEA), Energy Database; Panel C: OECD, National Accounts and Productivity Databases. StatLink 2 https://doi.org/10.1787/888933955142
193
Policy indicators: Lithuania B. There is room to improve the insolvency framework
A. The tax wedge on low incomes is comparatively high
Index scale from 0-16 from least to most efficient legislation,² 2016
Percentage of total labour compensation,¹ 2018
16
35
14 12
30
10 8
6
25
4 2 20
LITHUANIA
Advanced economies
EU
LITHUANIA
Advanced economies
3 best performing countries
0
Source: Panel A: OECD, Taxing Wages Database; Panel B: World Bank, Doing Business. StatLink 2 https://doi.org/10.1787/888933956016
Beyond GDP per capita: Lithuania A. Inequality has increased and is higher than in most advanced economies Gini coefficient, 2016 or last available year¹ LITHUANIA, 37.8
SVK, 24.1
Advanced economies median, 29.7
ZAF, 63.0 Emerging economies median, 46.2
B. Exposure to fine particulate matter is higher than in advanced economies Percentage of population exposed to PM2.5, 20172
% LITHUANIA
Advanced economies
< 10 μg/m³ 10-35 μg/m³
Emerging economies
> 35 μg/m³
World 0
10
20
30
40
50
60
70
80
90
100
Source: Panel A: OECD, Income Distribution Database, World Bank, World Development Indicators Database and China National Bureau of Statistics; Panel B: OECD, Environment Database. Note: For the explanation of the sets of indicators above, please go to the metadata annex at the end of this chapter. StatLink 2 https://doi.org/10.1787/888933956890
194
Lithuania: Going for Growth 2019 priorities Improve the employment prospects and work incentives of low-skilled workers. The high tax wedge hinders employment of low-skilled workers and undermines labour supply incentives. Financial work incentives are weaker for larger families.
Actions taken: The 2018 budget increased the non-taxable personal income threshold. A new inwork benefit scheme ("income disregard"), introduced in early 2018, increases the earnings threshold for being eligible for social assistance, especially for larger families.
Recommendations: Reduce social security contributions for low-paid workers, while ensuring that benefits remain. Monitor the impact of the new in-work benefit scheme in reducing poverty.
Help jobseekers to get back to work. More effective activation programmes, and increased participation in such schemes would help transition to new, quality jobs.
Actions taken: The new Law on Employment, which entered into force in 2017, expands the range of active labour market programmes and reallocates spending among them to increase efficiency. In addition, the management of public employment services has been centralised.
Recommendations: Increase investment in activation programmes, upon a close monitoring and evaluation of their outcomes based on systematic data collection. Ensure a sufficient number of suitably trained officers in public employment services to provide intensive personalised assistance for jobseekers.
Ensure workers acquire job-relevant skills. Skills mismatch is above the OECD average, with a high proportion of firms citing difficulty in finding the right skills, despite a highly educated workforce.
Actions taken: The curricula of vocational education and training continue to be reformed, with increased co-operation with social partners and vocational guidance made part of the general education system. A new model underway relates part of the funding to tertiary institutions to the achievement of the agreed performance outcomes. Apprenticeship labour contracts were introduced in 2017 as an instrument of training.
Recommendations: Reform the funding system of vocational education and training to reward work-based instruction of students. Make work experience a requirement for entry into vocational teaching. Link the length of apprenticeships to the level of acquired competencies. Encourage firms' participation in training provision.
*
Boost innovation capacity. Business expenditure on research and development is low and collaboration on innovation with the research sector is limited, weakening knowledge diffusion.
Recommendations: Make R&D tax incentives more effective by reducing the scheme's complexity and increasing its awareness among firms. Give more weight on collaborative research when allocating funds to research institutions. Improve co-ordination in the innovation system through consolidating agencies and programmes where overlaps exist.
*Improve the insolvency framework. More efficient insolvency procedures would facilitate the exit of less productive firms, improving the allocation of resources.
*
Recommendations: Further streamline bankruptcy procedures by simplifying the criteria for starting the insolvency process and introducing clearer deadlines for filings. Establish more favourable conditions for restructuring of firms in financial difficulties.
New policy priorities identified in Going for Growth 2019 (with respect to Going for Growth 2017). No action can be reported for new priorities.