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13 December 2018

Lithuania: structural improvement of household income and stronger social assistance needed

A survey by Lithuania’s central bank reveals the need for an urgent improvement in household income. Partly in line with this, the OECD published in 2018 several reports that asked for further labour market reform. Better-quality jobs in the formal sector are the key to increasing well-being and reducing poverty, while more effective support and active labour market programmes could help combat poverty.

After the launch of the annual Survey of Households 2018, commissioned by the Bank of Lithuania, a spokesperson for the country’s national bank said that an extra 400 euros per month would make life much easier for households. The survey aims to determine the saving and borrowing habits of households and the underlying reasons for these, as well as finding out how households assess their current financial situation. The survey also describes whether and how households make ends meet.

It is reported that four out of ten respondents claim that they would be happy if their monthly income amounted to between 800 and 1,600 euros. A third of households would be satisfied with their living conditions if their income exceeded 1,600 euro per month. Even those with a higher income (1,600 EUR per month or more) would like to earn at least 2,000 euro per month. Compared to the previous survey conducted in the first half of 2018, the share of households claiming that in the last six months their income increased has risen (from 20% to 27%). Every second household believes that their basic expenses in the upcoming half-year will increase (62% during the last survey). The potential rise in food prices continued to pose the greatest concern to households, although the share of such respondents has been gradually declining for the second consecutive year (from 49% to 36%). The potential rise in utility prices and job loss were a concern for slightly more than one in every ten residents (12% and 11% respectively).

In the summer of 2018, the OECD had reported that poverty remained at a high level, whilst social support was relatively weak. Based on 2015 data, the relative poverty rate – the ratio of the number of people whose income falls below the poverty line, taken as half the median household income of the total population – was the highest in the EU. In the latest OECD Jobs Strategy paper, published in December 2018, the quality of earnings is classified among the lowest in the OECD. And with approximately 15% of working-age people living in households with less than 50% of the median income, Lithuania stays in the category of the poorest performing countries. The OECD blamed the high level of informal working, a not very inclusive labour market and low labour productivity for this. Based on its reports, the organisation has recommended an increase of the level of social assistance while maintaining strong work incentives. This was repeated in a blog, written by the main collaborators.

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