US embassy cable - 04VILNIUS1522

UNCLAS SECTION 01 OF 04 VILNIUS 001522 
 
SIPDIS 
 
STATE FOR EUR/NB, DRL/IL, PRM/ENA 
 
E.O. 12958: N/A 
TAGS: ELAB, ECON, SMIG, PGOV, LH, HT49, HT45 
SUBJECT: EU MEMBERSHIP SPURS LITHUANIAN LABOR FLIGHT 
 
REF: VILNIUS 1493 
 
1. SUMMARY:  Young Lithuanians have left their homeland en 
masse since the May 1 accession to the EU in search of 
employment abroad.  The exact number leaving remains 
unclear, although as much as a quarter of the country's 
working-age population may leave by the end of the year. 
Some sectors have reported difficulties in hiring workers, 
although representatives from Lithuania's thriving 
construction sector argue that media talk of a labor 
shortage is overblown.  The Lithuanian government and other 
economic analysts hope that increased labor outflows will 
in the end benefit the country's economy, trusting that 
those currently leaving will return to Lithuania with 
capital and business experience.  For its part, the 
Lithuanian government appears willing to let the market run 
its course.  The Labor Party, victorious in recent 
Parliamentary elections, promised in its campaign platform 
to address the problem, but it remains unclear whether it 
really has a plan.  END SUMMARY. 
 
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Lithuanian Labor Exodus 
----------------------- 
 
2. Lithuania's emigration pattern shifted dramatically on 
May 1, when the country entered the European Union and its 
citizens gained the right to live and work legally in Great 
Britain and Ireland.  A startling number of Lithuanians are 
leaving their Baltic homeland for dreams of a better life 
in the West.  While the United States remains a destination 
of choice (reftel), about half of the new emigrees are 
heading for EU countries. 
 
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How Many? 
--------- 
 
3. The Ministry of Labor actively tracks Lithuania's labor 
outflow but keeps this data confidential at the highest 
levels of the Ministry.  It is difficult to estimate the 
exact number of people leaving, as many retain their 
permanent address in Lithuania while working abroad 
illegally.  According to a recent media survey, 28% of the 
population would like to leave Lithuania and go abroad. 
The Ministry of Labor told us it expects that as many as 
360,000 workers, about one-quarter of the country's 
working-age population, will have departed Lithuania by the 
end of the year.  According to government data, emigration 
increased by 64% in the first half of 2004 as compared to 
the same period in 2003 -- despite the fact that Lithuania 
continues to enjoy one of the highest economic growth rates 
in Europe.  Some experts from the Ministry of Labor note 
that the large labor outflow following EU accession 
included traditional summer seasonal work, and they believe 
that the initial "wave" of emigration has come to an end. 
Recent data from the Lithuanian Labor Exchange (i.e., the 
state unemployment office), supports this theory, 
indicating that emigration decreased 14% from June to July 
after the initial May accession exodus.  Figures from the 
British government also show that work applications from 
Lithuanians in the United Kingdom (Lithuanians' favorite EU 
destination) dropped 50% from the end of May high to the 
end of September. 
 
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Economic Shock 
-------------- 
 
4. Rimantas Kairelis, State Secretary of the Ministry of 
Labor, described the current labor outflow as a shock to 
the Lithuanian economy.  So far, however, the extent and 
character of that shock remains unclear.  Wages, currently 
among the lowest of EU members, will undoubtedly rise. 
Lithuania's GDP per capita for 2003 (using Purchasing Power 
Parities to adjust for price level differences) stood at 
only 42% of the EU-15 average and 39% of the UK average. 
As of July 2004, Lithuania's minimum wage (PPP adjusted) 
was only 25.9% of the corresponding wage in the UK. 
Salaries are slowly increasing, while political leaders 
debate how quickly they can afford to raise the minimum 
wage. 
 
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Internationalization of Labor 
----------------------------- 
 
5. Foreign workers who speak Russian and can therefore 
operate in the Lithuanian labor market will increasingly 
fill the gaps in sectors as diverse as textiles and medical 
services.  Kairelis noted that, with many Lithuanians going 
abroad, the GOL would likely begin increasing quotas on 
foreign workers, most of whom are currently from Belarus 
and Ukraine.   The Department of Migration confirmed 
greater demand for foreign workers in November, reporting 
that Lithuanian companies had submitted a significantly 
higher number of work permit applications since May 1. 
 
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Economic Boon? 
-------------- 
 
6. Many Lithuanian experts, while concerned about a shock, 
believe that increased labor mobility will strengthen the 
country's economy, assuming Lithuanians will send money 
back to Lithuania and eventually return to invest their 
savings in and apply their skills to the Lithuanian 
economy.  Data from the Lithuanian Labor Exchange indicates 
that, during the first month following EU accession, 56% of 
those Lithuanians who found employment abroad had 
previously been on the unemployment rolls in Lithuania. 
Marius Grecius, from the EU Integration division of the 
Ministry of Labor, argues, "We believe that with increased 
temporary migration (which is predominant in our case), we 
experience more advantages than disadvantages: notably, 
workers return with new experience, we export unemployment, 
and money flows back to the economy in the form of 
remittances." 
 
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Impact on Industry 
------------------ 
 
Trucking 
-------- 
 
7. Lithuanian trucking companies have been particularly 
hard hit by labor outflows.  The Lithuanian Trucking 
Association, Linava, reported in September a shortage of 
3,000-4,000 truck drivers in Lithuania.  Anatolijius 
Jakimovas, Linava spokesperson, noted that many Lithuanian 
trucking companies must now hire more foreign workers, 
especially from Russia. 
 
Retail 
------ 
 
8. Large retail stores, whose jobs are infamous for low 
wages and long hours, have also reported some difficulty in 
filling all positions.  Media emphasis on a labor shortage 
has sometimes proven exaggerated, however.  Inga Skisaker, 
general director of Rimi Lietuva, one of Lithuania's 
largest retail chains, said a month after EU accession that 
she knew of only one case of a Rimi employee quitting for 
work abroad. 
 
Construction 
------------ 
 
9. Lithuania's construction sector, credited by many 
analysts with driving Lithuania's current economic growth, 
has not felt much of an impact.  Ranga IV, a top-notch 
construction firm that has built many of Vilnius' largest 
buildings, reports that labor outflow has not significantly 
affected the company's business to date, although it has 
identified labor shortages as a possible obstacle to future 
business.  Ranga IV's Dita Purliene told us that, while the 
company does not currently employ any foreign workers, 
Ranga IV is now considering hiring from Belarus and Ukraine 
in order to forestall a future labor shortage.  Marius 
Sulcas, General Manager of Regina ir Co., a Vilnius-based 
construction company active throughout Lithuania and in 
some neighboring countries, described the labor flight 
issue as "more talk than a real problem."  He said that the 
quality of life for a skilled laborer in Lithuania, 
primarily because of the low cost of living and proximity 
to family, often matches or even surpasses that of his/her 
counterpart in the United Kingdom, despite the difference 
in nominal salaries.  Regina ir Co. has not witnessed a 
substantial increase in labor flight since May 1.  Turnover 
among the firm's approximately 200 employees remains stable 
at around two to three per month. 
 
-------------------------------- 
"No, Really, We'll Come Back..." 
-------------------------------- 
 
10. Although the impact on business remains unclear, a 
large outflow of labor could devastate tax revenues, place 
inflationary pressures on local labor markets, and have a 
"brain drain" effect.  Some analysts already list a 
shortage of skilled labor as a reason for a recent slowing 
of economic growth.  Lithuania's hopes that the current 
labor outflow will benefit the economy, therefore, depend 
on the return of a large number of expats -- or at least 
their remittances. 
 
11. Virtually all Lithuanians, however, claim that a 
majority of those leaving the country in search of 
employment will return after a short stay abroad.  Even in 
Kelme, a depressed, rural town in western Lithuania being 
abandoned by its youth in startling numbers, community 
leaders told us that they strongly believed most young 
people would return home after a short stay in the capital 
or abroad. 
 
12. Lithuania's students tell us that, while they would 
like to get some international work or study experience, 
they do not want to stay outside of Lithuania for more than 
one to three years.  Most Lithuanians abroad are able to 
secure only unskilled labor positions, despite their 
generally high educational level.  Educated, young 
Lithuanians note that they want to gain professional 
experience abroad, but will not be satisfied in the long 
term with menial positions, even at high wages.  Giedre 
Vilkaite, a member of the Kaunas Technological University 
Student Council, explained, "We do not want to wash dishes 
for the rest of our lives."  Strong nationalist feelings 
also restrain some Lithuanians from permanently leaving 
their 13-year-old republic.  Asked if she would accompany 
her boyfriend, who had taken a job for a logistics company 
in England, 26-year-old Ona Klizaite responded, "How could 
I disown my homeland?" 
 
13. Although polling indicates that a majority of 
Lithuanians would like to work abroad, only nine percent of 
respondents claim they would like to leave Lithuania 
permanently.  According to Monika Butkute, who is in charge 
of the EU's EURES employment database at the Vilnius Labor 
Exchange, many Lithuanians go to the Labor Exchange looking 
for work abroad simply to earn money for a big-ticket item, 
like a house or car.  After meeting their savings' goal, 
they usually return home. 
 
----------------- 
... Or Will They? 
----------------- 
 
14. Like so many Lithuanians before them, however, the 
plans of the latest wave of emigrants may change once they 
settle into new lives abroad.  Some of those currently 
departing Lithuania, once they attain quality jobs and a 
new lifestyle, undoubtedly decide to permanently reside 
abroad.  Asta Finch, a Lithuanian citizen who has been 
living in London for more than five years, provided us with 
a different perspective.  Asta left Lithuania for economic 
reasons, and she has settled in with a good job at Harrods 
department store.  Citing the dramatic difference in 
salaries in England and Lithuania, Asta rhetorically asked, 
"Why would anyone want to stay in Lithuania?" 
 
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Government Not Sure How to Respond 
---------------------------------- 
 
15. Despite increased media attention since May 1 to labor 
flight, politicians largely ignore the issue.  Rimantas 
Karelis, State Secretary from the Ministry of Labor, 
lamented that the GOL has not developed any real strategies 
or tactics to address the danger of labor flight.  Having 
long championed EU accession, the GOL now finds itself a 
victim of its own success, with no plan to deal with the 
demographic consequences of joining one of the world's 
biggest economic forces.  Politicians are only slowly 
realizing that they might have to take serious action to 
forestall a population crisis in their country of 3.5 
million. 
 
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Comment: An Issue for the Labor Party? 
-------------------------------------- 
 
16. Lithuania's new Minister of Economy Viktor Uspaskich 
hopes to stop the brain drain by sending students to study 
overseas.  Uspaskich's Labor Party ran to victory in 
October parliamentary elections on a platform that 
recommended state funding for Lithuanians who study abroad 
and then return home to work in critical industries. 
Uspaskich's own two children are studying in the United 
States.  It remains unclear, however, whether such 
proposals would do anything to stop the powerful economic 
forces that underpin the latest wave of Lithuanian 
emigration. 
 
MULL