Over two decades, Lithuania has been one of the fastest growing EU Member States in terms of labour productivity growth. Based on the purchasing power parity, labour productivity reached 75% of the EU average in Lithuania in 2017. This is reflected in the first assessment of Lithuania’s labour productivity, carried out by the Ministry of the Economy and Innovation.
‘In two decades, the productivity per hour more than doubled in Lithuania, which makes as much as about 103 %; the result in other EU Member States makes 21 %. There are several reasons for this growth. EU investment has enabled companies to update technology by replacing existing technologies with more efficient and more productive ones, which has enabled the digitisation of processes. The initiatives to improve the business environment have helped attract high value foreign capital companies to Lithuania and facilitate the establishment and development of innovative start-ups,’ says Minister of the Economy and Innovation Virginijus Sinkevičius.
The labour productivity assessment report notes that wage growth in Lithuania is the result of strong long-term economic growth. The warnings, however, is that in case wages are set to grow with no breakthrough in labour productivity, it will increase the risk for Lithuania to become less competitive; also, this will lead to the slowdown of the country economy’s growth.
The report also shows that investment in equipment and technology has a significant impact on productivity growth. Larger companies are more productive, pay higher average wages and determine lower labour market volatility.
It should be noted that, following the global recession, the difference between the most productive and other activities of manufacturing has increased in Lithuania. When the economy is small and open, like Lithuania, external demand is an important driver for export and labour productivity growth, which could be accelerated by actions that help businesses enter new markets and economic policies that increase competition.
Lithuania’s labour productivity assessment covered the period from 2000 to 2017. The assessment of labour productivity is carried out by the National Productivity Board established at the Ministry of the Economy and Innovation in compliance with the Council of the EU recommendation. The Board deals with the analysis of trends and policies in the area of increasing productivity and competitiveness.
Lithuania’s labour productivity assessment is available on the webpage of the Ministry of the Economy and Innovation.
Information: Ministry of the Economy and Innovation of the Republic of Lithuania