Viewing cable 05VILNIUS962
Title: CONTINUING EMIGRATION BEGINNING TO AFFECT LABOR

IdentifierCreatedReleasedClassificationOrigin
05VILNIUS9622005-09-13 12:17:00 2011-08-30 01:44:00 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Vilnius
This record is a partial extract of the original cable. The full text of the original cable is not available.
UNCLAS SECTION 01 OF 02 VILNIUS 000962 
 
SIPDIS 
 
SENSITIVE 
 
STATE FOR EUR/NB, DRL/IL, PRM/ENA 
 
E.O. 12958: N/A 
TAGS: ELAB ECON SMIG PGOV LH
SUBJECT: CONTINUING EMIGRATION BEGINNING TO AFFECT LABOR 
MARKETS 
 
REF: A. 04 VILNIUS 1493 
 
     ¶B. 04 VILNIUS 1522 
 
¶1. SUMMARY:  Lithuanians continue to emigrate since their 
country joined the EU last year.  As Lithuania's skilled 
workers emigrate, the number of foreign laborers from Belarus 
and Ukraine has increased.  The Government acknowledges the 
need for programs to manage emigration, encourage emigrants 
to return and prevent a near-term brain drain, but has not 
yet decided on a course of action.  END SUMMARY. 
 
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A Steady Flow Westward 
---------------------- 
 
¶2. Many of Lithuania's citizens seek their fortune abroad, as 
they have since the country obtained independence in 1991. 
Official statistics indicate that 15,000 Lithuanians 
emigrated in 2004, and that an additional 10,000 left in the 
first half of 2005. Polls show that up to 20 percent of the 
country's 3.4 million citizens would like to emigrate, at 
least temporarily.  Officially, the GOL estimates that 
320,000 people, or 10% of the population, have emigrated over 
the past 14 years. 
 
¶3. NGOs, such as the Civil Society Institute (CSI), maintain 
that official statistics understate the situation.  The CSI 
estimates that more than 500,000 may have already left 
Lithuania, and that another three to six percent of the 
population will leave over the next ten years.  Several 
factors contribute to the high rate of emigration, including 
higher salaries abroad, unemployment in Lithuania, and the 
strong Lithuanian communities overseas that facilitate the 
adjustment of new immigrants to their life abroad. 
 
------------------------------------ 
Filling the Gaps in the Labor Market 
------------------------------------ 
 
¶4. The outflow of labor is already bringing about labor 
shortages, especially at the lower end of the labor market, 
in textiles, shipbuilding, retailing, and construction.  A 
representative of a local private employment agency reported 
that "the situation in the labor market has changed 
dramatically.  A year ago, most of the time we were selecting 
from among candidates; now we are looking for them." 
Employers at a recent Amcham breakfast complained about the 
labor shortage, with one American forest products investor 
telling the Ambassador that he has had trouble finding 
workers "for some time."  Taxi companies say that 20 percent 
of their positions are unfilled.  Wages have been rising 
rapidly in the sectors where there are shortages, but are 
still not competitive with Western Europe. 
 
¶5. The declining availability of qualified workers has had 
little effect on chronic unemployment.  Unemployment, while 
declining, remains over nine percent, but urban rates are 
much lower, at three to four percent in some cities. 
Honoreta Masalskiene of the GOL Labor Exchange said that many 
of the unemployed are "not employable" and commented that 
only 20 percent of the 100,000 job seekers registered with 
the Exchange are qualified for work.  She said that "if an 
employer calls us looking for workers, we have no one to 
offer." 
 
¶6. Immigration to Lithuania, especially from Eastern European 
countries, is filling the gaps in the labor market. 
According to the Statistics Department, 2,202 people 
immigrated into Lithuania during the first half of 2005, a 
statistically insignificant increase over the first half of 
¶2004.  The number of residence permit applications, however, 
is increasing at a faster pace.  Masalskiene told us that the 
number of work permits issued has dramatically increased in 
2005, with 913 issued in the first seven months of the year 
alone, compared to 877 in all of 2004.  She attributed the 
increase directly to replacement of emigrating workers and to 
Lithuania's low number of available skilled workers. 
According to Violeta Rozkoviene, Head of the Immigration 
Section in the Migration Department, there are now 25 to 30 
thousand legal foreign residents in Lithuania, primarily 
Russians, Ukrainians and Belarusians. 
 
¶7. Work permits are relatively simple for employers to 
obtain.  However, since unemployment is still high and 
employers must demonstrate they cannot fill the position 
locally, most immigrants are skilled industrial workers. 
Masalskiene said that undocumented laborers remain extremely 
rare, and could recall only one example - that of a Chinese 
restaurant worker.  She anticipates, however, that illegal 
immigration will increase when Lithuania joins the Schengen 
zone in 2007. 
 
-------------- 
Planning Ahead 
-------------- 
 
¶8. VP Market, the largest retail/grocery operator in the 
Baltics with over 15,000 employees, reports that while labor 
shortages are not severe now, they anticipate problems in the 
future.  They recently announced a pilot program to import 
over one hundred workers from Ukraine and Moldova. 
 
------------------------ 
Bringing the Expats Home 
------------------------ 
 
¶9. Undersecretary of Labor Rimantas Kairelis told us that the 
GOL "cannot just wait for (the emigres) to return," but must 
create an action plan both to maintain relations with 
expatriate citizens and to encourage their eventual return. 
The Ministry of Foreign Affairs has recently released several 
proposals to maintain overseas workers' ties with Lithuania, 
although they have not yet found funding.  The MFA hopes that 
Lithuanians residing overseas who maintain their ties will be 
more likely to return.  The proposals include sponsorship of 
Lithuanian schools in foreign countries, creating "virtual 
schools" on the Internet to maintain knowledge of Lithuanian 
language and culture and establishing a special attache 
position for emigrant issues in Lithuanian embassies located 
in countries with large numbers of Lithuanian expatriates. 
 
¶10. Disincentives for emigrants to return can be substantial, 
including lower incomes at home, difficulties returning to 
the local job market, and liability for back taxes upon 
returning to Lithuania.  Some local employers are reluctant 
to hire recent returnees, fearing their return will be only 
temporary. 
 
¶11. The Parliament will discuss removing the income tax 
penalty on repatriation in its fall legislative session.  The 
proposal will likely eliminate returnees' liability to pay 
the difference between taxes they paid in the country of 
foreign residence and those to which their income would have 
been subject in Lithuania.  Workers who pay no taxes abroad 
would still be subject to taxes upon their return.  The GOL 
estimates the cost to revenues of such a tax code revision at 
LTL 22.5 million, or EUR 6 million. 
 
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Comment 
------- 
 
¶12. The labor shortages that have appeared during the last 
year have not yet affected Lithuania's fast-paced economic 
growth, but they loom as a potentially serious constraint on 
the economy's prospects in the future.  If this small country 
hopes to sustain six percent-plus economic growth, as it has 
over the past five years, it will have to staunch the flow of 
its citizens going abroad - or replace them.  Failure to do 
so will drive up production costs.  This could have a range 
of deleterious effects, threatening foreign investment 
inflows and complicating the economy's achievement of 
inflation targets required to qualify for adoption of the 
Euro in 2007. 
 
¶13.  The most obvious solution also entails risks to this 
relatively homogenous society.  If it continues to fill the 
gap from countries in the near neighborhood, Lithuania may 
have to deal with the social, linguistic, and cultural impact 
of an increasingly multicultural workforce -- many of whom 
are more comfortable speaking Russian than Lithuanian. 
MULL