The social security and labour minister has promised a good year, saying that incomes will grow four times faster than prices. An economist says, however, this gives a distorted picture.
Some people in Lithuania will see a rise in their income this month when they receive their pensions and social benefits that are going up as of January. For some workers, salaries may increase due to a higher tax-exempt income threshold.
Presenting these changes and their results on people’s financial situation, Social Security and Labour Minister Monika Navickienė said that, this January, the average household income is 62 euros higher than it was in January 2023. Moreover, a growth of 12 percent is forecast this year.
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Put against the expected inflation rate – 2.8 percent, according to the Finance Ministry – income growth will exceed price growth four times, the minister rejoiced.
But it’s not so simple, cautions economist Algirdas Bartkus, associate professor at Vilnius University.
“It is not entirely correct to say that income growth will exceed price growth several times over. And this hinges on one forecast – the price level projection. What will the prices actually be in our country – we will have to wait and see,” he tells LRT TV.
Moreover, this comes after several years of rampant inflation – hitting 20 percent in 2022 – that eroded real wages.
Bartkus says that the purchasing power of the population last year was still almost 3.5 percent below its peak in 2021. Granted, this year Lithuanians will be able to afford more than last year.
Minister Navickienė also insisted that rising incomes will reduce the need for social benefits and will pull more people out of poverty.
“Poverty among pensioners is still high in Lithuania, as well as among people with disabilities. Single people with disabilities should still be on our state’s radar, a priority as a vulnerable group,” said Navickienė.
For Bartkus, the biggest problem is that there are few well-paid jobs in the country.
“The fundamental problem in Lithuania is that we have too few highly paid jobs. There are some, but the number is very small. If we were to attract investors who would bring well-paid jobs, our problems would be fundamentally solved, whether it be pensions, inequality, or poverty,” the economist shares his thoughts.
Some investors are put off by the neighbourhood with Russia and Belarus, he notes.
More than 60,000 people in Lithuania currently receive some form of social assistance.
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