Towards a more inclusive labour market in Lithuania

Labour market outcomes have improved on many counts since the crisis, but employment opportunities remain depressed for some groups and job quality is often low. New legislation passed as part of the New Social Model significantly reformed labour institutions. Lithuania considerably liberalised employment protection for permanent and non-standard contracts, which reduces incentives for informal employment but risks further lowering job quality. Continuous reforms to labour inspection have improved its effectiveness, but further progress in labour law enforcement is needed, notably in the form of higher sanctions in case of violations. To ensure the balance between flexibility and worker protection, the currently weak social dialogue needs to be strengthened. Spending on active labour market policies should be increased. This would permit intensifying the support to needy jobseekers and raising participation in well-designed training programmes to better respond to the large upskilling needs. Many recent initiatives aim at reducing skill mismatch, but financial incentives for vocational training – and employer-provided training more largely – need to be further developed.