The industry’s success is overshadowed by looming threats – up to 50,000 to go. employees and salary growth is too high

According to the Lithuanian Department of Statistics, in the second quarter of this year, Lithuania’s gross domestic product (GDP) increased 8.6% year-on-year. Commenting on the results, economists unanimously agreed that the success of the industry, the Lithuanian exporter, had a significant impact.

“The importance of the industry is really very high and is often underestimated. Not only in Lithuania, but also in other countries. The euro of added value generated by the industry adds almost 2 euros more of added value to other sectors, since the industry is like an employer of the sector. Consequently, labor arises in the transport and service sectors, as well as in the construction sector, since it is necessary to build factories, etc. In fact, a positive vicious cycle of industrial companies is emerging.

Another important role is that in Lithuania in particular, most industrial companies are concentrated outside of Vilnius. This is a big difference between the service sector. In the high value-added services sector, we have about 80 percent. In Vilnius, 15 percent. – In Kaunas, he left scattered in Lithuania. As for the industry, if you look at per capita, it is not Vilnius that leads, but Kaunas county, then Klaipeda county, Telšiai. In fact, it also reduces regional exclusion.

If we want to have more uniform and sustainable economic growth, then the industry simply cannot ignore it. This is one of the two main priority sectors of the Lithuanian economy, ”Žygimantas Mauricas, Luminor’s chief economist, said of the industry’s impact on the economy on Delfi TV show, Monetary Affairs.

Vidmantas Janulevičius, president of the Lithuanian Confederation of Industrialists, told the program that in the first quarter of this year, the Lithuanian economy was particularly advanced in the chemical industry. And the second quarter has already shown that the entire industry has contributed to economic growth.

“The chemical industry, the pharmaceutical industry, accounted for only a fifth of that increase and 80 percent. It was a traditional manufacturing industry with a growing number of orders, increasing sales prices. The second quarter was a boom period for traditional industry, which we will likely see in the third quarter as well.

For the fourth quarter, we would not see such strong growth, simply due to higher commodity prices and a lack of working capital.

We are seeing an increase in orders, an increase, and we expect that growth to be stable and consistent, because we are actually shortening the supply chains that we talked about last year during the Covid pandemic, which happened today. We managed to receive many additional orders from other clients who have not worked with the Lithuanian industry so far. The key is to keep them going when the return of traditional European industry leads to higher orders again. Now the industry is recovering, growing thanks to the fact that traditional partners who used to use manufacturing services are growing back and ordering, we still have some older orders from those who have learned, shortened chains and started using other EU countries instead of Asia, “said V. Janulevičius.

Threats include staff shortages and increased wages

The success of the industrial sector may be overshadowed not only by raw material shortages, but also by turmoil in the supply chain. On the agenda, the interlocutors highlighted two main issues. The first is staff shortages.

“I can only assure you that today is the biggest shortage of staff since 2008. The statistics exceed: in one place we see 50 thousand. Vacancies, but that at least 21 thousand. Vacancies for today are, that is a fact. And up to 50 a thousand – that number fluctuates.

Obviously, there is sustainable growth, we have a good future, but we certainly have not solved the problem with the employees. We need to think about immigration in one case or another, we will not be training that many professionals quickly, and we would like to talk about training those professionals in the future if we want to keep the industry up 20%. of our GDP. As for the Confederation of Industrialists of Lithuania, today our members, more than 3 thousand. companies, creating 46 percent. GDP in Lithuania. Between us, we not only have industry, but also carriers, logistics and others. The industry itself is purely 21 percent. GDP.

We all need to solve the rating problem. Since 2016, the interest of graduates in technical specialties (physics, mathematics, chemistry, which is very important, because the chemical industry in Lithuania is quite significant) has dropped by 15 percent. almost. Admission to those specialties has been reduced by up to 4 times. In the long term, the engineering industry will continue to expand and develop, we see that all new technologies, the industry together with the software, have the best future, by modernizing, digitizing the industry and production, ”commented V. Janulevičius.

Economist Ž. Maurice said that one of the biggest threats is not only the shortage of employees, but also the rapid growth of wages.

“The growth of wages in the last five years has been inevitable and has been more in line with those countries, the Czech Republic itself, the countries of southern Europe, where efficiency is not so high yet, but it is quite high. . In terms of the current level, we are practically up to date. If we grow at this rate in the future, we will start to lose that competitive advantage. If we lose that competitive advantage, then we must seek other competitive advantages. It is not so simple. It should be recognized that most of the Lithuanian industry has medium added value.

Let’s say that the furniture industry is very large, where labor costs are still an important part. Jumping over the navel wouldn’t be very helpful in the long run, and right now I see such a common narrative in Lithuania, not even Latvia and Estonia, that it’s perfectly normal for 10 percent. Wage growth, almost as low as it can be, will continue for several years, and if wages are not increased, there will be great dissatisfaction. This is one of the biggest threats to Lithuania in the near future and, of course, complex measures are already needed to manage this challenge.

I think that, being in the euro area and with a fairly high level of wages, this should already be recognized. Three years ago you could say that it was small, now it is very similar to the level of other Central European countries. I believe that single digit wage growth would be much more sustainable for Lithuania. It may be 6 to 8 percent, but if it is already in double digits, it is a sign that not everything is very sustainable in the Lithuanian economy. It is better to grow less, but in a more sustainable way than to jump above the navel ”, explains the economist Ž. Mauricas.

V. Janulevičius emphasized that it is important not only to increase wages, but also how productivity grows at the same time.

“Wages have risen 106 percent over the last decade, but efficiency in the industrial sector has increased only 29.6 percent, or a third. Here are the biggest scissors we need to fear. We want our people earn more, but that should be the basis of our productivity. Employees not only need to grow, but companies need to invest in newer equipment. There is already a need for state support here, if we want to support growth, we have to invest and we have to realize that this is a process of more than a month and more than a year. The fruits that are available today are more concentrated in the regions, thanks to that small and medium industry that we have around the 58%. It is very important for us to keep the regions as a second rapidly developing Lithuania. We need to invest there to increase the profitability of those regions. It will probably grow to that single digit number. or.

We have no doubt that we will see the same thing this year, but we must look very carefully to the future, because the same companies that have reached the heights of their fields to date can start looking for other EU countries where that rapid El wage growth has been lower supply. Because the shortage of employees plus the growth of salaries will bring problems in the long term, “said the president of LPK.

He stressed the need to let in more workers from other countries, to finish the discussions on 4 to do in a week, because not only will we not attract new investors, but we will not keep existing ones.

“To this day, I see the greatest danger from Poland. These are our partners, neighbors, but in business terms, today I see that this is problem number one, because there is a huge market, the supply of employees is really quite well, the salary growth is also fast, but not like in Lithuania. And its tax base is attractive, to this day Lithuania lags behind with the benefit of reinvested earnings, “he added.

Economist Ž. When asked if there were any problems for the Lithuanian industry due to the shortage of raw materials, Mauricas replied that this was not a significant risk in terms of other industrial companies that had extended supply chains around the world, so they would be more affected.

“I associate the threat more with the normalization period that will come sooner or later. Then that competition will increase, then it will be more difficult for Lithuania. Industry, let’s not forget, in many countries during the pandemic the demand for goods even increased compared to the pre-pandemic period. (…) The challenge is that with the normalization of this situation and the resurgence of competition, it may be a little more difficult for Lithuanian producers to compete with these big players, especially if we fall short in terms of salary growth and other related ones. costs Specific situation of Lithuania. If it is a global event, it is less and less painful for everyone, ”said the economist.