Austerity, labour market segmentation and emigration: the case of Lithuania

• Author: Arunas Juska,Charles Woolfson
• Published date: 01 May 2015
• DOI: http://doi.org/10.1111/irj.12102
• Date: 01 May 2015

Austerity, labour market segmentation and

emigration: the case of Lithuania

Arunas Juska and Charles Woolfson

ABSTRACT

The so-called ‘Baltic model’ of austerity sometimes receives uncritical praise from

advocates of tightened austerity. This model has achieved an almost uncontested

vogue among international finance officials and European Union policy makers who

portray it as a ‘socially costless’ template for other crisis economies. The article

examines the impact of austerity on Baltic Lithuania, a peripheral newer EU member

state, and suggests that the harsh austerity measures adopted by its government in

order to restore fiscal balance have been far from socially costless. Austerity has

accelerated fragmentation of the labour market into a differentially advantaged

primary (largely public) sector, and an increasingly informalised secondary (low-skill

manufacturing and services) sector, stimulating extraordinarily high levels of emigra-

tion as the population, especially younger persons, depart from the country. We

describe this here as the formation of a new austeriat.

1 INTRODUCTION

The so-called ‘Baltic model’ of austerity has achieved a degree of unwarranted

praise by advocates of harsh austerity as the remedy for the economic ills of the

southern periphery of the European Union. This model has achieved an almost

uncontested vogue among international finance officials including the IMF, the

European Central Bank and among European Union policy makers who see it as a

‘socially costless’ remedy for past profligacies. Yet, as the example of the Baltics

reveals, such an interpretation obscures the profound social damage which the

imposition of austerity has created, not least in terms of an extraordinary emigra-

tion of its populations. Thus, while the onset of the global economic crisis in 2008

led to a dramatic increase of emigration throughout a number of East European

countries (Galgóczi et al., 2012), this was especially the case in Baltic countries

which experienced among the highest rates of emigration across the EU countries

(Eurostat, 2013a). At the peak of the crisis (2009–2010), emigration reduced the size

of Latvia’s population by 3.6 per cent and Lithuania’s population by 3.3 per cent

(ELTA, 2013; Latvijas Statistika, 2012). As this crisis-driven emigration from Baltic

❒Arunas Juska is Professor in Department of Sociology, University of East Carolina and Charles

Woolfson is Professor of Labour Studies in REMESO, Institute for Research on Migration, Ethnicity and

Society, Linköping University, Sweden. Correspondence should be addressed to Arunas Juska, Depart-

ment of Sociology, University of East Carolina, Greenville, NC 27858; email: juskaa@ecu.edu

Industrial Relations Journal 46:3, 236–253

ISSN 0019-8692

© 2015 John Wiley & Sons Ltd

countries turned into what looked like a veritable exodus from the region it has

become a subject matter of both wider scholarly interest and policy analysis (Apsite

and Berzins, 2012; McCollum et al., 2013; McDonald, 2010; OECD, 2011; 2013).

The Baltic austerity model has many admirers who regard it as an alternative to

(neo)Keynesian approaches to economic recovery, but these supporters avert their

eyes from this vast emigration which has ensued.

Much of the research on the scope and causes of Baltic emigration has tended to

rely on a combination of neoclassical macro- and micro-economic theories (for a

review of this literature, see Barcevicˇius and Žvalionyte˙, 2012: 31–74). Thus, in this

view, the spike in post-2008 emigration has been interpreted on the one hand pri-

marily as a response to a significant contraction of the economy and an increase in

unemployment and poverty in the region and, on the other, to the imposition of

stringent austerity measures such as cuts in wages, reductions in social benefits and

increases in taxes (Hazans, 2012; Lulle, 2013; Parutis, 2011; Sippola, 2013). There

have also been attempts to analyse Baltic emigration during the crisis years using

transnational and migration networks analysis (Bucˇaite˙-Vilke˙ and Rosinaite˙, 2010;

McCollum et al., 2013), as well as through discourse analysis and ethnography

(Woolfson, 2010).

This article acknowledges these existing studies of migration but will suggest that

there are limitations in their explanatory power with regard to the scale and intensity

of out-migration. Focussing in particular on the case of Lithuania, our analysis will

apply instead the less-often used labour segmentation theory in order to theoretically

position the surge of migration during the crisis. In so doing, we will argue that

austerity measures adopted by government since late 2008 have accelerated the for-

mation of bifurcated labour markets of a character that is particular to post-

communist countries such as Baltic Lithuania and is reflective of their economic

underdevelopment, as well as their dependent peripheral position within the Euro-

pean Union and the global economy. More specifically, austerity policies have inten-

sified the economic and social segmentation between (i) a primary sector constituted

mostly from relatively secure and protected public employment and (ii) an increas-

ingly informalised and unprotected low-wage and low-skill secondary sector in manu-

facturing, retail, hospitality and other service industries. This secondary sector has

disproportionally carried the brunt of austerity in terms of increased unemployment,

reduced wages and social benefits. Widening differentiation between the new

‘winners’ employed in the public sector and the new ‘losers’ employed in the unpro-

tected low-wage and low-skill private sector, in turn, has changed the ‘push’ and ‘pull’

calculus in terms of emigration strategies creating a new austerity-driven dynamic.

For those made redundant, as well as for those remaining employed but under

significantly worsened employment conditions in the secondary sector, coping strat-

egies during the crisis have become increasing circumscribed. They could either aspire

to more secure public sector employment or alternatively emigrate to core EU coun-

tries in search of employment opportunities, usually of lower-skill but with higher

levels of pay and basic social protection than available in Lithuania. The former

option was limited as competition for more secure public sector employment inten-

sified under conditions of austerity-induced retrenchment. For the majority therefore,

emigration constituted the only feasible option. As a result, an outflow of population

has increased to levels comparable only with the population displacement experienced

during World War II and its aftermath, raising the fears of an imminent demographic

crisis (OECD, 2013).

237Austerity, labour market segmentation and emigration

© 2015 John Wiley & Sons Ltd