If asked why they work, most people would say: to realise themselves, to improve their state of mind and material conditions, to feed and clothe their children and to ensure a better future.
Hardly anyone ever gives thought to the that the fruits of his labour are used not only by those whom they support at will but also by those whom they are forced to maintain. The latter are pensioners, the disabled, the unemployed and all those who live off state benefits, aid and concessions. These are granted not by the government nor by the state but by the creative segment of society.
Social insurance pensions alone are now paid to almost 900,000 recipients, or one fourth of Lithuanian population. This group continues to grow, as does the number of recipients of disability and widow’s pensions. In addition, there are close to 140,000 state pensions, some of which are paid along with social insurance pensions. Some individuals thus receive several pensions at a time. The state budget is also used to finance social pensions. In addition to cash benefits, socially supported persons are entitled to many concessions, such as transport concessions and discounts for heating and hot water.
Another large category of government dependants are the unemployed. Unemployment has reached a threatening level in Lithuania. It seems unbelievable that so many able and healthy people cannot find jobs and demand them from the state? Does that mean that there is nothing to do in Lithuania? That all goods and services people need are being produced? That people’s desires have been anticipated around the world? Of course not. Then why are so many people redundant in Lithuania? The answer is quite simple: the state prevents employment through coarse intervention in the market, particularly the labour market, offering humiliating unemployment benefits instead. Again, these benefits are paid not by the state but by those who have jobs… so far.
The minimum wage is probably one of the most conspicuous examples of such unacceptable interventions. Despite the fact that the government sets and raises the minimum wage in order to help low-income people, the results are quite the opposite. This policy hurts especially rural and small town dwellers. Most of them would be happy to offer their services at a lower wage than fixed by the state. Employers, on their part, would receive a signal that job creation pays. Meanwhile, the government-set minimum wage coupled with other regulations alert entrepreneurs that job creation is unprofitable and not worthwhile. If the government is truly concerned with providing favourable conditions for employment, it should remove barriers to job creation and allow people to work.
As the government devises fallacious social policies, it augments the ranks of their consumers. The unemployed are just one example. Once instituted, social allowances, concessions and other payments create increasing demand. Small wonder, some women, especially in rural areas, live off children’s benefits instead of maintaining their offspring themselves. When childbirth becomes a means of extracting money from the working segment of society, we should speak not just about social or economic problems but moral too.
What needs to be done to reverse the trend? The Lithuanian Free Market Institute (LFMI) has ready solutions. Last year LFMI made an in-depth analysis of the structure and development of social policy in Lithuania. Sociological surveys were carried out to elicit public opinion about the country’s social safety net. The results of the research, a one hundred-page analytical study, was presented at a seminar at the Ministry of Social Security and Labour last February. The main conclusions of the research follow in this issue of “The Free Market.”
LFMI formulated concrete solutions to replace the existing social policy, the proper role of which is to create conditions for people to pursue spiritual and material well-being. Today, however, it is aimed at vague, short-term results. Lithuania’s extensive, unwieldy social safety net dissipates generous largesse without clear-cut priorities and criteria. The state takes care even of those who do not need its support. Such inconsistencies result in inadequate support for those who need it most.
Government’s main concern should be to ensure that people would not require its assistance and have proper conditions to take care of themselves. To achieve this, the aim should be to remove all artificial obstacles for those who want and are able to work or to run a business activity of their own. By so doing, the government would lift the burden which is too heavy for it to bear. The state would have to take care only of those who are really unable to do it themselves. This kind of support should be granted in a transparent manner, under clear-cut criteria and only in cash. Recognising that social policy does not lend itself easily to reform, LFMI is preparing the ground for positive changes.