Lithua­nia’s mid­dle class: if you make 1,000 eu­ros, then you are in it

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Ac­cord­ing to a new poll, ev­ery third Lithua­nian res­i­dent views him­self or her­self as part of the coun­try‘s bud­ding mid­dle class, but, well, who can claim the cov­eted spot?

Ac­cord­ing to three Lithua­nian economists, all who makes at least a thou­sand euro per month, can see him­self of her­self as a mem­ber of mid­dle class. Yet note, if there is a fam­ily of four, with both chil­dren un­em­ployed, the par­ents have to bring home 2,000 euro each, which is a very hard task for most of the Lithua­nian fam­i­lies. «A nu­mer­ous mid­dle class re­flects a coun­try’s eco­nomic ca­pac­i­ties – de­vel­oped West­ern coun­tries have mid­dle classes com­pris­ing 50-60 per cent of their pop­u­la­tion. The rep­re­sen­ta­tives of the mid­dle class can, with­out great strug­gles, sat­isfy their ba­sic needs and set aside for sav­ings or in­vest­ment ev­ery month, or ded­i­cate more to con­sump­tion. Even if the mid­dle class is not as large in Lithua­nia, as it is in de­vel­oped coun­tries, it has growth po­ten­tial be­cause a young and ed­u­cated gen­er­a­tion is en­ter­ing the job mar­ket, in­vest­ment flows are on the rise and the num­ber of mid­dle class jobs is on the rise,» Swed­bank fi­nance in­sti­tute head Jūratė Cvi­likienė said, com­ment­ing the poll re­sults.

«The mid­dle class is of­ten de­fined in terms of in­come…Un­for­tu­nately, Lithua­nian mid­dle class by the stan­dards of the West­ern world is con­sid­ered as poor. If our politi­cians de­scribe peo­ple who earn about 1000 eu­ros as rich, then peo­ple in coun­tries to which we are try­ing to align are strik­ing against such salaries,» Žilv­inas Šilė­nas, pres­i­dent of Lithua­nia‘s Free Mar­ket In­sti­tute, pointed out re­cently.

«Mid­dle class is shap­ing up slowly in Lithua­nia. Besides, it is bump­ing into a slew of hur­dles along the way. For ex­am­ple, one of the gov­ern­ment’s lat­est de­ci­sions to al­lot the so called child sup­port money for all fam­i­lies re­gard­less of their ac­tual in­come is a blow to our mid­dle class. And there can be found a lot more de­ci­sions of the kind,» Sig­i­tas Be­sa­girskas, a Lithua­nian econ­o­mist told BNN. «In Lithua­nia, mid­dle class is def­i­nitely sig­nif­i­cantly smaller than in the West.»

Ac­cord­ing to the lat­est poll by Spin­ter tyri­mai, some 42 per cent of Lithua­ni­ans cur­rently see them­selves as lower mid­dle class, 15 per cent – as be­ing poo and 8 per cent – as be­ing in the higher mid­dle class. Ac­cord­ing to Cvi­likienė, in Lithua­nia it is ed­u­cated, young (18-25 years old) res­i­dents, who iden­tify as mid­dle class. More fre­quently men (37 per cent) than women (34 per cent). The group to least self-iden­tify as mid­dle class is typ­i­cally those aged 56 years old or above (28 per cent). Lithua­nian res­i­dents view those earn­ing more than 1069 euro per month af­ter tax as be­ing mid­dle class. Mean­while the high­est ex­tent of mid­dle class earn­ings is seen as 1980 euro per month af­ter tax.

Ac­cord­ing to Civilkienė, rep­re­sen­ta­tives of the mid­dle class are char­ac­terised not just by their in­comes. Most (75%) re­spon­dents be­lieve that the rep­re­sen­ta­tives of this class should own their own home and 45 per cent be­lieve that the rep­re­sen­ta­tives of this class should be able to set aside for sav­ings. Around a third of re­spon­dents be­lieved that mid­dle class rep­re­sen­ta­tives should have sav­ings equiv­a­lent to 3-6 months’ worth of wages and do not have debt, bar long term com­mit­ments. Both the re­sults of Swed­bank re­search and the typ­i­cal def­i­ni­tions of the mid­dle class show that it is de­fined not just by in­come, but also life­style and prop­erty. Ac­cord­ing to Swed­bank Lithua­nia chief econ­o­mist Ner­i­jus Mači­ulis, based on the cri­te­rion of prop­erty own­er­ship, roughly a third of Lithua­ni­ans can con­fi­dently view them­selves as mid­dle class.

«Yet based on solely the in­come cri­te­rion, the Lithua­nian mid­dle class is some­what smaller. Only 14 per cent of those in em­ploy­ment earn more than 1.3 thou­sand euro per month be­fore tax. That said, we can be happy that the num­ber of in­di­vid­u­als in this in­come bracket has al­most tripled since 2010. Con­sid­er­ing all in­come, this por­tion would be even smaller be­cause the in­comes of those re­ceiv­ing pen­sions and other ben­e­fits do not reach the mid­dle class mar­gin,» the banker com­mented. Ac­cord­ing to him, to make the mid­dle class more nu­mer­ous in Lithua­nia, it would be nec­es­sary to re­duce labour tax­a­tion, at­tract more in­vest­ment, par­tic­u­larly in the re­gions and im­prove ed­u­ca­tion and re­qual­i­fi­ca­tion pro­grammes, ac­cord­ing to him. He says that up­com­ing re­forms are not for the mid­dle class.

«One of the main changes is likely the merger of in­come tax and so­cial se­cu­rity pay­ments. This would mean that the un­taxed in­come size takes on more weight – it will be ap­plied to a larger por­tion of paid taxes and so­cial se­cu­rity pay­ments. As such, in­comes will rise for those earn­ing less than av­er­age. Yes, a part of them will per­haps tran­si­tion from the poverty line to mid­dle class in­comes. How­ever, the re­form is nonethe­less di­rected not at strength­en­ing the mid­dle class, but re­duc­ing poverty. That is to say, the in­ter­val of peo­ple, who could be viewed as mid­dle class is ex­panded, but based on in­come, they re­main dis­con­tented, which is what the re­search shows. Here we would per­haps need a very low So­dra ceil­ing, which would in­crease in­comes for most earn­ing a larger amount, not just earn­ing the least,» Mači­ulis em­pha­sised.

For Šilė­nas, of the Free Mar­ket In­sti­tute, it is wiser to de­fine the mid­dle class not by terms of in­come, but by at­ti­tude to­wards life. «If a per­son works, strives and be­lieves in be­ing pri­mar­ily re­spon­si­ble for his/her own destiny and not some­one else, if that in­di­vid­ual plans own fi­nances, saves up and at least tries to es­cape from the «from pay to pay» cir­cle – such a per­son is con­sid­ered as the mid­dle class or has all the po­ten­tial to be­come it. If an in­di­vid­ual wants to be a master of own fate, in­stead of de­pend­ing on a good will of the gov­ern­ment – he/she has traits of the mid­dle class, even with­out hav­ing earned money,» he ac­cen­tu­ated. Mean­while, Be­sa­girskas un­der­scores that West­ern Euro­pean na­tions give many com­fort­able bonuses to their mid­dle class. «The peo­ple re­ceive cer­tain tax ad­van­tages, for ex­am­ple, which can­not be said of Lithua­nia. The mid­dle- class Western­ers get bet­ter ed­u­ca­tion and health care than our mid­dle class. In Scan­di­navia, for ex­am­ple, the state pays for many ser­vices, in Lithua­nia we have as a rule to pay for ev­ery­thing out of our own pocket. And even do­ing so, we can­not of­ten ex­pect high qual­ity ser­vices, es­pe­cially in health care and ed­u­ca­tion,» he pointed out.

What the gov­ern­ment should do so that the mid­dle class grows in Lithua­nia? «Firstly, no new taxes shall be im­posed and a re­duc­tion of the tax bur­den for those who pay for their own and oth­ers’ pub­lic ser­vices should be en­forced. Se­condly, there shall be no tax­a­tion of sav­ings and in­vest­ment from which a per­son will pay for ser­vices – in­clud­ing ed­u­ca­tion, health­care and re­tire­ment, and thus such in­di­vid­u­als will not need oth­ers to cover their ex­pen­di­tures. Thirdly, peo­ple should be al­lowed to plan their fi­nances. A flex­i­ble tax sched­ule is needed; the tax sys­tem should be con­ve­nient for those who pay taxes rather than those who col­lect them. Fourthly, in terms of us­ing pub­lic ser­vices, those who have greatly con­trib­uted should be treated dif­fer­ently from those who have never paid for any­thing. Paid high con­tri­bu­tions to your pub­lic pen­sion scheme? Your pen­sion is most likely to be big. Paid a lot for pub­lic health in­sur­ance? You should at least get a wider choice than a per­son who did not pay any­thing. This would be both fair and ef­fec­tive,» Free Mar­ket In­sti­tute head Šilė­nas pointed out.

Pan­therMe­dia/SCANPIX

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