What changes have most affected Lithuania’s position in the IMD World Talent Ranking?

What changes have most affected Lithuania’s position in the IMD World Talent Ranking?

Jonė Kalendienė, head of the Research and Analysis Division at Enterprise Lithuania

After rising for two years in a row, Lithuania fell two places this year in the IMD World Talent Report 2021. In 2021, Lithuania was ranked 29th out of 64 countries. Our neighbour Latvia continued its rise in the ranking this year to reach 30th place, catching up with Lithuania. Meanwhile, Estonia held onto 19th place after making a big leap last year.

The development, cultivation, promotion and attraction of talents in Lithuania is still a problem area. The investment in and development of talent was and is the best-rated area in the index; however, ratings in this area fell sharply in 2021 (dropping from 18th place to 13th), and this impacted the country’s overall ranking. Meanwhile, the situation has improved in the most problematic areas (appeal and readiness), with Lithuania rising to 32nd place in both areas from 35th and 34th places last year, respectively.

The most striking positive trend in the index is the rapid growth of the workforce during the pandemic period. The workforce, which includes both the employed population and the unemployed, shows the potential that could be employed to build the economy. However, the workforce growth, as is typical of Lithuania during periods of economic difficulty, was conditioned by the increased number of unemployed. Due to the unemployment benefits paid and declining family incomes in times of crisis, more people decided to officially return to the labour market. This was especially noticeable among men. So although the improvement of this indicator officially increases Lithuania’s index value, the real situation is unlikely to change much in the near future. On the contrary – we are already seeing a shrinking workforce in 2021 when the unemployed decide to leave the labour market for personal reasons. Thus, this improvement in the sub-index can be considered a one-off, random occurrence.

The most striking negative trend in the index is the increase in the pupil-teacher ratio, which is why Lithuania’s position in the talent competitiveness ranking has fallen. Over the past year, the number of pupils per teacher has increased in both primary and secondary education, and Lithuania’s position in terms of these indicators has fallen from 9th to 28th place and from 3rd to 11th place, respectively. On the one hand, this is due to the declining number of teachers, which is becoming an increasingly acute problem. This was further accentuated by the introduction of distance learning during the pandemic as well as preventive pandemic management measures, which led to an increase in the number of outgoing teachers. On the other hand, the higher number of pupils per teacher is also related to rising salaries among educators.

It is likely that the most striking trends discussed will hold, so in order to improve Lithuania’s positions in the Talent Ranking, it is necessary to look for other sources of growth. Funding for education should be increased in order not to lose existing positions in talent investment and development. Increasing funding for education would not only statistically improve the values of this and other similar indices and Lithuania’s positions in them but, over time, would also lead to qualitative changes in the entire economy. Increased and better-distributed funding for education could also help address skills shortages. This Talent Ranking reveals that employees in Lithuania can only boast of language skills that best meet the needs of the labour market (20th place). Meanwhile, the scores for all other skills are relatively low. Employees’ finance skills are ranked the worst (55th out of 64 countries).

In order to increase Lithuania’s appeal for talents, the growth trends in salaries that we have been observing for several years should be maintained. Not only is the remuneration paid in the private sector important here – the salaries of public sector employees are as well. A more even and long-term increase in wages would also help solve another important problem – the brain drain. According to the Talent Ranking indicators, the outflow of educated and qualified people in Lithuania to other countries severely limits growth in economic competitiveness.

The long-term competitiveness and prosperity of the state depend heavily on the ability and efforts of political authorities to develop, retain and attract talented people. In the global world, countries compete with each other for talent, so it is important to understand what we, Lithuania, look like in this context. And if we want to ensure the country’s competitiveness, we must firmly take off from the current position by addressing systemic errors and reducing deepening problems.

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