Lithuanian social policy model influence to the CSR development in Lithuania

Ž. Simanavičienė, Phd, and R. Kovaliov, Phd, and J. Šubonytė MBA,

zaneta.simanaviciene@ktu.lt, Kaunas University of Technology, Kestucio 8-204, LT-44320

Kaunas, LT , 00 370 61436198

Paper for the 26th Conference of the Nordic Sociological Association 2012

Not to be quoted without permission from the authors

Keywords: Corporate social responsibility, state social policy, macroeconomic indicators

Abstract

Lithuania is facing major social development issues. Studies have shown that social problems in Lithuania despite the economic development, is getting worse. Investigations revealed that the main social problems are associated with social differentiation, weak middle class, emigration, lack of social dialogue. Monetary developments in the liberal proponents proclaim that social development should be halted and that the funds for social affairs should be reduced by claiming that the new conditions of globalization the European welfare state model is obsolete and that a strong state social protection is an obstacle to economic competition and economic growth. However, neither economists nor sociologists have not yet been clearly demonstrated the negative social impact in continental Europe's competitiveness and development. Moreover, socially-oriented northern European countries in modern economic competition remains as one of the leaders in the Western world, and growing social and public health measures value in some southern European countries are in parallel with the rapid economic growth. Some scholars argue that CSR is a business incentive to support the implementation of the initiative and the whole is not related to the policy, but some researchers points out that there is a link between the state social policy and the prevalence of CSR in different countries. A more socially-oriented economic policy reduces the CSR-based business initiatives, the value and benefits. Therefore, the aim of the article is to show how the main macroeconomic indicators of social and public policy influences the development of corporate social responsibility. The study dealt with Lithuania and other EU countries key social indicators (unemployment, employment rate, poverty, income inequality index). The study dealt with Lithuania and other EU countries, the key social indicators (unemployment, employment rate, poverty, and income inequality index). This analysis was to determine the Lithuanian social policy model positive or negative influence on the development of CSR. The examination of the main macroeconomic indicators influence to the CSR development indicators have been used for the statistical methods of data analysis, expert evaluation and population survey. Studies have shown that more attention should be given to health, social cohesion and social protection systems. They should be given for and regional policy in Lithuania, which is due to the growing regional disparities become increasingly relevant. The macro-economic business environment in particular is formed by public policy, and it in turn reflects the key macroeconomic indicators, which are also strongly influenced by business, as well as CSR and development opportunities in the country. Efficient and friendly national policies aimed at promoting CSR, has a significant impact on CSR development. Also, not only for the direct promotion of CSR policies implemented, but also on other government macroeconomic policies create an environment conducive favorable or not to the CSR development. The study was made during Lithuania's main welfare effect model analysis of the development of CSR: Lithuania macro environment is not the business plans for the development of CSR.

Background

The aim of the article is to show how the main macroeconomic indicators of social and

public policy influences the development of corporate social responsibility. The study dealt with

Lithuania and other EU countries key social indicators (unemployment, employment rate,

poverty, income inequality index). The study dealt with Lithuania and other EU countries, the

key social indicators (unemployment, employment rate, poverty, and income inequality index).

This analysis was to determine the Lithuanian social policy model positive or negative influence

on the development of CSR.

While the current global crisis has raised new challenges for business, but socially

responsible business concept lost relevance in the current situation. It is essential to achieve, that

next to the financial goals, companies more increasingly turn back to the person, take care of the

local community, a safe, clean environment and the welfare of society as a whole. After all, the

environment and business are closely related, and long-term business success depends on how

companies can integrate harmoniously into the environment and social attitudes of society to feel

and respond to community expectations. The need to ensure long-term harmonious development

of economy and society is a joint government, civil society and business purpose. Therefore, the

current economic crisis even got underway, in the business sphere is more talk about business

ethics, corporate social responsibility, and socially responsible business development.

Review and Context

Currently abroad, especially in the EU, scholars attaches great importance to CSR

development factors and their positive impact on the society (Christmann, 2000; Berens et.al.,

2005; Berner, 2005; Kotler, Lee, 2004; Gruca, Rego, 2005, Ubius R., 2012). There are also a

number of studies for the development of CSR evaluation using quantitative and qualitative

indicators, systems, and interviews with users (Godfrey, 2005; Mittal et.al., 2005; Ruby, Grewal,

2004; Roberts, Dowling, 2002 et.al.). Although in Lithuania is clearly visible CSR training,

educational and propagandistic nature, however, systematic research in this field in Lithuania is

not done. A few works published on CSR issues in Lithuania only by a small group of authors:

N. Vasiljevienė, A. Vasiljevas, 2005; R. Pučėtaitė, 2003; V. Pruskus, 2003; S. Žirgutienė, 2005;

Z. Monkevičienė and E. Rybakovas,2003; D. Vyšniauskienė and V. Kundrotas, 1999; A. Bosas,

2000; V. Juščius, 2007, 2008; J. Ruževičius, 2007, R. Virvilaite, 2011; A. Valackiene, 2011; R.

Kovaliov, 2010; A. Kilijoniene, 2009, 2010; D. Streimikiene, 2009 and other.

Lithuania is facing major social development issues. Studies have shown that social

problems in Lithuania despite the economic development, is getting worse. Investigations

revealed that the main social problems are associated with social differentiation, weak middle

class, emigration, lack of social dialogue. Therefore, Article endpoint is to show how the main

macroeconomic indicators of social and public policy influences the development of Corporate

Social Responsibility.

To assign a Lithuanian social policy model to one of the types of examined models of the

well-being, examined in Lithuania and other EU countries, the key social indicators

(unemployment, poverty, income inequality), reflecting the effectiveness of social policy and its

main features, such as a share of GDP for social protection and so on and compared to other EU

countries assigned to the relevant social policy models, indicators. Based on this analysis,

Lithuanian Social Policy Model positive or negative influence on the development of CSR was

set. The EU distinguishes between these types of models of welfare:

• Nordic model (Denmark, Finland, Sweden and the Netherlands). In these countries,

public spending on social needs are the most versatile and also guaranteed well-being of

every citizen. The labor market is relatively little regulated, but there are active labor

3,93,4

5,95,0 4,8

0,0

1,0

2,0

3,0

4,0

5,0

6,0

Times

1 2 3 4 Lithuania

Wellfare models

1. Rhine earth model2. Nordic model3. The Mediterranean model4. Anglo–Saxon model

market policies and a strong union wage levels ensures compliance with the work.

• Anglo-Saxon model (Ireland, UK) provides a relatively generous social assistance to

the redistribution of income, most of which goes to support unemployed people of

working age. Trade unions are weak and the labor market is little regulated.

• Rhine-earth model (Austria, Belgium, France, Germany, Luxembourg), mainly

based on social assistance for the unemployed, and pensions. The labor market is

regulated by more than the Nordic countries, while trade unions are strong.

• Model the Mediterranean (Greece, Italy, Portugal, and Spain), based on public

spending and large part for pensioners and small allowance for unemployed. The labor

market is heavily regulated to ensure a low level of unemployment and generous support

for early retirement to reduce the number of job seekers.

Source: made by authorsFigure 1. Income inequality indicators for comparison between different countries

Figure 1 shows the rate of unemployment averages of individual well-being models of

countries groups, and Lithuania in 2010, to establish which welfare model is the nearest for

Lithuania.

8,27,0 8,6

4,5

8,2

0,0

2,0

4,0

6,0

8,0

10,0

%

1 2 3 4 Lithuania

countries1. Rhine earth model

2. Nordic model3. The Mediterranean model4. Anglo–Saxon model

0,0

5,0

10,015,020,025,030,035,040,0

Lithuania

%

GDP share for soc. security The prevalence of poverty

Rhine earthmodel

Nordic model

The Mediterraneanmodel

"Anglo–Saxon

model

Source: made by authors

Figure 2. Comparison of the rate of unemployment among different countries models of

welfare and Lithuania.

In the figure 2 provide the prevalence of poverty and the share of GDP for social

protection indicators for comparison of individual countries welfare models and Lithuania in

2010.

Source: made by authors

Figure 3. Poverty prevalence and share of GDP allocated to social security indicators

comparison between different countries models of welfare and Lithuania.

Summarizing the basic welfare indicators reflecting the model, we can say that the basic

objective of ensuring social welfare to the population (to eradicate poverty and reduce

unemployment) follows the Nordic model. In these countries, poverty rates are the lowest, while

the share of GDP allocated to social security, is the largest (about 30 percent.), while the

unemployment rate is relatively low. Anglo-Saxon model also provides a low level of

unemployment, but the problem of poverty remains relatively high (about 20 percent.) and

compared with a share of GDP spent on social security, from Figure 2, we see that there are

relatively small. Therefore, we can say that this model doesn’t solve poverty problem. Countries

applying Rhine earth model to decide problems of poverty, paying a significant proportion of the

GDP share of social protection, but the unemployment rate in these countries is quite high.

Summarized the indicators of countries which apply Mediterranean model, we see that there are

significant problems of poverty and unemployment. Therefore, we can say that neither the

poverty problem nor unemployment, does not solve the model. After reviewing the indicators, it

can be said that the Lithuanian social policy tends to Anglo-Saxon model, while taking into

account the effectiveness of social policy in Lithuania and Lithuania-generated model of the

welfare impact on the development of CSR, it can be stated that Lithuania has not yet developed

a good model for an EU-wide models.

Objective

Changes in Lithuanian economy increase the segmentation of society, contrary to middle-

class formation assumptions. One of the most serious problems of social development in

Lithuania is a stable growth of economic polarization and inequality. It affects people's social

behavior, and eventually becoming the country's economic growth disincentives. Therefore,

effective development of a coherent public policy-oriented social object should be not only the

lower, marginal, but also middle stratum of society. Recent achievements of the Lithuanian

economy not only reduced the level of differentiation of life, but it increased even more. An

essential part of Lithuanian society (65%) during the investigated period was the residents

belonging to the lowest socio-economic and intermediate layer. Their living standard is below

the average national level. The middle class in Lithuania has a lack of massification – residents

belonging to this stratum on investigated period were below 25% (Developed Market countries -

60-80%).

Methodology

The examination of the main macroeconomic indicators influence to the CSR

development indicators have been used for the statistical methods of data analysis, expert

evaluation and population survey.

Studies have shown that more attention should be given to health, social cohesion and

social protection systems. They should be given for and regional policy in Lithuania, which is

due to the growing regional disparities become increasingly relevant.

Results

Resulted the socio-economic conditions do not promote the formation of the middle

class, because:

• No social, economic and political preconditions for development of the middle class has been

established, middle class is not formed as a public image of stability;

• The process of privatization and economic policies created favorable conditions for formation

of a small wealthy sector of society. High tax burden has weakened the welfare of the citizens

with lower and middle incomes.

• Market reforms unbalanced income and expenditure balance. The result - a low average income

levels, a large polarization of income and expenditure between the different population groups;

• Lithuanian economic policy is focused, in particular, the large rather than small and medium-

sized business interests;

• Education and professional career in Lithuania does not guarantee the material and social

status;

• The minimum standard of living index is not linked to the minimum of essential human and

cultural needs.

Lithuania, as in all post-communist countries, the formation of a true middle layer is

taking place, however, according to EU criteria, it represents only a small part, and the middle

class is in a state of development. The current small middle layer does not provide the social and

political stability, economic growth, so it is necessary to allow a layer to create and grow.

Analyzing the polarization of society and the ways to ensure social stability, the special attention

should be given to employment and labor relations indicators, which shows problems in this

area. It is necessary to draw attention to the negative development of the Lithuanian social

factors that increase the polarization of society and a threat to social stability. Major social

problems associated with weak middle class, lack of employment and wages, lack of social

dialogue. An important factor in the economy is the income of individuals. Increasing the overall

welfare changes traditional enmity among the rich - the poor situation, because declining income

disparities decrease the tension between the different incomes of individuals.

Despite the many positive achievements in Lithuania so far, neither the formation of

distinct state features of the welfare than the effort to choose a rational social policy model is

almost nonexistent. After the restoration of statehood, Lithuania was easy enough to consistently

go to any European or his neighbor's welfare model. However, the country created a free, rather

than the social market economy. Lithuania from the European welfare model staves off the fact

that most of the indicators describing the development of human resources do not have such a

dynamic development of macroeconomic indicators, they lag behind and develop extensively.

Social expenditure in the total cost increases more slowly compared with the costs in

other areas. In 2010, the total investment in human capital relative weight of the state budget

once again declined. Lithuania's fiscal policy is based more on cost allocation priority, rather

than the revenue-raising levers. When considering the budget, it is not followed by strategic

objectives (priorities), but by the appropriation managers' needs. For the state financial

performance, it is necessary to increase public participation in planning the state budget. The

highest tax burden falls on consumption and labor, while the land, capital and real estate taxes

are low. Therefore, in future, it is appropriate to reduce the tax burden on labor income - to move

it to property, land, natural resources taxation. In the European Union, Lithuania and Romania

through the budget redistributes least funds and devote the minimum on social security and other

welfare services and welfare sector reforms. A small state income level is a problem with

negative social and economic consequences. The problem is not only a low redistribution of

public funds through the budget, but low efficiency. Public welfare depends not only on the level

of income but also on how the income is used.

Monetary liberal state proponents of evolution proclaim that social development should

be halted and that the funds for social affairs are to be reduced. They say that by the new

European conditions of globalization the European welfare state model is obsolete and that a

strong state social protection is an obstacle to economic competition and economic growth.

However, neither economists nor sociologists have not yet been clearly and unequivocally

demonstrated the negative social impact in continental Europe's competitiveness and

development. Moreover, socially-oriented northern European countries in modern economic

competition remains as one of the leaders in the Western world, and growing social and public

health measures value in some southern European countries are in parallel with the rapid

economic growth.

Conclusions

Social problems in Lithuania, despite the economic development, are getting worse.

Economy achievements do not undermine the differences of living standards. Lithuanian income

changes taking place in the process of increasing segmentation of society and the polarization. It

is necessary to draw attention to the negative development of the Lithuanian social factors that

increase the polarization of society and a threat to social stability.

Major social problems are associated with social differentiation, weak middle class,

emigration, lack of social dialogue. More attention should be given to health, social cohesion and

social protection systems. It should be assigned to them also regional policy, which in Lithuania

becomes increasingly relevant due to the growing regional disparities.

The welfare state policies should be focused not only on passive benefits and services,

but also the provision of long-term social investment. Lithuanian official documents of the

strategic planning focuses on the compatibility problem, and the stated strategic objectives,

priorities are not effectively applied in practice.

The declared social welfare state of Lithuania development need much greater clarity: to

what welfare state model we focus and what measures do we apply. Public development

objectives and priorities should not only be identified and formally recognized in the official

documents and strategies, but it is necessary to implement them in practice.

Sustainable development concept is a key of modern society development concept. The

aim of any economic activity is to increase people's welfare and the prudent use of natural

resources and natural environment, is necessary for the preservation of human existence and

development. Business and the environment are closely related, thus ensuring sustainable

development, the main role goes to companies - economic growth, job creation and innovation

for a driving force. Business must be socially responsible business, carried out in collaboration

with various stakeholders who can justify the public's expectations and hopes for greater stability

and competitiveness and contribute to the overall goal - sustainable development. Therefore, a

voluntary environmental and social enterprise is crucial to sustainable development principles in

the society factor.

Lithuania's main welfare effect model analysis of the development of CSR confirms the

hypothesis: in Lithuania macro business environment is not conducive to the development of

CSR.

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