Impact of Industrial Change on Skills: Longitudinal Analysis of Change in Lithuania

Early literature on Transition Economics (Aslund, 1994, Balcerowics, 1995) argued that unleashed market forces should reallocate relatively highly-skilled workers in Central and Eastern Europe (CEE) from unproductive state-owned enterprises to new sectors and firms. This proved to be wrong: transition resulted in premature de-industrialisation (Greskovits, 2014) and reallocation of labour which implied excessive human and economic costs (Campos and Zlabkova, 2001). Macro and mezzo level studies (Lamo, Messina and Wasmer, 2011, Cazes and Nešporová, 2001, Kertesi and Kollo, 2001) on reallocation of labour from declining sectors found that due to highly specific 'inherited' skills a significant share of workers moved out of employment, while the rest witnessed declining returns to 'inherited' skills. However, the adaptation mechanism at the micro level remains unexplored: which skills were transferred from declining industry to new service sectors and to what extent industry change implied de-skilling, re-skilling or upskilling of workers?

The paper seeks to fill this gap by exploring labour market adaptation strategies of former workers of consumer electronics industry in Lithuania in 1990-2008. The industry, once a cornerstone of high-tech manufacturing in Lithuania, disintegrated during the transition shedding approx. 10% of the country’s labour force. Conceptually, the analysis of adaptation trajectories and skill change is based on a conceptual model initially proposed by Lazear (2003). Empirically, the analysis is based on 40 biographical interviews with former employees of the consumer electronic production factories. The interviews delve into work histories and resulted changes in skills used at workplaces.