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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 socia
l 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that the new conditions of globalization the European welfare state model is obsolete and that a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 initiat
ive 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 i
nitiatives, 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 co
untries 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 an
alysis 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 grow
ing 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 CS
R 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 th
e
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 s
ocial 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 dev
elopment
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 re
sponsible 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

b
y

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. Ruževiči
us, 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 econom
ic 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 in
dicators of social and public policy influences the development of Corporate
Social Responsibility.

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

of
the
well
-
being, examined in Lithuania and other EU countries, the key s
ocial 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 poli
cy 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
market policies and a strong union wage le
vels 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 m
arket 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 stro
ng.


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 authors

Figure 1.

Income inequality indicators for comparison between different countries


3,9

3,4

5,
5,0

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 model

2. Nordic model

3.
The Mediterranean model

4. Anglo

Saxon
model

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.


Source: made by authors

Figure
2
.

Comparison of the rate of unemployment among different countries models of
welfare and Lithuania.

In the f
igure 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.

8,2

7,0

8,6

4,5

8,2

0,0

2,0

4,0

6,0

8,0

10,0

%

1

2

3

4

Lithuania

countries


1. Rhine earth model


2.
Nordic model

3.
The Mediterranean model

4.
Anglo

Saxon model



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 ensu
ring 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
per
cent.),
w
hile
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.)
a
nd
compared with a share of GDP spent on social security, from Figure
2
, we see th
at 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
0,
0

5,
0

10,
0

15,
0

20,
0

25,
0

30,
0

35,
0

40,
0

Lithuania

%

GDP share

for soc. security

The prevalence of poverty

Rhine earth

model

Nordic


mode
l



The Mediterranean

m
odel

"Anglo


Saxon


model

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 sa
y that

neither

the
poverty problem
nor


unemployment,
does not solve the model.
After reviewing

the indicator
s, it

can be said that the Lithuanian social policy tends to Anglo
-
Saxon model, while taking into
account the effectiveness of social policy in Lit
huania 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 p
eople'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 strat
um

of society.
Re
cent achievements of the Lithuanian
economy
not only reduce
d

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
-
econ
omic 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
-
8
0%).


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 incom
e 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
-
size
d business interests;

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


T
he minimum standard of living index is not linked to the minimum of essential human and
cultural needs.

Lithuania, as in all post
-
c
ommunist 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 emp
loyment 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 soci
al
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 change
s

traditional enmity among the rich
-

the poor situa
tion, 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 ch
oose 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 20
10
, the total investment in human capital relative weight of the state budget
once again declined. Lithuania's fiscal policy is based more on cost alloc
ation 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 prope
rty, 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 obso
lete 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 Europ
e'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 co
untries 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 tak
ing 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 off
icial 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 practi
ce.

Sustainable development

concept

is a key of modern society development concept.
The
aim of a
ny 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 developme
nt. 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 bus
iness environment is not conducive to the development of
CSR.

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