Baltic blues

An unusual problem: labour shortages

SINCE the collapse of communism, it is jobs not workers that have been in short supply. But that's changing. Employers in Estonia, Latvia and Lithuania, where growth rates are over 7%, now complain of labour shortages. Last month Elcoteq, the country's best-known foreign investor, started busing 150 workers from Narva in Estonia's hard-up north-east to work at its big mobile-phone plant in the capital, Tallinn. When it opened in the early 1990s, would-be workers from the city's grim suburbs queued overnight to apply.

One reason is a boom in labour-thirsty business: Latvia's construction industry, for example, jumped 16% in the first half of 2005. Membership of the European Union is bringing foreign investment and outsourcing. That stokes manufacturing. Tourism is soaring, meaning more jobs in restaurants and hotels. And wages are growing by around 10% annually, meaning higher spending power and more jobs in shops.

Officially, unemployment is still around 8% in all three countries. But some of the jobless are not easily employable: “Too old, too drunk or too lazy,” says one official unkindly. More importantly, many are working, either illegally at home or elsewhere in the EU. When Latvian teachers recently demonstrated for higher salaries, one placard threatened “see you in Ireland ” - -which, like Britain, has opened its borders to workers from the EU's newest members.

Indeed, in Britain there may be 100,000 workers from the Baltic states (combined population: under 8m). Poland, with nearly 40m people, reckons that 300,000 of its citizens are working in Britain. Polish building firms are complaining of labour shortages - though unemployment is officially 19%.

One solution is better labour mobility: if money can tempt workers across a continent, it can also shift them around at home. But though higher wages please voters, they worry governments. Central and eastern European countries need to nudge inflation still lower if they are to qualify to adopt the euro. Higher labour costs may also threaten competitiveness. A big Lithuanian knitwear firm, Utenos Trikotazas, has shifted production to low-wage Ukraine.

But the most controversial idea is to import extra workers. Poland has tens of thousands of illegal immigrants, chiefly from Ukraine: now the talk is of making it easier for them to work legally. In Latvia, VP Market, a retail chain, wants to hire staff from neighbouring Belarus; other firms are thinking along similar lines. That may make business sense, but in the Baltic states, where many still see Russian migrants as a lasting and unwelcome reminder of Soviet occupation, such notions are regarded with horror.

Labour shortages are proving a difficulty in the three Baltic Republics.