The conventional wisdom has it that the Baltic countries have attained high levels of female labour force participation because of their radically neoliberal approach to transition, which was based on low provision of social benefits and high social tolerance for inequality. It has been argued that such ‘ruthless’ post-socialist transformation has forced low skill women to participate in the labour force by taking any available job at low market wages. This paper challenges such a version of history by showing that even women with tertiary education in the Baltics have worked substantially more than in the Central and Eastern European EU member states. Furthermore and even more importantly, I show that the public sector is not at all smaller in the ‘neoliberal’ Baltics than in CEE. On the contrary, I argue that the substantially larger public sector employment in these countries has provided a framework for development of high productivity private sector services through what Thelen (2014) calls embedded liberalisation, i.e. through ‘social investment’ into education and R&D instead of passive support policies. The strong ‘neoliberal’ trajectory of the Baltic states seems to have, in reality, been supported by fiscal policy, i.e. continually expanding public social investment. I also show that current perceptions in the literature stand in stark contrast to my argument because they distinguish between Eastern European welfare states by focusing on social transfers only instead of the wider social sector which includes social services, education and health. Therefore, my analysis shows that public sector employment and social investment played a crucial role in supporting development of high productivity services in the Baltics, which had a significant impact on female employment both as providers and as beneficiaries of public services.
