Abstract.  The paper analyzes the functioning of the newly created labor exchange in post-Soviet Lithuania. It is argued that the labor exchange in post-Soviet Lithuania operates under the conditions of a structural contradiction: welfare services are designed to reintegrate unemployed into the labor force under the conditions of (a) increasing competitiveness of the labor markets and (b) a rapid decline of employment within the Lithuanian economy. As a result, labor redundancy is produced which consists predominantly of low skill/education individuals. Because the economy is unable to generate employment, job searches for this segment of the population are transformed into a highly bureaucratized and ritualized activities directed and supervised by the labor exchange. The purpose of the activities is to impose social order and control over those marginalized from the labor force via the creation of the divisions between deserving and undeserving poor. Foucault’s theory of governmentality is used to examine two types of rituals employed by the labor exchange: individual and group based. The effectiveness of the labor exchange as a mechanism of social control and the impact the labor exchange has on the marginalization of some categories of the unemployed are discussed.