Thursday, 30 July 2015

What's better - unemployment or a low-paid job?

The big debate about low pay, job insecurity and inequality rumbles on in Poland as it does in the UK, where Genius George Osborne has outflanked the left by increasing the minimum wage and cutting in-work tax benefits. By doing so, at a stroke he cut what was effectively a subsidy, paid by the taxpayer, to companies employing staff on a minimum wage, expecting tax credits to bring pay up to what could be considered a living wage. (He also increased the attractiveness of the UK as a destination for Polish migrant workers. 42.50 złotys as a minimum wage, anyone?).

Here in Poland, the issue of 'junk contracts' (umowy śmieczowe) has become a top economic issue for politicians - it turns out that over 27% of all Poles working have one of these (me included), making Poland the most flexible labour market in the whole of the EU.

For me, an umowa o dzieło is the preferred way of working. This type of freelance contract is based on the notion of a dzieło, or a work as intellectual property. I write, I edit, I translate, I prepare presentations, I'm a journalist by training and by career experience, and so I've no qualms about being on umowa o dzieło. I work for my zleceniodawca (lit. commission-giver) where I choose and when I choose. Plus, an umowa o dzieło is better for me than setting up as a sole trader (jednoosobowa działalność gospodarcza) because having to run around each month to satisfy the various organs of state with little bits of paper fills me with dread. An umowa o dzieło gives me the flexibility to take on other zlecenia (commissions); typically I have four or more in any tax year. This makes me a proper freelancer - this is not about me trying to escape the clutches of Poland's social security institution ZUS (in any case I've been paying into Britain's National Insurance since 1974). Nor is it about my zleceniodawca avoiding employer's ZUS.

But for young people - and in particular for young women of childbearing age, any type of freelance contract - be it umowa o dzieło or umowa zlecenie, the more usual type of 'junk contract' - is a big problem. In particular, it holds them back from taking on a mortgage loan, and getting a foot on the property ladder. Junk contracts offer zero long-term job security.

Why is this important? Politically, because a property-owning democracy is less likely to vote for populist whackos, having a big stake in the economy. Look at how Margaret Thatcher and John Major won four elections in a row by massively increasing home ownership (and indeed share ownership) in the UK. And their Labour successors didn't dare revert to old-fashioned socialism.

Poland's labour market is full of anomalies. The latest headline unemployment rate for Poland (end-June 2015) is 10.3%. This is the percentage of people of working age registered as unemployed. In Warsaw it is 3.9%, in Szydłowiec, notorious unemployment capital of Poland for many years, just 75 miles south of Warsaw, it's currently 32.1%. However, Eurostat, the EU's statistical office, gauges unemployment not by those signed on, but by those actively seeking work. By this measure, unemployment in Poland is 7.8%. Suggesting that one in four of Poland's registered unemployed are not actually looking for work, being gainfully employed in the grey economy (szara strefa).

According to Eurostat, the UK's unemployment rate is 5.4%, while Britain's Office of National Statistics says that it is 5.6%. This suggests a rather smaller grey economy than Poland's.

Why do so many more Polish employers choose to pay cash-in-hand? It's less about saving money, more about red tape. Poland is not an easy country in which to employ people. Even if the relative costs of employing people are much lower than in western Europe, the procedures and monthly reporting is more burdensome to employers, in particular to micro- and small enterprises.

If the Polish government tightens the rules on the 'junk contracts', such as awarding public tenders only to companies that employ staff on regular umowy o prace, it will nudge up wages, making Poland less competitive regionally. It will also slow down the fall in unemployment, but it will put more cash (taxed cash at that) into the pockets of workers. This money will drive up consumer consumption, and will make young people feel more confident about their future - which means more will buy property, and more will have babies.

Should a labour market be flexible or inflexible? Just compare France and the UK. In Britain, it's hire and fire, like in the US. Result - low unemployment, and low wages for the less well off - while the managerial class and the business owners rake it in. In France, according to Eurostat, 10.3% of the workforce is looking for a job. That's nearly double the UK's rate. Among the young, it's even worse. The very last thing a French employer wants to do is to take on another employee. They're difficult to get rid of should they prove to be poor workers. So French employers invest in technology - robots -and as a result productivity in French manufacturing is higher than in the UK's. Great for France's manufacturers, not so good in its service sector.

So my tip for Poland's policy makers is as follows: push up the minimum wage, but at the same time make it easier to hire and fire. Force employers to pay more, but reduce the administrative burden on them of employing people to an absolute minimum. Slash the red tape. Then Poland's micro-enterprises (1-9 employees) might suddenly find they can take on workers without needing yet another person to administer them. And Poland's small firms (10-49 employees) - which employ a smaller percentage of the nation's workforce than the small-firms sector or any other EU member state - will grow into medium-sized businesses (50-250 employees).

Better paid Poles in more secure jobs will go out and spend money on things they need to get on in life - in particular property. They'll buy furniture and baby food. They'll see the sense of the long hours worked. They'll stoke the growth of Poland's GDP.

Like Britain, Poland needs to redress the balance between private and public sector. In Britain, George Osborne made it clear than employers (in particular of low-skilled workers) have had it too good for too long at the taxpayers' expense. But in Poland, it's been the public administration that has had it too good for too long at the taxpayers' expense. Too many paper-pushers ensuring that petty regulations are monitored, adding no value to Poland's economy. Get them off the employers' back, and at the same time get the employers to pay their workers more - especially those at the lowest rates of pay.

George Osborne cut over half a million public sector jobs in the UK since 2010. When he announced his plans to do so, the left wailed that the economy would collapse. Yet what actually happened could not have been predicted even by the most gung-ho free-market enthusiasts - more than two million private-sector jobs were created. More people work in Britain than ever before. But then inequality in Britain is higher than it's been since the end of WWII.

As I go around companies in Poland I see just how deeply ingrained the concept of Kaizen - bottom-up continuous improvement is in those that are thriving. Yet the public sector is unable and unwilling to accept the challenge of seeing the need to constantly improve its processes to ensure better service to the taxpayer. Once this cultural problem is addressed, Poland's determination will see to the rest.

This time last year:
A return to Liverpool

This time three years ago:
Too good to last (anyone remember OLT Express airline?)

This time four years ago:
Poland's Baltic coast as a holiday destination

This time six years ago:
The Warsaw they fought and died for?

This time eight years ago:
Floods, rainbows and hope

Tuesday, 28 July 2015

Warsaw to Radom railway works start soon (to Piaseczno at least)

It's been a long time coming - though the contract with the contractor has just been signed and work's due to start within a month - there've been many false dawns since the plans for modernising Line 8 (Warsaw-Radom) were first published over five years ago. It was meant to have been ready this year (in April 2010 I wrote these words: "When will this all happen? According to the PLK website, "work will ... be completed in 2015"). As it happens, if we're lucky, work will start this year.

Today's Gazeta Stołeczna carries the story of the plans. There's good news for those living in Warsaw's southern suburbs and exurbs - by the spring of 2017, the railway will have been modernised all the way from W-wa Okęcie to Czachówek (27km). The SKM (Szybka Kolej Miejska - the railway line operated by the City of Warsaw) will then run to Piaseczno, as it does today to exurbs like Sulejówek Miłosna, Otwock, Pruszków or Wieliszew.

Not only should this double the number of trains between W-wa Jeziorki to town from two to four in peak hours and from one to two outside of them, but the track improvements will mean that the trains will be able to speed up to 160km/h from the 60 to 80km/h they are restricted to at the moment.

To facilitate this, the island platforms currently in use at W-wa Okęcie, W-wa Dawidy, W-wa Jeziorki and Nowa Iwiczna will be removed, the tracks straightened to run parallel between two platforms, one on either side of the two tracks. The existence of the coal line between Okęcie and Nowa Iwiczna will make things more difficult, as the 'up' platform (to town) will have to nestle between the coal train line and the 'up' main line.

Below: looking towards W-wa Jeziorki station. The 'up' line swings round to the left to skirt the island platform, slowing down trains.

And more good news - the level crossing at W-wa Jeziorki will be replaced by a viaduct for ul. Karczunkowska over the railway line. However, no viaduct carrying ul. Baletowa is now planned (the press release issued by the Ministry of Infrastructure and Development mentioned only the one at Jeziorki).

Bad news further down the line - no additional stations are planned - neither for the Cargo Terminal/W-wa Poleczki where new logistics and office developments are bringing in thousands of new workers to the area, nor for Mysiadło with its new housing developments  and no public transport links nor for Stara Iwiczna and Piaseczno's northern edge. The Park+Ride planned for W-wa Jeziorki is on the cards (built by Warsaw city hall), as is a massive car park for 400 cars at Piaseczno station, currently in remont. Piaseczno station is being redeveloped by the local authority there.

There are still question marks over where the SKM trains from Piaseczno via W-wa Jeziorki will end up going in town. They could go via W-wa  Śródmieście, as Koleje Mazowieckie trains from Piaseczno do today; they could terminate at W-wa Główny - currently the site of the Polish national railway museum, or they could swing round before W-wa Zachodnia and circumnavigate central Warsaw via Wola and W-wa Gdańska, crossing Most Gdański bridge before reaching W-wa Zoo then swinging north towards Legionowo.

All this work has been on the cards since 2007, and over that time the condition of the track has continually degraded. I mentioned the state of the track-bed between W-wa Dawidy and W-wa Jeziorki before; only a minority of the sleepers are in sound condition. Many are rotted or burnt. Below: the middle sleeper is in effect useless, being unconnected to the rail in any way.

For folk living south of Czachówek, the news is not good; the tenders to modernise the line from Czachówek from Warka and from Warka to Radom will not be announced until next summer. The line from Warka - including the river crossing over the Pilica - is currently single-track and will need to be to doubled up - which means a new bridge. We read today that Radom and Warsaw will not be linked by modern railway until 2020 at the very earliest.

Until then, there will be several years of delays caused by works on the line, causing passengers to go by road. This blog will be following developments as they happen.

This time two years ago:
In praise of the (Polish-built) Fiat 500 

This time three years ago:
Llanbedrog Beach and a farewell to North Wales

This time four years ago:
To the Polish seaside, by night train

This time five years ago:
Accounting for the past - 20 years on from PRL's fall

This time six years ago:
An introduction to fine British cheefef

This time eight years ago:
Over the Peaks by bus

Monday, 27 July 2015

Reducing inequality in Polish society

This post is written as a reply to the fundamental questions posed by student SGH in his comments to my post from last week about populist economic policies.

We humans are status-obsessed, and whatever economic system is in place, there will always, but always, be those people who'll go flat out to use (indeed even abuse) that system to gain a higher place for themselves in the pecking order.

This was as visible in Poland under communism as it is today in a free-market democracy. The difference was that under communism, the average Kowalski had, say, 20% of what the average Briton then possessed, while the communist apparatchik had 40%; today the average Kowalski now owns 70% of the wealth possessed by the average Brit, while those who've done well from Poland's economic transformation are now several time wealthier than the average Brit.

Say what you like about communism, but it did actually produce a more egalitarian society. And while the bonzowie didn't have to stand in queues to buy bread or shop for meat at stores with nothing but Japanese sausages (nagye haki), they were poor in comparison with the exploited capitalist workers of the Western World. Both relatively and absolutely.

But in our hierarchy-obsessed societies - from North Korea to the USA, what's more important than just having is having more than the next person.

Western Europe has thankfully moved away from abject, life-threatening poverty. There is a safety net; the only question - facing governments in all democratic countries - is how comfortable a safety net can be afforded from tax income without creating unsustainable debt.

And so - to student SGH's point:
"I would argue this paragraph could more revolve around the question whether the system or the people are to blame. Your standpoint depends on where you think a human's fate lies. Either you believe an individual's prosperity lies in their hands, or you believe it is that state that should secure the framework for an individual's success."
The difference between Poland under communism and Poland today shows where that balance lies. The system can either hold everyone back (as it did between 1945 and 1989) or let the harder-working element of the population thrive (as it has done since 1990). And since 1990, the less hard-working feel hard done by. "My neighbour now has a Mercedes. He must be thieving/cheating." No possibility that the neighbour works a 10-hour day and six-day week.

Back in 1989, Poland was, along with Japan, the most equal society on earth, using the Gini coefficient that compares income distribution between the richest and poorest in any society. It's just that Poland was a lower-income country then, while Japan was near the top of the trajectory of its post-war economic miracle.

Is everyone being equally poor better than some people being inordinately richer than the masses? Populist politicians would like the masses to think that. But this is merely their answer (as driven, capable human beings) to the question of how they should find themselves a higher place in the pecking order. "Vote for me, I'll reduce the distance between you and the rich man" is a beguiling message. "In return you give me power and social status".

Yet as we have seen the world over these past 100 years, populist redistributionism makes economies shrink. Wealth-creators, driven by vision, passion, courage, sheer hard work - and big egos - will go elsewhere to realise themselves. In a free-market society, they do this by creating wealth, rather than rising to the top of the heap some other way. Imagine a Bill Gates or Steve Jobs born, educated and trapped in 1980s USSR. How would they have got on? My guess is they would have upped sticks and left rather than striven to become local party secretaries. Should the business environment become too hostile to the wealth-creators, they will move to where it is more benign. them.

So the price Poland has to pay for becoming a materially wealthier society is greater inequality. The poorer quintile's income doubles, but the richest quintile's income rises twenty-fold. The poor are no longer starving - they have access to the staples that keep body and soul together - but they are aware of the fact that they are not living in villas nor driving Porsche Cayennes nor holidaying in the Caribbean.

A system in which the successful are allowed to succeed, unhindered by the politics of envy, needs to be tempered by mechanisms that prevent the poor from falling too far behind. Scandinavia is a shining example. Scandinavian society works, and produces happier people; the state sector is efficient, so citizens don't mind paying high taxes, because they can see their money being put to good use. Tax money burnt on an inefficient public administration creates resentment among taxpayers.

Inequality is rising across the developed world; as Poland becomes a richer nation, so its richer folk become richer still, as we are seeing happening in America and Britain, and as Thomas Piketty has made a name writing about.

What policy responses can be used to slow the growth of unsustainable inequality? The less-driven should be helped by improved access to education - at all levels, by more nuanced macroeconomic tools, by adverts for glittery things on the TV and on billboards. Yet we live in an age of deficit and debt, and governments - having overspent in the past now have to focus on reigniting economic growth and getting the budget out of the red.

I am convinced that as a whole, the Polish population is more driven than the comfy societies of Western Europe, where prosperity (much of it inherited) is a given for the majority. Poland is still a country na dorobku ('on the make', 'working one's way up'). Poland: Determination.

The system does need continual reform. Continual, bottom-up improvement, Toyota-style, kaizen. Kicking out the jams. Bureaucracy that adds no value, nor protects value, must be eliminated. Identifying the friction that makes the business or doing business more complicated than it should be.

But while wealth-creation in Poland is still being stultified by unnecessary friction created by an inefficient state - what should happen to that wealth once it has been created? Should it be taken away from the wealth-creator and redistributed to all the clients who vote for a redistributionist economic model?

Here we see the responsibility of those who have made it to give something back to society. Once they've got bored of swanking around town in the latest four-wheel drive limo and holidaying in the most exotic locations, once their villas no longer give them the satisfaction of showing them off to impress acquaintances - then they realise that engagement in philanthropic activities places them even higher up the pecking order. As we get richer we owe an increasing duty of care towards those unable to compete in the free market. Whether the rich chose to support educational or healthcare charities (from the Bill and Melinda Gates Foundation going back to Andrew Carnegie), American billionaires have pointed the way - use the fruits of what they have earned to help humanity along on its road from barbarism towards civilisation.

If the rich want to avoid the hubris of populist revolution (cf. France, Russia, China), they will need to see - in their own self-interest - the need to share their blessings with the less well-off. Soft power. Helping other human beings realise the most of their potential. The rich - by way of enlightened self-interest - will need to work out how to modify the current political-economic system - the best mankind has ever had - to make it more sustainable. Otherwise the politics of envy might yet come to destroy it.

This time two years ago:
Llanbedrog beach

This time four years ago:
The Accursed Soldiers - a short story

This time five years ago:
Driving impressions of the Toyota Yaris
[The car continues to be totally, 100% faultless five years on.]

This time seven years ago:
Poland's dry summer

This time eight years ago:
The UK's wettest summer ever

Saturday, 25 July 2015

Defining my Sublime Aesthetic

Sunset, crushed velvet twilight in my City of Dreams.

Magic hour; shortly after the sun has passed below the horizon.

Neon lights reflecting off wet asphalt. The feel of the sun and wind on the face. Iridescence. Moonglow. The Cosmos. Stars sprinkled on a midnight blue-black sky. Aurora Borealis. Silver aircraft illuminated by sunlight, high up in the stratosphere. That numinous feeling associated with the glory of being alive.

The Road. Wide open plains or prairies, the desert under a sapphire sky, the light polarised by aviator's sunglasses.

Below the sky's canopy, rain forest echoing rich life. Dense, lush, exotic, saturated colours. Darts a dragonfly, unchanged from the Carboniferous era, 300 million years ago. Like the shark, a great evolutionary triumph.

And lobefins - air-breathing fish making their way out of the oceans to evolve into land animals. Trilobites scuttling about beneath giant horsetail ferns that tower 30m over primeval swamps, half-way from Zero to One. What was once, will be. The infinite - immortality - atavism. Time past morphing seamlessly into the future. Palm fronds, Palm Hills, Iridium Springs... 1950s America.

The 1950s - mid-Century modern architecture from the USA, influenced by Scandinavian modernism. Flat roofs, windows stretching from floor to ceiling. Industrial infrastructure shimmering in the heat - steel pipes, radio masts, railway lines converging into the distance.

The Radio - tuning in through the crackly ether to catch pedal steel guitar and station idents. Heavenly doo-wop harmonies, crooning saxophone and carefully chosen notes from an upright bass.

Waves lapping endlessly upon the shore on some faraway beach. Footsteps in slow motion; sunlight and saltwater on the skin; the Oceanic Feeling. Metaphysical sensations. The transience of blossom, the earliest intimations of impending autumn.

An aesthetic that connects the conscious observer with the Eternal, catching those moments of transcendence from the here-and-how.

This is but a sketch of a draft of a prototype of an aesthetic manifesto - a direction in which I am driven to explore. Where to go, what to experience. But most important - to define further. I have a Quest.
Photograph of 1930s aeroplane - Nick Morris 
Infra-red photograph of railway line - Rysiek Szydło
This time two years ago:
Porth Ceiriad on the Llyn Peninsula

This time four years ago:
Jeziorki sunset, late July

This time seven years ago:
Jeziorki sunset, after the storm

This time eight years ago:
Rural suburbias - the ideal place to live?

Friday, 24 July 2015

Poland in ruins

A big thank you to Student SGH for pointing me towards Polska w Ruinie, a Facebook site mocking the assertion by opposition politicians that Poland is in ruins. Poland is clearly not in ruins.

As I got off the bus this morning and boarded a town-bound train at W-wa Okęcie, gazing down at all the brand-new, fit-for-purpose infrastructure from the pedestrian walkway, it occurred to me that for all my moaning and complaining about the tardiness of the S2/S79 construction works, things are finally coming right for Poland.

I remember when this was all fields...

...back in 2009. Polska w ruinie.
I looked at the cranes on the horizon, all the way from Wola via Śródmieście all the way down south towards Mokotów and Służewiec. This isn't EU hand-out money - these are private investors expressing their faith that Poland's economy will continue to grow at a handsome clip.

It would be a shame to flush all this down the toilet by voting for an ideologically-motivated party with little interest in economic matters, willing to sacrifice the economic gains of the past quarter-century out of political spite. [I recall talking to the vice-president of a state-owned enterprise who'd been installed by PiS after its 2005 election victory. I asked about the tasks ahead of him. He said "I've got a couple of years to get rid of all the communists working here". Commercial goals were of little interest to him.]

Populist politicians the world over tend to convince those who are less determined, less hard-working, weaker of will, that it wasn't their fault they preferred to goof off rather than study for their exams, or that their work-rate was lower than that of their more successful colleagues, or that they preferred to spend money on immediate pleasures rather than save. No, it's the fault of a global conspiracy of evil people to do them down. "Vote for me, and I'll take money from the rich man in taxes, and give it to you in benefits." And this process has the side-effect of totally screwing up the economy. Just look at Venezuela. Politically motivated, economically hapless. And look at Ukraine - richer than Poland in 1990 in terms of GDP per capita - now a basket case because of 25 years of bad government. And Argentina - in 1900, the world's fourth-richest economy, today merely an emerging economy. Bad macroeconomic management by elected governments.

Poland has done well, yet it's economic success has tended to be patchy. Poland's big cities have done well, Warsaw the best. Take a look at this map of Europe's regions - here. (A big thank you to Paddisław Wędrowniczek for digging this one out.) This picture dates back to 2011. Since then, Poland's economy continued to grow faster than the rest of the EU, so the picture showing the catch-up process is even more pronounced when the data is extended up to the second quarter of 2015.

So back in 2011, Warsaw's residents are better off than people living in most UK regions - only Inner London, Berkshire, Buckinghamshire, Milton Keynes, Edinburgh and Aberdeen are better off. (This is in terms of purchasing power - living costs are much lower in Warsaw, in particular housing, public transport and education.) Poznań and Wrocław were looking good too - and we can see the effect that KGHM, Poland's copper-mining powerhouse, has had on the Legnicko-Głogowski region.

The current Polish government has had a lot of good luck, it has made some good macroeconomic decisions, it has largely avoided taking bad ones, but it has failed to drive the reform process at the pace required to spread the fruits of a quarter-century of economic boom more evenly. This complacency now threatens the government in the forthcoming parliamentary elections, set for Sunday 25 October.

The idea that a 'right-wing' government will redistribute wealth by taxing retailers (all of them - foreign or Polish-owned, selling food, clothes, furniture etc.) on turnover rather than on profits is laughable. It will only serve to decrease wealth and lead to job losses. In Hungary, ideologically motivated tampering with macroeconomic issues resulted in the closure of shops on a Sunday. The result - the destruction of 3,000 jobs since March. A Sunday-trading ban would hit Poland - a much larger economy - even harder.

Messing about with the macroeconomic levers sends all the wrong signals to foreign investors, who - like it or not - create vast numbers of jobs and put billions of zlotys into Poles' wallets. Silly policies such as 're-polonising the banks', arbitrary changes in the way certain sectors are taxed, bringing down the retirement age or closing shops on Sundays are all messages to foreign investors - "don't bother coming here to create jobs".

I am worried that at the elections, ideology will take the upper hand over economic pragmatism, that an ill-judged assault on 'foreign capital', 'exploiters of the ordinary Pole', will actually have the opposite of the intended effect - due to the economic illiteracy of an ill-chosen government. I'd like to be able to look at this post in years to come and say 'I got it wrong'.

Either in that PiS took office and steered clear of making ideologically motivated economic policy mistakes - or that by some miracle they didn't win the election.

This time three years ago:
Penrhos - a bit of North Wales that's forever Poland

This time four years ago:
On motivation - and being motivated