Poland's labour market woes

I'm speaking at a Government-sponsored conference tomorrow about the problems facing Poland's labour market. We've recently reached a tipping point. Three factors have coincided to turn an employers' market into an employees' market in just a few short years. In 2001/2 you needed good contacts to find a job. Today, employers need similarly good contacts to find workers.

Firstly - migration. Around 1.6m Poles have left Poland to work in the labour-starved economies of western Europe, the UK and Ireland being the main ones. These are the people Poland needs - the young, dynamic and open to the world. Fed up with 20% joblessness and bullying bosses, once the door to EU labour markets was flung open, hundreds of thousands of Poles voted with their feet.

Secondly - a booming economy. Those that stayed, however, have tended to prosper. Average wages are up 11.5% in the year to January 2008, consumer confidence is at an all time high - consumer spending up by nearly 20% in fourth quarter of 2007. Companies are investing heavily too. EU funds (all €67 billion of them!), a construction boom fuelled not least by the EURO 2012 football finals, and record foreign direct investment have all helped create 1.2 million new jobs in 2007.

Thirdly - and I think this factor is insufficiently understood by commentators - demographics. As the above graph I made using GUS (Poland's central statistical office) data shows, Poland's rising demographic trend has peaked with record numbers of young people entering the labour market in recent years. You'll notice that ever since economic transformation began in 1989/90, each year for the next 19 years, the number of school and university leavers has been successively rising. For employers - great times. But those great times have ended.

Every year for the next 20 years, the number of young people entering the labour market will fall by and average of 17,000 a year. Things will get really bad in the mid-late 2020s, when the smallest age cohort - today's five year olds - start looking for work. There's only 350,000 of them - nearly half the number of today's 25 year-olds. And all this will happen when the peak of the post-war baby boom hits retirement age.

What are the answers? I can see some around me already. For the last three weeks, the check-out ladies at Auchan were (I suspect) Ukrainian. I could tell by the accent and their name badges. I'm sure their monthly earnings are far less than the 4,600 zlotys that's the current Warsaw average. Other solutions will require costly policy measures. A few weeks ago, Gazeta Wyborcza stated that only one in four of Poland's over-55s is currently working. The report said that it costs the government 8,000 zlotys to get an unemployed person over 55 back into work - if that person has higher education. If not - the cost is a staggering 22,000 zlotys. I'm sure the private sector could do this for less!

Another solution is to look at the structure of unemployment. On paper, Poland's unemployment is currently 11.7% - the highest in the EU. Yet Warsaw, Poznan and the Tri-City have unemployment below 3%. (London's unemployment rate is nearly three time higher than Warsaw's!) Wrocław, Kraków and Katowice have unemployment between 4% and 5%. And in all of these cities, unemployment continues to fall, while the national average climbs. Click here for latest unemployment figures across Poland. The map above is based on these figures, broken down by sub-region. This clearly shows that Mazowsze, ostensibly the wealthiest Polish province, consists of rich Warsaw, its well-off hinterlands, and three sub-regions with high levels of social deprevation.

Radom a mere 60 miles from Warsaw, with 22.5% of its population registered as unemployed. Poland’s unemployment blackspot, the Szydlowieckie district (poviat) south-east of Radom, has 34% joblessness. The Ciechanów-Płock sub-region, north of Warsaw, has 17% unemployment, peaking at over 20% in three of its poviats. As stated in this article, it would be good for the outlying sub-regions of Mazowsze to be split from the capital, otherwise they risk missing out on getting their fair share of EU structural funds because of the province's overall wealth - all attributed to the success of Warsaw's economy.