Employment in Poland 2005

This publication is a non-technical report prepared for Polish Ministry of Economy and Labor. The main goal is to present a comprehensive statistical and econometric analysis of employment, unemployment and participation in Poland in the period 1998-2004 and confront Polish experiences with international empirical and theoretical studies in labor economics. Also the qualitative survey of institutional background of labor market in Poland is conducted. We complement our research with some policy prescriptions. At the moment Poland exhibits the highest unemployment rate in OECD and one of the lowest employment and participation rates. We begin with a detailed analysis of the reasons of the rapid decrease of employment and increase of unemployment in 1998- 1999 and its later persistence. We find that the supply-side characteristics and sectoral structure of the economy significantly influenced the strength and the durability of the effects of the Russian crisis of 1998 and of the adverse supply shock that affected Polish economy in 2001-2002. We scrutinize the ability of various groups of workers (by age and education level attained) to cope with both shocks and constantly undertaken restructuring. We also focus on structural mismatch between labour demand and labour supply in Poland. We find that the employment gap between Poland and UE15 is mostly due to low participation/employment of older workers in Poland, although individuals aged 15-24 also contribute to this gap. However, we show that low participation of young is mostly connected to lengthening of average education spells whereas older workers take advantage of the social security benefits subsidizing leisure. We complement our analysis with multinomial logit of transitions on Polish labor market. Then we turn to the role played educational system in the accumulation of the human capital by young people, and we evaluate the life-long learning in Poland. We find that schooling system is rather inefficient in shaping creativity and solving problems exceeding schematic procedures and algorithms. Then we focus on the influence exerted in Poland by standard labor market institutions, like social security system, taxes, minumum wages, trade unions, employment protection legislation, active labor market policy. In each case we begin with description of the shape of these institutions in Poland and then we empirically assess their relative importance for labour market performance.