Reasons for unemployment in Poland

Useful information
16.11.2020

Virtually every country characterized by a free market economy struggles to a greater or lesser extent with the problem of unemployment. Detailed observations of highly developed countries provoke reflection, as long-term unemployment occurs more and more often in these areas. Until the end of the 1980s, there was no unemployment in Poland, because at that time there was a command and distribution system in the country. It ensured 100% employment, but at the same time blocked the occurrence of free-market mechanisms, guaranteeing a natural balance between demand and supply. The economic transformation came with 1989, which showed the real scale of unemployment in Poland. How many Poles are currently unemployed and what are the most common reasons for unemployment in Poland? We answer these questions in this article.

Basic definitions related to unemployment

Unemployment is a general social phenomenon. They are most often classified according to a given geographic area or group of people. It consists in the fact that people who are capable and willing to perform paid work do not find employment for themselves.

An unemployed person is therefore a person who has no employment but is able and willing to take it. According to the International Labor Organization, an unemployed person is a person aged 15 to 74 (non-statutory working age) who during the analyzed week:

not working,
is actively looking for a job,
is ready to start working soon.

At the same time, a person who has not been actively seeking employment remains unemployed, because he had been waiting for cooperation with a given economic entity for a period not longer than 3 months and was ready to undertake this cooperation. “ltr”> We should also mention the unemployment rate, which is a measure reflecting the percentage of the unemployed in the total number of economically active people. Professionally active people include both the unemployed and the employed.

Unemployment rate in Poland

The unemployment rate largely reflects the overall economic situation of the country. There is a vicious circle effect – the higher the unemployment rate, the worse the condition of a given country, and the worse the economic condition of a country, the higher the unemployment rate. A falling unemployment rate, on the other hand, is usually associated with an improvement in the economy of a given country, an increase in the value of the gross domestic product (GDP), and the wealth of citizens. Here, too, you can observe a positive vicious circle effect – the increase in people’s wealth makes them invest, buy more products and goods, use more services, and this develops the economy.

In Poland, the unemployment rate reached its peak at the beginning of 2003, when it was 20.7%. Since then, a downward trend has been observed. Even 2008 (when the global financial crisis occurred) did not bring a significant increase in the number of unemployed people in Poland.

Until the end of 2019, the unemployment rate was regularly declining (in October it fell to 5.0%, in December it was 5.2%), while from January 2020, an increase can be observed:

- January: 5.5%;
- February: 5.5%;
- March: 5.4%;

April 5.8%.

This situation is of course largely influenced by the situation related to the ongoing COVID-19 epidemic. In Poland, the first confirmed cases were recorded in March 2020.

Causes of unemployment in Poland

What are the most common causes of unemployment in Poland? Currently, very volatile economic conditions make it difficult to clearly state what causes of unemployment prevail in our country, however, undeniably at the fore are:

- an increase in the minimum wage – from the moment the minimum wage was established from year to year an upward trend is observed in this area. Currently, the minimum wage is PLN 2,600 gross, and the government has announced an increase in this amount to PLN 4,000 gross. On the one hand, such a high minimum wage will guarantee employees a higher standard of living, but on the other hand – the development of the shadow economy and more frequent employment based on junk contracts;
- high employment costs – when hiring an employee under an employment contract, the employer in practice pays the employee’s gross remuneration (which includes: net remuneration, social security contributions, and income tax) and additionally social security contributions;
- lack of qualified workforce – better-paid jobs available for Polish specialists abroad are still very popular. When qualified specialists leave the country, there is a shortage of competent employees;
- technology development – general robotization, mainly in the field of industry, in positions related to manual work, deprives many people of employment;

high taxes – high taxes will always block the development of enterprises, and thus the possibility of employing new personnel.

The recent events related to the emergence of COVID-19 in Poland have undeniably increased unemployment. Movement restrictions, top-down orders to close activities in the tourism, beauty, recreation, sports, etc. industries – all of this resulted in a decline or even total loss of revenues in many companies. In turn, the consequence of the weakening of the financial condition of enterprises is frequent layoffs.

The recent increase in the number of layoffs and the fear of losing jobs automatically resulted in a decline in demand for various types of products and services. In the first place, the decline affected luxury products and services, but the deterioration of the financial situation of most consumers also causes a decrease in the demand for products and services, which were previously considered more basic, and as a result – again lower demand for employees.