Sunday, 19 December 2010

The Scourge of Unemployment

In the early morning on 14th October on the outskirts of Warsaw, 18 unemployed people were squeezed into a van and driven to illegally pick fruit . The small van was not designed to carry people but goods. The passangers were seated on wooden boxes and planks without seatbelts. All 18 died after the van collided head-on into a truck. The incident highlighted the desperate conditions that millions of Poles live in and the exploitation they face when they try - often illegally - to earn some money. The major cause of this poverty and desperation is the extremely high level of unemployment, that has been a constant feature of life in postsocialist Poland.

In 1988 there were 21.8m people of working age and 18.2m of these, 83.5%, were in paid employment. 14 years later, when unemployment was at its peak, the number of Poles of working age had increased to 23.6m although the numer of these working had decreased to 10.4m, i.e 56%. Around 1.2m of these were students meaning that around 9m Poles of working age were neither working or studying. During some years, throughout the past 20 years , unemployment has reached 20% - two and a half times the OECD average. The average rate of unemployment during the past two decades stands at 14.3%.

During the past 20 years the unemployment rate has undergone periods of increase and decrease. These can broadly be categorised into five phases:

1. 1990 - 1993: Following the introduction of the shock-therapy reforms and the mass closure of state industries and farms. By the end of 1993 2.9m people were unemployed.

2. 1994-1997: The SLD-PSL government introduced a more interventionist policy and slowed the economic reforms. Unemployment fell by more than one-million and by July 1998 around 1.7m people were unemployed.

3. 1998 - 2004: Unemployment went through a huge surge - especially during the period of the AWS-UW government when new liberal economic reforms were introduced. By the end of 2000 2.7m people were unemployed, which increased to 3.2m by the end of 2002. Between 1999 and 2001 almost 2000 jobs were lost every working day.

4. mid-2004 - mid-2008: The number of unemployed fell from around 2.9m to 1.5m. This was caused by an upturn in the Polish economy following entry into EU. Most importantly was the fact that around 2m Poles - mostly young - emigrated to Western Europe.

5. mid-2008 - now: Since 2008 unemployment has begun to rise again. This is due to the effects of the economic crisis, which have induced an economic slowdown and also reduced the possiblities of Poles finding work abroad. Unemployment presently stands at 13%.

The major cause of poverty in Poland is caused by this high unemployment rate. This is compounded by the fact that only around 1/7 of the unemploymed in Poland receive any benefit. The level of unemployment benefit is extremely low - 601 zł a month, when the minimum social level of existence is estimated at 900 zł. Around 30% of the unemployed have an income below 351 zł a month - which is regarded as the minimum level for existence.

However, the specture of unemployment that haunts Poland is not just a social disaster but is also one of the major barriers to the country's further socio-economic development. If we accept that it is labour and its creativity that creates wealth then we can understand how the inactivity of such large numbers of people is not just a social disaster but also economic madness. Unfortunately the neo-liberal ideoglogues, who tend to dominate economic debate, postulate that the 'natural' unemployment rate is around 8-10%. Even when this figure is not met, then the blame is placed upon the unemployed for their condition, such as their inability to psychologically or culturally adapt to the demands of a market economy (Homo Sovieticus).

Such thinking was able to find some resonance at the beginning of the transition - when unemployment was primarily caused by the closure of state industries and farms. During this time it was claimed that this was a temporary phase and that once the private sector had managed to grow unemployment would fall. The continuation of unemployment could then be explained by the fact that these ex-state workers had been unable to sufficiently adapt themselves to the new reality. However, high unemployment in postsocialist Poland is not a temporary result of the closure of state firms nor can it be explained by the psychological failings of individuals brought up in a different system. Nowadays unemployment is structural and affects different sections of society including the young and educated.

In March this year there were 451,000 people under the age of 25 who were registered unemployed. Furthermore, 17% of these were graduates, with 22,000 new graduates unable to find work. One of the great successes of the transition has been the rise in the number of young people going to university. However, the inability of many of these to find work is wasting the energy and skills of some of the most able people in society. This threatens a new wave of emigration out of the country.

Public debate in Poland is presently dominated by the state of public finances and the need to bring down the deficit. This often focusses on issues such as raising the retirmement age. However, the major structural problem in Poland is the huge numbers of people without work. Attention should therefore be focussed on reducing the once again rising unemployment rate and finding work for those of working age, particularly the young. The returns in taxation (both indirect and direct) would be the surest way to control public finances and sustain a course of economic growth.

Some of the information for this article was taken from an interview with Mieczysław Kabaj from the Institute of Work and Social Affairs.

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