Monday, 26 March 2012

We Are The 97%

A recent opinion poll  shows that just 7% of Polish society supports the government's plan to raise the pension age to 67  for men, while only 3% agree that this should also apply to women. In other words, 97% of society do not agree with the government's attempt to increase the retirement age in Poland.

Despite not making it part of his election campaign, PM Donald Tusk announced his new plans to raise the age of retirement shortly after forming a government last year. The current retirement age in Poland is 60 for women and 65 for men. The government plans to steadily raise this from 2013, with it increasing by one month every four months (i.e. three months annually). This will lead to the retirment age for men reaching 67 by 2020 and for women 2040.

The government's plans to raise the retirment age are being presented as a necessity forced by demographic changes. A whole series of scary projections are being presented in the media showing the shrinking percentage of people of working age compared to those in retirement. For example, it is forecast that while in 2010 there were four people of working age for one Polish pensioner, in 2020 this will be three people, and in 2035 only two people. However painful these reforms may be, it is argued, we must act quickly before it is too late. You cannot after all argue with facts.

If it is such an obvious thing to do and there is no alternative, why is it that everyone is against it?

Whilst there needs to be an ongoing review of the retirement age as people live longer and society changes, the government's plans are understood by society as being unfair and one-sided. There indeed exists in Poland a serious problem regarding the amount of people who are working and not working, however this has many causes.

One of the contributing factors has been the huge fall in the birth-rate over the past couple of decades. The present fertility rate in Poland is just 1.3, amongst the lowest in EU and there are currently more people dying each year than there are babies being born.  The government has failed to address this issue through improving such things as maternity benefits and child care facilities. Poland has one of the lowest percentage of children attending nursery education inside the EU, with just 57% of children aged 3-5 going to a nursery (i.e. around 1/2 million children of this age do not have a pre-school education.) In these circumstances it is often grandparents (invariably grandmothers) who fill the gap left by the state and provide parents with childcare support. If elderly people are expected to work longer who will perform this social role?

In recent years Poland has also experienced a large wave of emigration, with millions of predominantly young Polish workers moving to Western Europe. Whilst a large number of these workers would like to return to the country, the lack of employment opportunities in Poland often prevented them from doing so. What is the government doing to readdress this issue? And furthermore if the government wishes to tackle its demographic problems, why is it not focusing on the extremely low level of immigration into the country?

One of the major problems, that underpins many of the country's demographic problems, is the huge deactivation of labour that has occurred since the collapse of Communism. As noted on a previous article in this blog:
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 number 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%.
Whilst unemployment fell significantly following entry into the EU (partly due to the mass emigration of labour), it has since risen back to around 13%. This is still significantly below the pre-EU accession level but this relative success disguises another significant problem on the Polish labour market.

According to Eurostat, Poland has the highest number of workers employed on so-called 'junk contracts' - i.e. non-fixed, temporary contracts. Whilst the average percentage of workers employed on such contracts stands at less than 15% in the EU, in Poland it exceeds 27%. Furthermore, this has increased by more than five times since the beginning of the century, with just 5% of workers employed on these 'junk contracts' in 2000.  A report by the government 'Młodzi Polski,  revealed that over 60% of workers aged under 25 are employed on 'junk contracts'. This is further compounded by the large number of self-employed workers in Poland. 19% of all those working are self-employed, which is the fifth highest number in the EU after Greece, Italy, Portugal and Romania. Whilst a section of the self-employed have chosen to work in this manner and indeed suits their requirements, a large percentage are simply forced into creating their own 'company' as a means to find employment. 

All this means that employers in Poland are presented with the much sought after flexibility to fire and hire workers, reduce their pay and  increase their work burden. It also ensures that they are able to avoid many of the costs of paying social insurance that are required when workers are employed on permanent full-time contracts. For example, the self-employed usually opt to pay the lowest level of National Insurance, meaning both that they are destined to receive the lowest level of pension in the future and also that the National Insurance Fund (ZUS) is further starved of funds. National Insurance levels are presently set at a flat-rate in Poland, meaning that those forced out of the labour market and required to make ends meet through self-employment are paying the same level of National Insurance as large, profitable companies. An inevitable consequence of this situation is that a large group of workers simply opt out of the system altogether and operate partly or entirely on the black-market. This leaves them without any health or social insurance and further reduces the amount of money going into ZUS. 

And what is the government doing about this situation? You guessed it, nothing.

In these circumstances it is hardly surprising that Polish society is so opposed to the government's decision to prioritise raising the retirement age. The government is now completely out of touch with the realities of the working population. As the sociologist Julia Kubisa has pointed out the government regards work through its own narrow perspective: non-manual, not physically demanding and well paid. This contradicts the reality of millions of workers in Poland, with society aware of this discrepancy.

With the vast majority of society opposed to the government's plans, the trade union's have gone on the offensive. The Solidarność trade union collected over 1m signitures demanding a referendum on this issue. On Wednesday both of the main trade union federations, Solidarność and OPZZ, will be organising a picket outside of parliament as MPs debate whether a referendum should be held or not (the government is opposed to this option).

The issue of raising the pension age has caused a mini-crisis within the ruling coalition governrment. The junior partner - the Peasants' Party (PSL) - is reluctant to support the government's plans as they are so unpopular with its electorate. Citizens' Platform (PO) has already talked to both the Palikot Movement (RP) and the Democratic Left Alliance (SLD) about them supporting a bill to raise the retirement age. So far the SLD has, sensibly, expressed its opposition to the government's proposal. In contrast RP has made it clear that they support raising the retirement age, expressing very clearly how RP's self-declared left-wing credentials tend not to extend to socio-economic issues.

The proposal to raise the retirement age has created a new and serious divide between society and the present government. 

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