Labor supply in Poland will continue to decrease for years

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In the coming decades, there will be fewer and fewer workers in Poland, they will be getting increasingly old, and these trends could only be limited by higher fertility and professional activity rates.

That, however, would require the adoption of more flexible solutions – indicates a study conducted by Poland’s central bank NBP. The report confirms the existence of dangerous trends long signaled by the experts.

In 2015, the number of unemployed people in Poland decreased by 260,000. In November 2016, the registered unemployment rate amounted to only 8.2 per cent and was the lowest since 1991. In part this is the effect of an increasing demand for labor, and in part the beginning of a long-term process of reduction in labor supply.

“Until 2004, the size of the labor resources was positively affected by the demographic situation which more than compensated for the decrease in professional activity, but this trend has now expired. Until 2012 the increase in professional activity (especially among the oldest age groups) was to some extent still limiting the negative consequences of the demographic processes. But starting from 2013 the labor resources have been systematically decreasing” ‒ indicates the report “Labor Market Survey”, prepared by the Economic Institute of NBP.

At present, the annual labor supply is falling below 50,000 persons per year, but according to the projections of the European Commission based on the demographic data of the Central Statistical Office of Poland, from 2025 it will be decreasing by 100,000 persons per year, and from 2044 ‒ by 150,000 persons per year. That’s a lot when we take into account that in 2015 more than 16 million people worked in Poland, and there were about 1.5 million unemployed persons.

However, the key to improving the rates lies in the remaining groups. The 8.5 million children and students will start working, but in the case of 1.8 million people, mostly women caring for children or other dependent persons, this will require access to childcare and nursing services. More than 7 million people say that they are inactive due to retirement.

“In the perspective of several decades only a combination of a high fertility rate and a high professional activity rate can ensure a structure and ratio of inactive persons to the labor resources similar to the current one,” states the report.

The activation of professionally inactive persons in Poland could increase labor supply by almost 9 per cent, not taking into account persons over the age of 65. In 2015, there were 4.8 million women and 3.1 million men who were professionally inactive. For both sexes, the highest percentage of professional inactivity is found in the age group 15-24 (due to education) and 55-64 (health condition, retirement pension).

Potential reserves can be found especially among women from the age group 25-44. Almost every third women who is professionally inactive due to taking caring of children or other persons identified the lack of appropriate institutions in her place of residence, as well as their cost or quality as the reason for inactivity. This gives a total of 250,000 women, whereby the problem is greater in the countryside than in cities.

The problem will not be solved by the influx of immigrants either. “Under realistic scenarios of immigration to Poland, it is not possible for the positive impact of immigration to compensate for the decrease in labor supply caused by the ageing of society,” write economists from NBP.

This realistic assessment follows from the fact that so far only 13 per cent of the companies declare the employment of at least one foreigner, and the Ukrainians, who have been coming to Poland en masse since 2014, are mostly staying here for the short-term only.

What are the possible solutions? The only thing that can help in the long term are further increases in work productivity (in 2014, we reached 59 per cent of the hourly average for the EU-28 countries). In the short term, we should build more nursery schools and day care facilities, and introduce flexible working hours, telecommuting and part-time employment for women.

Pensioners should also be able to work on a part time basis or have the ability to select the work tasks, for example due to their health condition.

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