Ukrainians transformed Polish labor market and boosted GDP

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The influx of workers from Ukraine boosts Poland's GDP by 0.3-0.9 percentage point per year, but this positive impulse won't step up anymore, predicts Jakub Growiec, an economic adviser at Poland’s central bank, NBP.

CE Financial Observer: What is the most important finding derived from the imperfect data about Ukrainians in Poland?

Jakub Growiec: Obviously, the most important factor is the sheer scale of the immigration in recent years and its impact on the labor market. Back in 2013 we had less than 200 thousand Ukrainian citizens working in Poland, and last year there were as many as almost 800 thousand people from Ukraine, which corresponds to 4.6 per cent of the workforce. Such a large wave of immigration is an unprecedented event in the post-war history of Poland.

Does it mean that there are 800 thousand Ukrainians living in Poland? There are different estimates, some are saying that this group could be as large as 1.2 million people.

There is no contradiction here. We estimate that on average approximately 800 thousand Ukrainian people are employed at any given time. However, due to legal restrictions many are only staying in Poland for a few months of the year. In this way the group of 1.2 million people staying in Poland for a part of the year translates into an annual average of 800 thousand full-time jobs. Of course, this is just an approximation.

Why an approximation?

We simply don’t have precise data on the number of Ukrainians in Poland. There are data on border crossings, but not every border crossing is work-related. Many people are studying or coming as tourists. There are data on work permits, but frequently employers apply for more permits than they actually end up using. We try to take all these factors into account in our estimates, but at the same time, we are curious about other, innovative methods. For example, I‘ve read about a study in which the number of Ukrainians was estimated on the basis of specific settings in the mobile phones active in Poland. Regardless of the adopted methodology, there is no doubt that since 2013 we have seen an unprecedented and significant scale of migration of Ukrainian citizens to Poland.

In 2017, NBP reported that on average Ukrainians in Poland are earning PLN2100 (EUR485) after tax for 54 hours per week. These figures were derived from surveys conducted in Warsaw and Lublin. Are there any nationwide estimates?

Of course, these results cannot be applied to the country as a whole and, unfortunately, we don’t have any data that would cover a representative sample of immigrants from Ukraine. We are forced to rely on imperfect approximations. However, we can still compare the main characteristics (such as age, sex, occupation) of the Ukrainian employees who have been interviewed in Warsaw and Lublin with the characteristics of Polish employees during the same time period. As a result, we will then be able to calculate the approximate contribution of these new employees to GDP growth in Poland in recent years. This was the essence of a study that I co-authored with Paweł Strzelecki and Robert Wyszyński.

And what does this comparison reveal?

We know that the immigrants are younger than Polish employees. Moreover, they are mainly employed in relatively low-paid occupations, that is, not in managerial positions or as professionals. Due to these factors, they are earning a little less than the average for domestic workers. Their distribution in individual sectors is also slightly different than in the case of Polish workers. Compared with Poles, a relatively higher percentage of Ukrainians work in agriculture, construction and industry, while a lower percentage is employed in the services. However, we are also noticing new trends: the number of Ukrainians in the services sector is increasing and their wages are growing. They are starting to move towards the Polish average. At the same time, we are finding that the difference in their earnings compared with Polish employees in comparable positions is smaller than we initially assumed. Instead of the initially assumed 20 per cent difference, after taking into account the characteristics of the employees, this figure turned out to be closer to 10 per cent.

Is it true that many Ukrainians are working below their qualifications?

This seems to be a natural phenomenon in the case of any migration wave. The first wave of Poles leaving for the United Kingdom and for Ireland in 2004-2006 were also university graduates yet started to do relatively simple jobs. The significance of professional qualifications in a new country is another issue. For example, an expert in the field of Ukrainian literature has higher education, but his qualifications may not be useful to Polish employers. The diploma of a Ukrainian doctor, or the experience of a Ukrainian logistics specialist cannot be easily transferred to a new market.

How has this migration affected Polish economy?

It has been beneficial. Our research shows that in the years 2013-2017 immigration expanded the effective labor supply by about 5 per cent, increasing the contribution of the labor component to Poland’s annual GDP growth from 1.3 percentage points up to 1.6-2.2 percentage points. Of course, the overall supply of labor didn’t increase only thanks to Ukrainians. After all, there was a parallel decline in unemployment and an increase in the occupational activity of Polish citizens. However, the inflow of workers from Ukraine was strictly responsible for a 0.3-0.9 percentage point contribution to GDP growth per year.

You’ve probably heard the opinion that such an inflow of labor is not beneficial for the economy in the long run, because it prolongs an economic model based on low labor costs and doesn’t increase productivity.

This is a difficult issue. It is impossible to determine what would have happened if the Ukrainians hadn’t arrived in such large numbers and whether companies would then have been forced to start investing more in innovation and labor productivity. We can only speculate whether that would have happened, or whether a simpler scenario would have materialized, e.g. due to the shortage of workers the companies would be developing at a slower rate and the economic growth would be weaker.

And is there any scenario showing how the opening of the German labor market in 2020 will affect the number of Ukrainians in Poland?

I haven’t estimated that myself, but research conducted by Robert Wyszyński indicates that once new regulations enter into force in Germany, as much as 20-25 percent of Ukrainians could leave Poland over the next four years. Of course, such estimates are associated with considerable uncertainty due to the ongoing legislative procedure in Germany and the controversy regarding the final form of these regulations. We should also keep in mind that the scale of the outflow of Ukrainian workers from Poland to Germany will largely depend on the condition of the German economy.

Let’s assume that every fourth Ukrainian will actually leave. What would that mean for the Polish economy?

One can imagine that this would not be a major issue, but we don’t know for sure. Especially considering that the sharp increases in the numbers of new immigrants, observed from 2013 to 2017, have flattened out in the last year. This wave of immigration has stopped. If this new trend continues, the number of Ukrainians working in Poland will not significantly exceed 800 thousand people, and perhaps some of them will indeed leave starting from 2020.

Maybe the 800 thousand Ukrainian people staying in Poland isn’t such a great number considering the scale of the problems faced by our neighbors?

The decision on emigration is always the result of both “pull” and “push” factors. I’m convinced that many Ukrainians decided to come to Poland because of the war in the eastern part of that country and because of Ukraine’s general economic problems. In their case the decision to come to Poland may have been determined by the factor of cultural and geographical proximity. Many immigrants may also have been encouraged by the prospects of easily available employment in Poland. However, the question remains open whether we could draw in more workers from Ukraine, and if so, whether that would require more active policies on the part of the state.

Is there anything that we still don’t know about Ukrainian workers? NBP surveys have already been conducted in Warsaw, Lublin, Wrocław and Bydgoszcz.

Yes, but this is still just a small sub-section and not the whole population, or even its representative sample. It would be great if we could reach immigrants (Ukrainians and others) in other cities, but also in rural areas, as a large number of them is also employed in agriculture. We would like to know what they are like, try to measure their productivity and compare it with the productivity of Polish workers. We are also planning to carry out detailed measurements of the scale of wage differences and to develop new and better ways to combine the fragmentary survey data with nationwide administrative data.

What is your long-term forecast? Will the Ukrainians stay in Poland permanently or will they return if the situation in their country improves?

There are many question marks here, mainly in relation to Ukraine itself. In addition to political and economic problems, that country also faces a demographic challenge. The Ukrainian society is aging rapidly, and this phenomenon is further exacerbated by the emigration of millions of young people. We can expect that this wave of Ukrainian emigration to Poland could be somewhat similar to the aforementioned wave of Polish emigration to the United Kingdom. Those who made the decision to move abroad, mostly stayed in their new country. However, for the time being this conclusion is mainly based on intuition, and the similarity of these two waves of migration is another thing that we would like to potentially explore in the future.

The views expressed in this article are the private views of the author and are not an expression of the official position of the NBP.

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