Youth Unemployment in Poland – Economic Growth is Not Enough

Until recently, youth unemployment had received relatively little attention in Poland’s policy-making circles. However, since 2008 the youth employment situation has deteriorated considerably, even though Poland’s general economic indicators stood out positively in the EU. And when one factors in that around one million youths migrated abroad, the situation is even worse. The Polish case demonstrates clearly that GDP growth does not have to translate into more jobs but rather, on the business side, more attention is paid to the flexibilisation of the labour market. In the coming years Poland is going to enter a phase of economic slowdown, which might further deteriorate the situation for youth. Additionally, the prospects for combating youth unemployment are significantly constrained by the fiscal considerations of government.

Atypical employment: dead-end for youth?

In the discourse maintained by Polish employers, flexible solutions in the labour market are a key to reduction of unemployment, and a path towards stable work career, especially among youth. Accordingly, Poland has been the country where the incidence of fixed-term contracts and other forms of atypical employment has been particularly widespread. However, the research on the transition from fixed-term and other forms of atypical employment towards the stable employment suggests it is the case only for a fraction young Poles.

The Diagnoza Spoleczna (Social Diagnosis) survey shows that during 2009-2011 period, being employed, if only as a part-time worker, was one of the most important conditions preventing young workers from subsequent unemployment. However, only 40.3% of temporary workers became permanent workers, and the number is even lower for other types of contracts, such as those based on Civil Code regulations.

Relations between the educational system and employers

The most visible phenomenon in the educational system in recent years has been the so-called “education boom”, in which a steep growth in the proportion of Poles with higher education has been witnessed.  Compared to older cohorts, young Poles prefer a general profile of education rather than vocational pathways: 80% of students attend schools which allow them to enter into competition for university education.

However, while employers are critical of the way Polish educational system functions, as they claim they cannot find proper employees, they themselves rarely engage in the training of youth. In 2010, less than 23% of Polish companies cooperated with a school or a centre for practical training. Such marginal cooperation has been a stable characteristic for several years and puts Poland at the bottom of the league of EU countries.

Labour market policy in the context of austerity

Polish labour market policy has been characterised by relatively low extensiveness, especially when it comes to unemployment benefits. At the end of 2011 only 16.5% of all the registered unemployed were eligible to draw unemployment benefits. Due to the eligibility rules, very few young people qualify for benefits, as they are required to have worked for a period of 12 months during the 18 months preceding their registration as unemployed.

When it comes to the active labour market policy financing, since the mid-2000s the Labour Fund has been in relatively good shape and showing a surplus. However, in recent years expenditure from the Fund has been reduced. Such a decision had to do with government plans not to exceed the levels of public debt and deficit. Moreover, the room for maneuver is limited due to the reductions of the tax wedge in 2007 and 2008.  As a result, in 2011 the amount of spending on active labour market policy was reduced by half. Such measures decreased the number of individuals taking part in subsidised traineeships from almost 300,000 in 2010 to only 109,000 a year later. Currently, the surplus of the Fund is estimated to be at around 5 billion Polish zloty.

Anti-crisis package

One of the most important legal solutions aimed at mitigating the impact of the economic slowdown was introduced on 22 August 2009 for a period of 2 years. The main measures were targeted at employers and included: more flexible management of working time, a temporary reduction in working hours and salaries within a simplified framework, financial aid for employers introducing reduced working time or production stoppages (wage subsidies and stipends), financial support for those employers who want to increase the human capital of their employees, and the possibility of repeated employment based on fixed-term contracts of 24 months. Interestingly, the most popular policy measure among employers was the possibility of using an unrestricted number of contracts, while, for example, improving the skills of workers was much less popular.

Combating youth unemployment

The recent governmental initiative from May 2012 called “Youth in the Labour Market” (Mlodzi na Rynku Pracy) is the first systematic attempt to tackle youth unemployment. The aim of the project is to increase the employability of young Poles by providing them with additional training and mobility instruments. Yet the first problem here is financing: the programme is to be financed from the Labour Fund, whose resources are largely frozen.

Second, the program deals with entrants to the labour market. While such an approach is partially justified, the main emphasis should be put on the creation of skills and qualifications at the education stage. Finally, the programme focuses mostly on the supply side of the labour market.

Conclusions

The necessity of releasing constraints on pro-employment spending from the Labour Fund is clear. This point is especially important because simple measures aimed at stimulating GDP growth may not translate into an increase in stable jobs. Moreover, the government should direct more resources into pro-employment investment.

Also, the role of social partners, especially employers, in the process of skills formation should be strengthened, including vocational training, curricula design, and establishing a systemic method for defining skills demand.

This column is part of a project on youth unemployment in Europe run by the Friedrich-Ebert-Stiftung and Social Europe Journal.

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