Impact of the 500 plus program on Polish households

05.05.2017 09:15|Conotoxia.com

Shortly after Poland joined the European Union, the financial situation of many large families was very difficult. This gradually improved over the past decade. However, a significant change did not occur until the 500 plus program appeared. Currently, income for families with at least three children are near those in Italy or in Spain. A commentary from Marcin Lipka, Cinkciarz.pl senior analyst.

Marcin Lipka, główny analityk Cinkciarz.pl

A comparison between the data from the Polish Central Statistical Office (GUS) and from Eurostat gives a relatively accurate picture of the standard of life in Poland, as well as in other EU countries. One of the most objective indexes of the financial situation is the median equivalised disposable income, which shows the total income for a particular family member minus taxes or health insurance.

This index is complemented by the Original OECD equivalence scale, which allocates importance to family members according to their age. This is because a 2+3 family does not have to generate income which is five times higher than the income of a one-person household in order to achieve a similar standard of living. In addition, if we express income by using the euro Purchase Power Standard (euro PPS), which eliminates differences between prices in particular countries, we will be able to compare the financial situation of Polish families to the entire European Union.

Disastrous beginning, clear improvement

According to Eurostat, the median equivalised disposable income for one member of a large family in 2005, was slightly above 3k euro PPS. This was the third lowest result in the EU next to Lithuania and Latvia. The financial situation of Polish households was clearly worse than of those in Hungary, as well as in the Czech Republic (4.5k euro PPS and 5.9k euro PPS, respectively).

The gap between Poland and the countries of the “old” EU was even larger. The above mentioned index was at the level of approximately 9k euro PPS for Greece, 9.5k euro PPS for Italy, approximately 12k euro PPS for Ireland and approximately 14k euro PPS for both the United Kingdom and Austria. This means that despite including the difference between prices, the financial situation of Greek households was three times better than it was in Poland. Moreover, this difference was even larger without including the euro PPS (e.g. Denmark – more than 20k euro, Poland – 1.6k euro).

In 2015, the equivalised disposable income for large Polish families increased clearly. This index was at the level of 7.6k euro PPS, which was a better result than in Greece or in Hungary (7.1k and 6.5k, respectively). However, this was still lower than the result of the Czech Republic (10.3k), as well as of the richest EU countries (within the range of 15k-20k).

Impact of 500 plus on income

The Eurostat database doesn’t contain data regarding household income for 2016, for the time being. However, it’s possible to estimate the impact of the 500 plus program quite accurately thanks to the data from the Ministry of Family, Labour and Social Policy.

According to this data, 60% of large families have been collecting benefits for every child (three children – 58%; four children – 71%; five children – 77%; six and more children – 86%). This means that the median income for these families has increased at least 1.5k in the Month over Month interpretation, as well as 18k in the Year Over Year interpretation. Due to the fact that these benefits are not taxable, nor do they generate additional costs, it’s possible to classify them as disposable income.

If we convert this additional income to equivalence units for households with three or more children (according to GUS: 2.72), as well as to the euro PPS (2.34 PLN in 2015), this will give the median equivalised disposable income of approximately 10.5k. This is 37% more than two years ago. Moreover, this result does not include potential income from labour, economic activity or additional social benefits.

The above mentioned result is higher than its equivalent in Portugal (8k euro PPS), Estonia (9.1k euro PPS) and the Czech Republic (10.3k euro PPS). In addition, the disposable income for Polish households with three or more children is very similar to its equivalent in Italy (10.6k euro PPS), as well as in Spain (10.7k euro PPS).

 


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