Polish economy calls for economically inactive citizens

13.10.2017 09:22|Marcin Lipka

The unemployment rate holding below the 5% boundary suggests that the Polish economy is dramatically reducing the number of workers who are ready to work. This usually hampers economic growth. In fact, reserves among the employees are still significant, of which the largest group are economically inactive people," writes Marcin Lipka, Conotoxia Senior Analyst.

Marcin Lipka, główny analityk Cinkciarz.pl

According to the EU's methodology, the unemployment rate for people aged 20-64 after Q2 this year amounted to 4.9%. This means, that only 830k people were looking for a job. The decreased pace of unemployed at 200-250k in recent years would mean that in future quarters there, will be a shortage of the labour force, which will have a negative effect on the whole economy.

However, the above statistics do not include economically inactive people - people who don’t have a job and aren’t looking. In the 20-64 age group, there are about 5.7 million people, which makes up about 25.3% of the aforementioned population. The average percentage of economically inactive people in the EU is 22%, while in Germany it is 17.9%.

Poland above EU average results

Currently, Poland has very good statistics on employment, therefore improved data for a specific age group or education may bring greater benefits than trying to achieve a barely average EU result. In the case of Poland, the growth of professional activity by 1 percentage point means an increase in the workforce by 230k people.

Unemployment among Poles aged 20-64 with higher education amounts to 2.6% (148k people) and the percentage of economically inactive after graduation is 6% among men (155k) and 15% among women (552k). All of these parameters are better than the European Union and eurozone average. However, the 86.8% employment rate is likely to be very difficult to raise as Germany, Sweden or the Netherlands max out at 90%.

Lesser education equals a higher likelihood of economical inactivity

The situation is completely different for people with an education level of 3 or 4, according to Eurostat (post-secondary, vocational, secondary education). In this group, the unemployment rate in the last three years has decreased by almost half (from 10.2% to 5.7%), and the percentage of employees has increased by 4.5% percentage points to 68% (9.8 million).

However, the percentage of people with post-secondary, vocational and secondary education in Poland who are economically inactive remains very high at 27.9% (about 4 million people, 2.5 million women and 1.5 million men). A portion of this group can be activated in order to balance the rate to the EU average of 22%.

As unemployment and employment statistics indicate, the economy generates a strong demand for employees without a higher education and the number of Poles working in this group may increase due to the return to the labour market of those who are economically inactive. A decrease in the number of inactive to the EU average would translate into the possibility of employing around 800k additional employees.

Poland is also characterised by a particularly high percentage (53.7%) of unemployed and those who aren’t seeking a job among people with middle-high school or primary education, with an EU average of 35%. This is a relatively small group of 1.8 million people, but a rapid increase in professional activity may be difficult to achieve due to the complications of completing qualifications. Fortunately, unemployment dropped significantly in this group, from 20 to 13%, over the last three years. Therefore, the conclusion that the economy generates sufficient demand for labour to increase the number of participation in this group to at least 55% (average in the EU is 65%), would mean an additional 200k people in labour force resources.

Implementing change will require goodwill

Rapidly falling unemployment and growing employment among people with a low education creates excellent conditions to significantly reduce the group of economically inactive Poles.

For this process to end up successful, there is a need for goodwill among all those involved. Entrepreneurs should take into account the fact that employees who come out of economic inactivity require longer training than unemployed. Those who are employed, in turn, probably have to be prepared to adapt to new working conditions. State policy should also be in favour of economic activation, which should implement tax benefits to stimulate the economically inactive. It is worth investing in this, as the increase in professional activity will ultimately pay off for all parties. Employers will gain one million people prepared to work, the state will gain more tax revenue, and employees will benefit from wages, which, according to the latest GUS data are growing at the highest rate that they have in many years.

 


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