mBank – CASE seminar: The influence of economic migration on the Polish economy

The 149th mBank-CASE Seminar was devoted to the influence of economic migration on the Polish labor market. The main presentation was delivered by Joanna Tyrowicz, an assistant professor in the Economics Department of the University of Warsaw and a co-founder of GRAPE. Paweł Kaczmarczyk, Ph.D., a specialist in research on economic migration, was invited to supplement and comment on the presentation.

Tyrowicz began with a critical analysis of the two narratives concerning the labor market that are currently dominant in the Polish media. First, we regularly hear about how unemployment is constantly declining, repeatedly falling to new record lows, even though it remains above 8% (seen in developed countries as a relatively high level). As a result, commentators often speak of the emergence of an “employee’s market” and the resulting difficulties for employers in finding workers.

Tyrowicz began the main part of her presentation by presenting the current and forecast situation on the Polish labor market. She demonstrated that first of all, the supply of labor will continuously fall: by 2050, it will have decreased by about 6 million people. Secondly, the labor force will age: the current average age of labor-force participants in Poland is already 41.5 years, an increase of about 2 years compared with 2009. Considering the scale and consequences of these processes, economic migration, according to Tyrowicz, is not a real solution over the short-term time horizon.

In the second part of the presentation, the author discussed the reserves available on Poland’s labor market. Her analysis indicates that if all the people who have left the workforce and would like to return actually managed to do so, it would increase the supply of labor by as much as about 9% (about 1.4 million people in absolute terms). There is a range of causes for professional inactivity among Poles. For women, the most important thing is care for dependents (mainly children): as many as 75% of women aged 25-44 who are out of the labor force (about 250,000) cite a lack of access to childcare services as the reason they are unable to take up paid work. In total, about 1.8 million people are professionally inactive for reasons related to care of dependents; their return to the labor market could be eased by increasing the availability and affordability of care services. Additionally, Tyrowicz pointed out the low percentage of Polish post-secondary students who also work; in many EU countries this figure is as much as two times the Polish level. People who are actually discouraged from seeking work make up an insignificant part of the total of professionally inactive people (there are about 0.5 million).

Failure to use these reserves is inextricably connected with the barriers present on the labor market. One of the main reasons for failure to use the reserves of the labor force is the arduous, long process of looking for work in Poland: The average duration is 10 months (by comparison, during the economic crisis in the Netherlands, the duration was only four months). This is to a large degree caused by the ineffectiveness of the labor intermediary system, dominated by the ossified, ineffective system of government labor offices, as well as companies’ use of job announcements as the main method for advertising recruitment. This naturally brief form means that candidates with unsuitable educational and professional profiles end up applying. That in turn means the process of seeking an employee for a new opening takes as much as three to six months, generating heavy costs for employers (about 0.4% of GDP).

Tyrowicz also pointed out that companies – particularly Polish companies – prefer to invest in physical capital rather than human capital and job creation. This is also due to the aforementioned long period of searching for the right employee for a newly created position, which discourages many companies from creating them. In the case of younger age groups, it is a great challenge to bring young people onto the labor market; to a significant degree this is due to a mismatch between graduates’ skills and employers’ requirements.

Moving to the question of migration, Tyrowicz pointed out the lack of precise data on immigration to Poland, as well as its small scale – even though in 2016 13% of surveyed companies stated that they employed foreigners, they made up only 1% of all employees. Although we can assess the experience of other countries related to the inflow of economic migrants as positive, a large role in this positive effect was played by the high inclusivity of labor markets in those countries, which we do not have in Poland.

After finishing her presentation, Tyrowicz gave the floor to Kaczmarczyk, director of the University of Warsaw’s Centre of Migration Research, who provided a deeper analysis of the impact of immigration from Ukraine on Poland’s labor market.

He began by presenting a general picture of immigration to Poland. The key factors are its limited scale and the dominance of temporary migration. Immigration, though insignificant, is growing: In January 2015 in Poland only 0.3% of the population (about 110,000 people) were immigrants; at the beginning of 2016, already more than 210,000 people had the right of residency in Poland. In terms of location, they are concentrated mainly in the regions with the largest urban agglomerations, with Warsaw having a significant lead. In terms of immigrants’ origins, Ukrainians are clearly dominant.

Despite the insignificant share of immigrants as a percentage of the total population, immigration from Ukraine has been growing quickly in recent years: In 2002-2011 the number of Ukrainians registered as permanent residents in Poland grew by 3.5 times. In following years, this process strengthened as a result of the outbreak of war in Ukraine (in 2014 growth in the number of registrations for permanent residency was two times the rate in 2010, and in 2015 four times).

The simplified system of access to Poland’s labor market makes it easier for foreigners to take up work; it requires only that the employer present a declaration of its intention to hire a foreigner. The rate of growth in the number of such declarations is very high: While it was slightly over 20,000 in 2007, and stood at 387,000 in 2014, in 2016 it exceeded 1.3 million (of which more than 350,000 were in Mazowsze province, where Warsaw is located). The key sectors in which foreigners were employed were agriculture, construction, trade and domestic services, though the variety of work in terms sector and region is increasing year by year.

The average monthly income of a Ukrainian immigrant to Poland ranges from PLN 1,500 (domestic services) to PLN 2,400 (construction). The number of hours worked per week is significantly higher than the average in Poland, reaching more than 60 hours, though in the case of domestic services it reaches as much as 75 hours. It is important to note that many immigrants from Ukraine take jobs for which they are overqualified: 82% have post-secondary or vocational education, including 39.1% with post-secondary education. The majority of immigrants have already spent several periods of time in Poland, sometimes more than 10 (particularly in the case of agriculture and domestic services).

Kaczmarczyk also pointed out that after the outbreak of the conflict in Ukraine, the profile of immigrants from that country changed: younger and better educated people are immigrating. The statistics also show more men, and more people from central and eastern Ukraine. For the men, the construction sector (and, to a lower degree, agriculture) remains particularly significant as an entry sector for the Polish labor market. For women, work for households remains key, while the significance of hotel and foodservice work is increasing.

After the presentation a discussion with seminar participants was held.