Executive summary
Spurred by robust economic growth, Poland’s inactivity rate has steadily declined since 2007 and reached a historic low in 2019. However, despite the positive long-term trend, Poland’s inactivity rate (the share of the working-age population not in the labour market) is still above the OECD average. That rate differed across regions by 13.3 percentage points in 2019, from 21.1% in the Warsaw capital region to 34.4% in Warmian-Masuria.
High inactivity rates put pressure on public finances. Poland currently spends more on social protection relative to its total government expenditure than the OECD average, despite its low unemployment rates. Additionally, structural barriers to labour force participation may negatively affect economic growth.
Despite some improvement in recent decades, economic inactivity rates are particularly high in some groups:
For older people of working age, early retirement is still the norm. In 2019, economically inactive people between 55 and 64 years old represented 35% of the economically inactive working-age population in Poland but the age group only accounted for 20% of the working-age population.
Women often take on family duties, preventing them from becoming economically active. Although women’s economic inactivity rate (aged 15 to 64) decreased slightly, from 40% in 2000 to 37% in 2019, the gap with men widened from 11 to 14 percentage points over the same period.
Nine out of ten high-skilled individuals were active in the labour market in 2019, compared to less than half of low-skilled individuals. The gap is partly driven by the lower education level among older people of working age (55-64), but is widening over time.
Among people with disabilities, only 27% of men and 35% of women were economically active in 2020.
Economic inactivity rates are much higher in some regions, particularly in Eastern Poland. Although there has been a trend towards convergence in economic inactivity rates across Polish regions, a number of factors have meant that some regions have lagged. In the east of Poland, for example, many SMEs have lower productivity and are not as well-integrated into international value chains as compared to firms in western regions, where proximity to EU markets has helped to attract foreign investment. The same eastern regions bore the brunt of Poland’s shift away from agricultural production towards manufacturing and the service industry, leaving them with limited and less attractive employment opportunities.
Automation of production processes and job polarisation are likely to impact economic inactivity rates in the future. In almost all Polish regions, 48% or more of jobs were at risk of high or significant change from automation. The exception is Warsaw, where that figure stood at 40%. With the share of middle and low-skill jobs declining gradually, those with low- or medium-levels of education may see shrinking job opportunities, impacting their labour force participation.
While Poland has come out of the COVID-19 pandemic with minimal changes in unemployment rates, the decline in labour demand during the downturn could have long-term impacts on the most vulnerable. While demand for labour is now rebounding, some regions and groups were hit disproportionally. The regions of Eastern Poland, in particular Podkaparcia, Podlaskie and Lublin Province experienced the sharpest absolute rise in the number of registered unemployed per job offer. There is also a risk that even the small drop in labour demand may reverse some of the favourable trends that helped disadvantaged groups increase their participation in the labour force in recent years.
Going forward, there are policy actions Poland can take to help promote an inclusive COVID-19 recovery and further reduce economic inactivity.
Provide technical assistance and financing to SMEs and independent workers to purchase supplies to facilitate the transition to telework. The existing teleworking grant, available to employers for creating a teleworking workspace for unemployed parents with caring responsibilities for a young child, could be expanded in its scope and coverage.
Make personal care and IT services available to encourage labour market participation. Assistance can take the form of mobility help, personal care at home or help installing internet infrastructure to facilitate telework. The “Personal assistant for persons with disabilities” programme introduced in 2019 could be expanded to help those caring for people with disabilities as well.
Extend the focus of public employment services (PES) to target people with disabilities. Stronger incentives could be introduced for the PES to increase training opportunities for people with disabilities and to boost their participation in labour market programmes. In the case of projects financed by the ESF, older people of working age and people with disabilities could be treated as priority groups.
Use the State Fund for Rehabilitation of Disabled People (PFRON) to provide stronger support for the integration of people with disabilities in the labour market. The system of subsidising the remuneration of people with disabilities could be revised to include stronger incentives for employers to hire people with disabilities who are economically inactive. For example, a relatively higher wage subsidy could be paid for the first 12-24 months of employment for people with disabilities who were previously economically inactive or long-term unemployed. Moreover, the share of PFRON allocated to social economy actors for the professional activation of people with disabilities could be gradually increased.
Further develop child care infrastructure, particularly in regions with the highest economic inactivity rates. Such investment would likely benefit the labour market participation of economically inactive women with care responsibilities. Geographically, it would particularly benefit the voivodeships of Eastern Poland, where economic inactivity is relatively high and childcare provision for the youngest children relatively underdeveloped.
Encourage the integration of services provided by different institutions to address the needs of economically inactive persons. Public employment services and social assistance could strengthen their cooperation by offering a full range of services “under one roof”. In the initial phase, pilot projects could be conducted in cities with county rights where labour market and social welfare institutions function at the same level of local government.
Consider expanding the use of the European Social Fund (ESF) as an instrument to address economically inactive persons. National and regional authorities could ensure that a larger share of ESF projects targets economically inactive persons. Regional authorities responsible for the implementation of ESF-funded programmes could provide strong incentives for project providers to support those in the most precarious situations with individualised solutions.
Build a cross-institutional knowledge base on working with the economically inactive. Experience sharing across institutions could be enhanced by organising training-workshops and conferences as well as issuing best practice guides on working with different groups of economically inactive people.
To better mobilise the social economy, consider testing a volunteer-based programme to direct discouraged, inactive and long-term unemployed people to local associations who can prepare them to re-enter the open labour market. Poland could create local committees, made up of public employment services, associations, local elected officials and other actors, for the long-term unemployed and economically inactive. Committees identify those who wish to work, build their skills and progressively seek out opportunities in the open labour market.
Strengthen existing roundtables to develop measures to support a fair digital transition. The existing Social Dialogue Council that aims to foster a dialogue between social partners and the Polish government provides an opportunity to plan thematic work sessions around the digital transition.
Consider a comprehensive investment to retain older workers in the labour market, including in skills, health, work organisation and working conditions. One opportunity is to create an advisory body to support the labour force participation of older people. The main task of the body would be to improve the coordination of actions undertaken by different Ministries. Representatives of employers and trade unions could be invited to participate. A new programme could be developed to co-finance activities undertaken by entrepreneurs to extend the working life of their employees. These activities could be co-financed from ESF funds.
Place-based policies could support regions such as Silesia to manage the green transition and to mitigate the risk of a rise in economic inactivity. Following international best-practice examples, training programmes offered by Polish regional employment services could start to integrate “green skills” development. For example, in the construction sector, training could include sustainable building and energy efficiency methods.