For richer, for poorer

With continually strong economic performance, Poland’s wealth levels are increasing by leaps and bounds. And while the latest data points to significant disparities at local level, the country manages to remain inclusive, particularly for the mobile youth

By Beata Socha

With 4.6 percent in GDP growth last year, Poland’s economy made another leap towards catching up to its Western neighbors. In fact, last year Poland was the most successful country globally in closing the wealth gap, according to a Credit Suisse report, at least in percentage terms. While wealth levels increased between 2016 and 2017 by 6.4 percent globally, Poland’s wealth surged by 18 percent, or $131 billion in absolute terms. The main reason for the increase was rising equity prices: market capitalization grew by 38.4 percent between 2016 and 2017, while the house price index increased by 9.7 percent. According to the World Bank’s report: “The changing wealth of nations,” Poland’s total wealth per capita amounts to $154,932 – below the global average of $168,580. Here wealth means capital, land, resources, earnings and foreign assets. By that measure, Norway is by far the wealthiest country in the world ($1,671,756 – ten times the average), exceeding even the oil paradise Qatar ($1,597,125), and Switzerland ($1,466,757). The poorest country by that metric is The Gambia, with $5,208 total wealth per capita. “Global wealth grew significantly between 1995 and 2014. Middle-income countries are catching up in large part because of rapid growth in Asia, but inequality in overall wealth persists,” the report reads.

Poverty Trap
Poland is definitely getting richer as a whole, but its least affluent citizens are also seeing improvement. Between 2008 and 2016, the risk of poverty and social exclusion decreased in Poland by 8.6 percentage points (from 30.5 percent of the population to 21.9 percent being at risk of poverty and social exclusion), marking the sharpest decrease in the EU, according to Eurostat data. Poland’s score was far better than that of the next-in-line, Latvia (with a 5.7 point drop), and Romania (a 5.4 point decrease).

Greece, on the other hand, led the ranking in the biggest growth of poverty risk, from 28.1 percent in 2008 to 35.6 percent in 2016, making it the sharpest increase in the EU (of 7.5 points). Cyprus (with a 4.4 point increase) and Spain (4.1 points) also saw a risk of poverty increase between 2008-2016, largely because of the heavy hit these economies suffered during the financial crisis. Surprisingly, even Sweden saw the risk of poverty increase (by 3.4 points).

Currently, the lowest risk of poverty and social exclusion is observed in the Czech Republic (13.3 percent), Finland (16.6 percent), Denmark (16.7 percent) and the Netherlands (16.8 percent). The highest risk of poverty and social exclusion was recorded in Bulgaria (40.4 percent), Romania (38.8 percent) and Greece (35.6 percent).

A tale of three mining cities
Despite wealth increasing, disparities in income levels are quite substantial at local level, particularly when we compare data for Polish municipalities. With average gross salary at PLN 7,170.21, the municipality with the highest monthly earnings is Lubin, located in western Poland and with a total population of 223,000. The main city in the municipality happens to be the seat of state-owned copper and silver mining conglomerate KGHM, the second largest silver producer worldwide, where the average pay is a staggering PLN 10,000 a month (approx. PLN 7,000 after tax). As many as 12,000 KGHM employees receive pay at this level.

Another mining municipality, Jastrzębie-Zdrój, the HQ of coal producer JSW, came in second, with PLN 6,131.62. Interestingly, the city was the only location where average pay decreased over the period of 2011-2016. Salaries dropped by PLN 193 overall after the global decline in coking coal prices, bringing the mining company to the verge of bankruptcy and forcing it to tighten its belt.
The third spot in income levels went to yet another mining city, Bełchatów, where Poland’s energy giant PGE has its Bogdanka mine and the average monthly pay stood at PLN 5,778.97 (all GUS data for 2016, published in early 2018).

Three state-owned mining giants – three highest earning cities. It may come as a surprise to some that Warsaw didn’t make the podium. This goes to show how important natural resources still are for the economy and how much they influence individuals’ incomes. Warsaw, while it doesn’t have much to excavate other than the tunnels for its second subway line, still managed to come in fourth in the top earners ranking, with PLN 5,739.61 – not too shabby.

Interestingly enough, the traditional division between eastern (poorer) and western (richer) Poland is less distinct. The poorest municipality in Poland was Kępno, with PLN 2,658.47 in average monthly earnings, located only 150 kilometers away from the richest, Lubin. This means that the residents of the richest area (Lubin) earn almost 170 percent more than those in the poorest (Kępno), which is less than a two-hour drive away. That is the same disparity as between Poland and, say, Kuwait, according to World Bank data.

 

 

Elite industries
Closing the income gap, and in turn the wealth gap, has been one of the key goals for many governments in developed countries. And while some are clearly doing a better job at leveling the playing field, the rising gap between top and bottom earners persists. UK-based think tank IPPR recently suggested that all UK-born citizens should receive a “universal minimum inheritance” of £10,000 as they turn 25 to help address the growing wealth inequality. This could help university graduates pay off some of their student loans or serve as a downpayment for a house. Or, as is the case for many university graduates striving to make it in fashion, media and politics, allow them to be able to afford to take an unpaid internship (some of which last well over a year) in the hopes of making a career in these highly exclusive industries. A recent exposé published in The Guardian of a training internship at Monocle, one of the UK’s most desired employers for aspiring journalists, claims that “Britain is addicted to internships. The most recent figures suggest there are at least 70,000 interns, around a third of whom are unpaid. Most work in politics, journalism, fashion and other creative fields,” wrote Amalia Illgner, Monocle’s former intern, who decided to sue her former employer for unpaid wages.

Poland is no stranger to internships, but with the unemployment levels at a historic low, employers have been struggling to fill even entry-level positions. They’ve been forced to sweeten the pot beyond the “opportunity to gain experience and make contacts in the industry.” According to wynagrodzenia.pl, the median salary for an intern in Poland stood at PLN 2,775 in January (which is more than the average earnings in the Kępno municipality).

Promised land
Unsurprisingly, large cities have been on the receiving end of young people moving in search of better career opportunities. Warsaw, for instance, is expected to grow by an additional 1.5 million residents over the next decade or so, if it is to follow the common pattern, according to which the capital city accounts for 10 percent of a country’s population. And while there is certain opposition from the city’s second or third generation residents to the “young wolves” (sometimes jokingly described as “jars” by Warsaw-born residents, in reference to meals they bring back from their home towns every weekend), the newcomers have been a blessing for the capital’s labor market. “Three-quarters of new apartments are purchased by 30-year-olds who have moved to the city,” said Marek Roefler, Warsaw-based housing developer and one of the richest Poles, in an interview with Na Temat. He also said that he couldn’t find a single plumber, electrician or tile layer from Warsaw among his staff. “All my workers are from out of town. More than that, some of them have recently moved to Warsaw permanently, because here you could find work even in the worst years of crisis, with wages much higher than elsewhere,” he added.

But what about those who remain in the lowest earning small towns and villages? Are they doomed to see the wealth gap turn into an insurmountable chasm? According to a Marcin Piatkowski, author of the recently published book “Europe’s Growth Champion: Insights from the Economic Rise of Poland,” Poland is the only European country where since 1989 all segments of the society have seen their income grow faster than in G7 countries. The reason for that is the fact that Poland has managed to remain egalitarian after the transition to capitalism in 1989. It is one of the few countries where, unlike in the US and the UK for instance, parents’ economic standing does not entirely determine their children’s future social status.

Between incomes getting higher and large cities luring hordes of young people with the promise of better career opportunities, we may expect to see many more people becoming wealthier and their birthplace hardly affecting their odds of success. At least so long as we manage to keep wealth disparities at reasonable levels. Because, while wars and revolutions have been the great equalizers that have led to the modern societies we now live in, no one wants to see this part of our history repeated.

The middle one
To better understand the gap between the haves and the have-nots, two basic figures are usually given: the mean and the median wealth per adult (calculated as the marketable value of financial assets plus non-financial assets – principally housing and land, minus debt). The mean, that is the total wealth divided by the number of adults, stood at $28,057 in 2017, according to Credit Suisse. Meanwhile, the median, which means basically “the middle one” was less than half of that: $10,302.

To understand what the disparity between median and mean signifies, picture an office with 10 employees. The lowest-earning worker makes $1,000 a month, the second one – $3,000, the third in line makes $5,000 and so on, each subsequent employee gets $2,000 more than his/her colleague lower on the pay scale. The median (the middle salary) would be exactly $10,000 in that company. But for the mean salary to be $28,000, the highest earner would have to make a whopping $199,000!

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