Great aspirations
15:11
The middle class is the driving force of the economy in any developed country. While the small-in-number and exclusive upper social milieu shop in Paris and Milan and spend their holidays in private villas on the French Riviera, it is the most numerous and relatively affluent middle class that generates most of the domestic demand
by Beta Socha
Due to Poland’s recent history, the country’s social structure is considerably different from what we observe in Western societies. For example, some 20-30 years ago, education had little to do with income and material status: a university diploma hardly increased people’s chances for advancement in the material and social hierarchy.
One could argue that 44 years of communism left Poles with modest material wealth and with an undifferentiated social structure. However, the past 25 years have seen the rise of more coherent and increasingly exclusive social classes in Poland. Family background is starting to play an increasingly important role: children born in one class are now more likely to remain in that strata throughout their lives. Climbing up the ladder is therefore increasingly more difficult.
“If we try to define the Polish middle class on an occupational and economic basis, it will encompass both small employers and self-employed professionals, such as lawyers, doctors, various consultants, as well as civil servants and the upper strata of the working class etc.,” said sociology professor Juliusz Gardawski.
No doubt, the Polish middle class is very eclectic. It also has the strongest influence on the country’s economy and political scene.
“The middle class in Poland is very significant. I think this is the best thing about Poland. In other post-communist countries, the middle class never grew to such a size and is not nearly as powerful as in Poland. Look at Ukraine, for instance,” said Arie Koren CEO of developer Okam, whose residential projects target mainly the upper middle class.
Money, money, money
Income has traditionally been the deciding criterion for placing people in different economic and social strata. But sociologist say that what really distinguishes the Polish middle class from other social groups is their need for validation – they want more than just bank statements to stand witness to their success. They want other people to be aware of it as well.
They live predominantly in large cities (in cities with a population above 500,000, spending per person was 56.8 percent higher than Poland’s average and income was 65 percent above average in 2013, according to the statistics office GUS) and most have a university degree. Most of them entered adulthood in the 1990s and early 2000s and depending on their wit and skills have already managed to accumulate sizable wealth.
They have comfortable, well-furnished apartments and some dream of or already own a weekend house somewhere in the suburbs. They don’t skimp on their children’s education, neither do they forsake life comforts and status symbols such as premium cars or expensive furniture. But they are also more adept at long-term planning, willing to forgo pleasures for the sake of financial security.
The number of high earners is definitely increasing in Poland. In 2012, 768,000 people fell into the higher of the two tax bands, paying 32 percent, reserved for those whose gross annual income exceeded the equivalent of €21,000. In 2016, that number will reach 1 million, according to projections by consultancy KPMG. It doesn’t necessarily follow that 97 percent of all Poles make less money than €21,000 per year. There is also a large number of self-employed professionals and businesspeople who pay a flat CIT rate of 19 percent. In fact, self-employed people had the highest disposable income among all groups last year, at €1,230 per household per month, 81.5 percent of which they spent.
Saving and investing
With higher earnings, Poles are saving more and more each year. GUS data show that while in 2003 households spent 95.2 percent of their disposable income, in 2013 they spent 81.7 percent. Altogether, in 1996, Poles had less than €20 billion in savings accounts, in 2013 – over €200 billion, according to NBP figures.
Poles’ accumulated wealth is still nowhere near the levels seen in Western European countries. According to Credit Suisse, only about 45,000 Poles have assets exceeding $1 million. Meanwhile, in France there are as many as 2.2 million people worth at least $1 million, in Germany – 1.7 million, and in the UK and in Italy – 1.5 million each.
No wonder then that financial services such as private banking or asset and wealth management services are more easily accessible in Poland than in the West. A Pole doesn’t need millions to become a member of the “private banking” club. All it takes is some €10,000 in savings and you can choose from asset management services offered by a dozen or so financial institutions.
Traveling in style
But it’s not only the income, education or family name that puts Poles in a given strata. Sociologists agree, that people’s lifestyle and aspirations are becoming the common denominator for social classes. What we drive, what we wear, and increasingly what we eat – makes us members of the middle class.
The car you drive is the most prevalent status symbol and Poles are choosing premium models increasingly often. Some of the popular car makes, such as Kia, Hyundai, Nissan and Fiat, recorded declines in registrations of between 6.5 percent (Hyundai) and 14 percent (Fiat) during the first six months of 2014 compared to the same period in 2013. Meanwhile, the premium segment has seen strong growth figures this year. Each of the most popular premium makes: BMW, Audi, Volvo, Mercedes and Lexus saw an increase in registration figures, some of them quite impressive (Lexus saw a whopping 195.5 percent increase), according to automotive consultancy Samar.
Where Poles go on holidays is also strongly correlated with their income. During the communist era, Poles rarely vacationed abroad, and if they did, they traveled to other communist countries, with Bulgaria being the most popular destination. Shortly after the transition, holidays abroad were often considered an unnecessary expenditure, but the sentiment is changing. Just like with cars, Poles like their holiday choices to reflect on their material status. For years, Greece gas been the most popular tourist destination. But each year, an increasing number of Polish tourists are choosing much more exotic places, like Ghana or Thailand.
After several years of thrift, Poles are finally beginning to believe the economy is back on track. This year, the average household income of families planning on going on holiday abroad is PLN 4,500 (€1,070), while in 2013 it was PLN 6,000 (€1,400), according to data released by Mondial Assistance, an insurance firm.
Poles are also choosing increasingly expensive accommodation. The share of stays in four-star hotels has risen from 37 percent in 2006 to 44 percent in 2012, while the figures for three-star hotels are showing the opposite trend (41 percent in 2006 against 27 percent in 2012, according to travelplanet.pl).
Fashion aware
What if you don’t drive a car, because your apartment is conveniently located next to the subway? One of the easiest ways to show off your material status is through the clothes you wear. The Polish middle class is increasingly aware of that and new brands keep replacing old favorites. Only in 2013, 13 new fashion brands entered the Polish market, including some premium ones, like Manila Grace, Karl Lagerfeld and Armani Jeans.
Interestingly, tailor-made designer clothes are no longer seen as a luxury commodity, available only to the very few affluent members of society, but are attracting ever larger crowds. “The group of clients who appreciate tailor-made clothes is getting bigger,” said Tomasz Ossoliński, a Warsaw-based fashion designer. “My clients represent different professions. They are lawyers, politicians, businesspeople and actors. … And they’re not only men, but often also women who like tailor-made suits,” he added.
Healthy, wealthy and young
Gym membership is another status symbol – so much that an increasing number employers include it in their job perks, right next to a competitive salary and private health insurance. Still, Poles are not a nation of athletes, as only 5 percent of the population pursues sport or fitness on a regular basis. Another 23 percent do it “with some regularity,” as data from Eurobarometer show.
“Our experience and available data show that it is 20-40-year-olds who are most engaged in sports and fitness activities,” said Tomasz Józefacki, CEO of Benefit Systems. Last year, the value of the fitness market in Poland stood at some €250 million and is expected to increase.
Physical activity is only one facet of a healthy lifestyle and a growing number of Poles are also becoming conscious about their nutrition. With a total value of €4.2 billion, the health and wellness food and beverages segment represented 21.2 percent of the total Polish packaged food and beverages market in 2013, according to data from Euromonitor International.
Analysts have no doubt that the health and wellness market has a lot of potential for growth. Last year, despite being difficult for the Polish economy, saw an increase in the the healthy foods consumer base, meaning more and more Poles visit organic food stands in supermarkets as well as specialist organic shops, a trend retailers are eager to capitalize on. Carrefour for instance is adding organic food aisles to its supermarkets in Gdańsk, Łódź and Wrocław.
Food craze
The Polish middle class is also increasingly eager to eat out. They are not afraid to experiment and prefer exotic cuisine to traditional Polish restaurants. Granted, it’s still a budding market compared to Italy or France, where eating out is part of the daily routine. In Poland, only about 3 percent of Poles, mostly those living in major cities, eat in restaurants regularly.
In 2012, Poles spent on average only 2.8 percent of their disposable incomes on restaurants and hotels, three times less than the EU average. The entire gastronomy market in Poland is valued at some €6 billion. By comparison, the French food service industry is valued at some €80 billion. But recent figures are showing some promise. In 2012 alone, 1,500 new restaurants opened across Poland, increasing the total number of establishments by some 10 percent. Even though some of that growth was the product of the football championship held in Poland and Ukraine in 2012, most of them managed to survive, which bodes well for the future of the market.
Even though internally varied and still in the early stages of development, the middle class is Poland’s biggest growth engine. They are ambitious, entrepreneurial and ready to fulfill their dreams.
“As all social groups improve their standards of living, also the aspirations and influence of the Polish middle class will be growing, further stabilizing our democratic system. It is after all the middle class, that has the largest influence on the direction in which the country is going,” said Professor Gardawski.
Varied and volatile [caption id="attachment_59202" align="alignleft" width="150"] Juliusz Gardawski[/caption] Juliusz Gardawski, director of the Institute of Philosophy, Sociology and Economic Sociology at the Warsaw School of Economics Ewa Boniecka: Who are Poland’s middle class? Juliusz Gardawski: In Poland, the middle class is far more varied and volatile than elsewhere. Generally the middle class is defined by their income. They are above the 20 percent with the lowest income and below the 20 percent with the highest income. In Germany, for example, the middle class are those with disposable income between 70 and 150 percent of the median income in society. If we try to define the Polish middle class on the occupational and economic basis, it will encompass both small employers and self-employed professionals, such as lawyers, doctors, various consultants, as well as civil servants and the upper strata of the working class etc. From the economic point of view, the most important group are entrepreneurs. Is the Polish middle class getting bigger and stronger? I think that as all social groups improve their standards of living, also the aspirations and influence of the Polish middle class will be growing, further stabilizing our democratic system. It is after all the middle class, that has the largest influence on the direction in which the country is going. So it is in our national interest to grow and strengthen the middle class. Are the divisions between different classes in Poland strong? Some sociologists say that traditional class divisions are no longer applicable, due to the technological revolution and globalization of the world economy. The divisions between groups are mostly cultural, ethnic and related to lifestyle rather than anything else. The role of big corporations and corporate culture is growing and influencing the behavior of all social groups. Your research focuses on small and medium-sized entrepreneurs. How much do they contribute to the Polish economy? Statistical research shows that privately-owned micro-firms provide about 29 percent of the gross national product, large enterprises about 24 percent and small and medium-sized firms about 19 percent. This means that big corporations are not the largest contributors to our economy. Polish entrepreneurs come from various social groups and almost half of them come from the working urban and rural class. Half of them have higher education. Some of them are also people from the old establishment, those working in high positions during the communist era, in state-owned companies. There is also a group of craftsmen who are now trying to expand their businesses. In 2010-2011 you conducted research on 70,000 small and medium-sized employers. How has this part of the middle class evolved over the past 15 years? What is interesting in comparison to my findings made in 1999-2000, is that despite their business successes and greatly improved financial standing, many entrepreneurs feel frustrated and claim that their interests are being ignored and neglected by the state. They say that big corporations have much easier access to public contracts and EU funds and that they enjoy more tax privileges than SMEs do. What is very positive is that their businesses are open to innovation. However, they do not trust their workers, they have a rather paternalistic approach to them and they are reluctant to cooperate with trade unions. Very few are members of industry and business organizations because they also do not trust them. In my view, these are the consequences of the very low level of social capital the Polish society had under communism. Polish entrepreneurs are still very self-reliant and do not believe that business and trade organization could serve their interests. They also have an ambiguous attitude towards the state. They do not trust it, but on other hand they support at least some of its involvement in the economy: social services and health care. They expect that the state will support modernization and innovation in the economy. So if we look at entrepreneurs as members of the middle class, it is a picture of a class of people satisfied with their accomplishments, yet somehow frustrated.
Varied and volatile [caption id="attachment_59202" align="alignleft" width="150"] Juliusz Gardawski[/caption] Juliusz Gardawski, director of the Institute of Philosophy, Sociology and Economic Sociology at the Warsaw School of Economics Ewa Boniecka: Who are Poland’s middle class? Juliusz Gardawski: In Poland, the middle class is far more varied and volatile than elsewhere. Generally the middle class is defined by their income. They are above the 20 percent with the lowest income and below the 20 percent with the highest income. In Germany, for example, the middle class are those with disposable income between 70 and 150 percent of the median income in society. If we try to define the Polish middle class on the occupational and economic basis, it will encompass both small employers and self-employed professionals, such as lawyers, doctors, various consultants, as well as civil servants and the upper strata of the working class etc. From the economic point of view, the most important group are entrepreneurs. Is the Polish middle class getting bigger and stronger? I think that as all social groups improve their standards of living, also the aspirations and influence of the Polish middle class will be growing, further stabilizing our democratic system. It is after all the middle class, that has the largest influence on the direction in which the country is going. So it is in our national interest to grow and strengthen the middle class. Are the divisions between different classes in Poland strong? Some sociologists say that traditional class divisions are no longer applicable, due to the technological revolution and globalization of the world economy. The divisions between groups are mostly cultural, ethnic and related to lifestyle rather than anything else. The role of big corporations and corporate culture is growing and influencing the behavior of all social groups. Your research focuses on small and medium-sized entrepreneurs. How much do they contribute to the Polish economy? Statistical research shows that privately-owned micro-firms provide about 29 percent of the gross national product, large enterprises about 24 percent and small and medium-sized firms about 19 percent. This means that big corporations are not the largest contributors to our economy. Polish entrepreneurs come from various social groups and almost half of them come from the working urban and rural class. Half of them have higher education. Some of them are also people from the old establishment, those working in high positions during the communist era, in state-owned companies. There is also a group of craftsmen who are now trying to expand their businesses. In 2010-2011 you conducted research on 70,000 small and medium-sized employers. How has this part of the middle class evolved over the past 15 years? What is interesting in comparison to my findings made in 1999-2000, is that despite their business successes and greatly improved financial standing, many entrepreneurs feel frustrated and claim that their interests are being ignored and neglected by the state. They say that big corporations have much easier access to public contracts and EU funds and that they enjoy more tax privileges than SMEs do. What is very positive is that their businesses are open to innovation. However, they do not trust their workers, they have a rather paternalistic approach to them and they are reluctant to cooperate with trade unions. Very few are members of industry and business organizations because they also do not trust them. In my view, these are the consequences of the very low level of social capital the Polish society had under communism. Polish entrepreneurs are still very self-reliant and do not believe that business and trade organization could serve their interests. They also have an ambiguous attitude towards the state. They do not trust it, but on other hand they support at least some of its involvement in the economy: social services and health care. They expect that the state will support modernization and innovation in the economy. So if we look at entrepreneurs as members of the middle class, it is a picture of a class of people satisfied with their accomplishments, yet somehow frustrated.
