World Bank urges reforms to stave off rising unemployment
There are no quick and easy solutions to Poland's growing joblessness, the World Bank (http://www.worldbank.org) said in a report last week. But a government commitment to tighter budget controls, lower job and payroll taxes, looser labor regulations, and better education and training are part of the policy mix needed to address the problem, it said.
The country's unemployment rate hit 15.9% at the end of March, bringing the number of Poles looking for a job to 2.9 million, according to the Central Statistical Office (GUS).
The Sejm (http://www.sejm.gov.pl) last week began discussing government proposals to boost employment.
On Friday, MPs listened to the first reading of legislation related to unemployment and officials have introduced proposals on several changes to the tax code, including easing the payment system for small businesses, phasing in lighter income and corporate taxes and less-bureaucratic labor regulations for small companies.
Bills that were read Friday would change the way foreigners receive work permits, change the schedule for social security (ZUS) payments and allow individuals receiving pre-pension benefits limited work opportunities without losing those benefits.
These bills will definitely be passed, said Stanislaw Szwed, vice chairman of the Sejm's Social Policy Committee, which reviews the legislation, and a member of Solidarity Election Action (AWS).
Measures introduced to make the labor code more liberal for companies employing fewer than 50 people do not have Union support and will likely die, he said. The measures would have made it easier to hire workers on temporary contracts, made it easier to fire workers and limit sick leave. Szwed said his committee began discussing additional policy changes Tuesday and is likely to consider government proposals to cut tax rates, a measure he said is more important than labor code changes.
"The pre-election period is not the best time to introduce revolutionary changes," he added, referring to parliamentary elections scheduled for September.
Bartlomiej Piotrowski, a government adviser on labor and social policy, said government actions have limited the rate of unemployment growth, but he admitted more must be done. The pressure of public opinion should spur Parliament to enact a slew of government proposals hopefully before its summer recess but he said some might be left for whoever wins the election.
As for the World Bank report, Piotrowski said some of the proposals, such as lowering the minimum wage in poorer areas, are controversial and would be difficult to implement, though others are in line with government thinking.
Poland's economy is undergoing a dynamic phase, with significant job creation, according to the report, but that pace is not matched by job losses. The steady rise in unemployment stems in part from Russia's 1998 financial crisis, which forced companies to restructure and began pushing unemployment higher in 1999, but is compounded by lax fiscal policies and high interest rates, the bank said.
Poland's government also needs to limit barriers in the transition from old to new jobs. Policy prescriptions include lowering minimum wage in poorer regions, lowering taxes on labor and moving away from vocational training to general education in skills that are transferable and in demand.
The bank also recommended proceeding with proposed changes in the labor code that will affect employment in firms with fewer than 50 people, make temporary work contracts easier to execute, and allow substitute employees.
The bank report also acknowledged the principle role of the private sector in creating jobs almost half of all new jobs are created by business start-ups and called for lower costs to start and run a business. A transparent business environment, a simplified tax system and high standards for public administration are necessary, the bank said.
