Why you should care

Poland was once a shining example of postcommunist success. Now a lackluster workforce is dampening its prospects.

How long will Poland remain the economic darling of Europe?

Sure, it managed the transition from communism to capitalism with unusual grace, and yes, it glided through the financial crisis with barely a scratch. Yet, even as its economy is forecast to grow, this Baltic Sea nation faces an issue that experts say could hurt its prospects for decades to come: an aging, shrinking labor force that experts call “a demographic crisis in the making.” The trend is worse than in most of the developed world — and serious enough to imperil Poles’ long-held dream of achieving the same living standards as in nearby Germany, France and Scandinavia. Without having to move there.

Poland’s labor woes are visible in every segment of the population. Relatively few women work outside the home. The retirement age is low. It’s not particularly welcoming to immigrants. And young people continue to flee in droves for better futures elsewhere in the EU. For Ryszard Petru, a noted Polish economist who spoke with OZY at a buzzy Starbucks in Warsaw, all of this adds up to an economic storm in the making. If the Central European powerhouse doesn’t figure out a way to engage more of its labor force, and keep more of its people at home rather than fleeing to Western Europe, “there’s going to be a very strong pressure on public finances and the economy as a whole,” warns Petru.

… a setback for a government hoping people would return home as Europe’s economy sank and Poland’s climbed.

Start with the issue that some 2 million Poles live and work outside of Poland. That’s about the population of Qatar, the world’s richest country on a per capita basis, and double the population of Fiji. In other words, enough people to make an economic impact, and enough to raise public alarm too. Last month, Polish newspapers gave top billing to the latest labor force numbers from Eurostat — 36.5 million — while noting that the Polish government pegs its country’s population at 38.5 million, because it counts Poles living in countries like England, Ireland and Germany too. Eurostat’s calculation suggests a smaller labor force, a setback for a government hoping people would return home as Europe’s economy sank and Poland’s climbed.

Other issues are at play. Fewer than 60 percent of Poles are employed on a full-time, long-term basis, says the Organization for Economic Cooperation and Development (OECD), which blames that low figure on certain structural issues, including difficulty hiring and firing and starting new businesses and a farming policy that encourages unproductive, small-plot agriculture. Female employment hovers at just around 50 percent. Those who are employed are primarily low-cost laborers, which German companies and a growing number of multinational corporations have taken advantage of, driving the country’s recent economic success.

And as is the case in much of Europe and the rest of the developed world, Poland’s population is aging. What’s particularly worrisome, though, is that the country’s population is aging at a faster pace than almost all other European countries, a key factor that the World Bank says could cause “sharp declines in long-term growth potential.” People here retire relatively early — at 60 years old. While the government has begun enacting policies to raise this to age 67 by 2020 for men and 2040 for women, the OECD has recommended accelerating that time frame, warning that the current pensions scheme “is expensive and might undermine work incentives.” What’s more, the OECD notes, Poland’s birth rate is lower than all but a few other countries in the developed world.

Poland needs to lure back some of those who’ve moved abroad, because “a lot of people have left.”

For years, Poland has been the envy of Europe. It was the only EU country that avoided a recession during the financial crisis, and even as much of the continent is contracting, it’s forecast to grow a decent 3 percent this year and next. In Warsaw, which native Varsovians say is a completely different place than just five years ago, there’s an increasingly crowded café culture with Western coffee chains and local kawiarnia sprinkled along the trendy avenue Nowy Swiat — as well as a new, gleaming skyline that lights up Poland’s capital at night. And, yes, the country is still well ahead of Eastern Bloc contemporaries like Hungary and Slovakia in its transition to a modern market economy.

But to continue with its current economic growth, Poland needs to lure back some of those who’ve moved abroad, one young Polish diplomat told OZY. “A lot of people have left,” he lamented. Enticing them will require improvements in the quality of life here, with shorter workdays, state-of-the-art facilities for technology and research workers as well as more comfortable, affordable homes for people to live in. Vibrant cities and towns that appeal to young people — beyond just Warsaw and Krakow in the south — are another must. “Last but not least,” says Petru, “we have to be open to migration.”

people walk in front of a bank in Poland

A branch office of Poland’s Bank Pekao SA in Kraków.

Source ZUMApress

That means attracting Romanians, Belarusians, Ukrainians and others to its east, in the same way Western Europe has lured away Polish citizens. With Ukraine’s conflict with Russia still raging, and no signs of stability on the horizon, Poland may indeed become an increasingly appealing destination for migrants from that part of the world. Building a labor market — and a society — that can bring everyone into the fold will be the country’s next big test.

This OZY encore was originally published Nov. 12, 2014.

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