Pragmatism in Poland?

By Claus Vistesen


Cross Posted From Demography Matters


Well, it certainly seems as if something has dawned on somebody in Poland.

Poland is loosening its visa restrictions on workers from Ukraine, Belarus and Russia in order to ease a labor shortage in the farming and construction sectors, the Labor Ministry said Wednesday.

New rules go into effect this Friday, slashing the cost of work visas for citizens from the three former Soviet republics from 900 zlotys (US$330; €240) to 100 zlotys (US$37; €27), and easing bureaucratic restrictions, the deputy minister of labor, Kazimierz Kuberski, told the news agency PAP.

Under the new rules, workers would be granted three-month work visas upon presentation of a letter from a Polish employer.

"Because of the needs of Polish economy, we decided to open our job market in all sectors," Kuberski said.

Despite a jobless rate of about 13 percent, the European Union's highest, Poland is suffering a labor shortage that comes amid a booming economy desperate for construction workers.

The labor shortage has been exacerbated by the departure of hundreds of thousands of Poles to wealthier European Union countries for higher wages since the country joined the EU in 2004.

For a more comprehensive account of the situation in Poland I did a review and preview not too long ago over at my own blog. The main point is I think that while Poland's unemployment rate is still set in double digit territory the labour market is already suffering in key areas such as contruction. Furthermore, I would also guess that other sectors are lacking too. But where are all those Polish people going then? Well, it is of course difficult to give a comprehensive account but I can say that we are getting an awful lot of them in Denmark which is welcome news for our construction industry which indeed also is suffering from labour shortages but not, as it were, for the construction industry in Poland. The chart below gives a solid indication of the rise of the Poles in Denmark ...

Whether this surge signifies permanent placement is clearly an important question to answer but it is important to remember that if the economic situation in the home country deteriorates there could be a strong lock-in factor for the people who are living abroad to stay.

We are not quite done with Poland and Eastern Europe yet and I don't suspect we will be soon. As such, this is very much an ongoing (fast) process both in terms of what actually goes on the ground in CEE economies but also when it comes to our investigation of the matter. In the post below, I noted briefly how Poland is now taking concrete steps to address the issue of labour shortage. This piece from Ukrayinska Pravda further elaborates ...

Polish government facilitates entry in the country for immigrant workers from Ukraine, Russia and Belarus. It was announced by the deputy Minister of labor and social policy Kazimezh Kubersky, reports Interfax-Ukraine. According to his words, on July 20 a respective decree comes into force allowing the residents of these three countries work “in all sectors” of the national economy. When making a speech at the press conference Mr. Kubersky explained this decision by growing demand for workforce caused by economic growth. According to the estimates of the Ministry of Labor, Poland needs 500 thousand foreign workers annually, predominantly in agriculture and construction fields, and qualified engineers and health care workers are also in big demand.

According to the new rules, Polish enterprises get a right to employ immigrants from Ukraine, Russia and Belarus twice a year for the term of up to three months.

One thing which stands out I think is this number flung out by the Ministry of Labor which indicates that Poland needs about half a million workers annually. Now, as Edward points out to me in a mail it is difficult to say exactly what this means. Are we talking about a cumulative number here or what? But given the fact that human capital is a regionwide scare resource, and given the fact that many a ministry of labor might do some pocket calculations of their own across the region, it will at some point, I think, be difficult to see where the labor is to come from. Remember also here that while we could narrate this as a shortage of labor it is perhaps more a shortage of labor with the necessary skills we should be talking about. In this way there is a fundamental mismatch on the labour market (skill mismatch) as well as labor force participation rates across gender and cohorts could be better. The simple point we are making is however that in order to solve these issues you need time and time is exactly what these economies don't have. It is then here that the effects of strong outward migration to the West as well as a region wide population pyramid inversion as a result of a fertility collapse in the 1990s come in all this could end up being a sinister vicious circle if it is not already.

Moving back on track with Poland there is also the issue of the rather large unemployment rate coupled with mounting evidence that labour shortages are pretty acute. In short; something don't quite add up. However, the following snippet might help shed some light on this.

Warsaw, About Poland 29 January, 2007 Poland’s Minister of Labor says 30% of the unemployed do not want to work and that their files should be moved to a separate administrative unit. The Ministry would not spend time trying to help them to find work. They would simply continue to get benefits and the Ministry could spend more time helping those who want help.

Currently the unemployment offices spend a lot of time doing paperwork. Getting those who don’t want to work out of the system could reduce the paperwork load. The goal of the Minister of Labor, Anna Kalata is to allow the unemployment offices concentrate on helping those people who actually want work. Under the proposed change, those who refuse retraining or refuse job offers 2 or 3 times would be considered as not wanting to work. Their files would be essentially ignored. Under the Polish law, after two years people are considered as permanently unemployed and they stop receiving unemployment benefits. But they continue to get free health insurance.

The system is very convenient for those who run their own unregistered businesses. And the new change will make it much easier for them.

Even from this rather crude evidence it seems clear that the official unemployment statistics from Poland are much more opaque than we could perhaps have expected. Finally, there is this small piece from the Guardian which notes how Poland is looking for labor from other places than her peers in the CEE. As such, both construction workers from India as well as convicts are being considered ...

And so Poland has started to look elsewhere for the bricklayers, roofers, fitters, crane operators and bulldozer drivers who can throw up three stadiums, hotels, airports and hundreds of miles of motorway in quick time. It has found the answer: India.

"There are severe discrepancies in our labour market," said Poland's labour minister, Anna Kalata, who recently travelled to New Delhi to sign a memorandum of understanding with India to entice workers to come to the former eastern bloc country to fill the gaping hole. "The need for labour is particularly acute in the construction sector in the run-up to Euro 2012, and we need you," she told Indians. "The fact that the Polish economy is growing at a rate of over 7% is making the problem even more acute."

(...)

The shortage is so dire that the authorities are even reportedly considering using up to 20,000 convicts, under armed guard, to kick-start the construction. The problems are manifest in Warsaw, where construction projects dot the landscape but work proceeds at a ponderous pace.

And please also note this last paragraph ...

Some still hold out hope that at least some of the emigrants will return, enticed by the ever-increasing wages, so that the country can avoid turning - for the first time in its history - into a land of immigration. "But these hopes won't be fulfilled as long as the west remains more attractive," said Emil Szwezda, an analyst.

Now, we have already opened up the discussion on this issue in the post below. In general it is clearly difficult to say but given the outlook for the continuation of catch-up growth as well as the current wage wedge between east and west you cannot but think that the expecations of a reversal of the migration flows remain a fool's hope at best. An important qualifier to note here is of course the flow of remittances which in themselves represent a sort of proxy for how emigrating labor still contribute to their home countries' economies. However, could we not perhaps dig up some microevidence regarding the determinants of whether migration is permanent or not? Well, as it turns out we might be able to use this one ... (hat tip; IPEZone);

In this paper we analyze the demographic factors that influence the migration dynamics of recent immigrants to The Netherlands. We show how we can allow for both permanent and temporary migrants. Based on data from Statistics Netherlands we analyze both the departure and the return from abroad for recent non-Dutch immigrants to The Netherlands. Results disclose differences among migrants by migration motive and by country of origin and lend support to our analytical framework. Combining both models, for departure and returning, provides the probability that a specific migrant ends-up in The Netherlands. It also yields a framework for predicting the migration dynamics over the life-cycle. We can conclude that for a complete view of the migration dynamics it is important to allow for both permanent (stayers) migrants and temporary (movers) migrants and that return from abroad should not be neglected.

I will have more to say about this paper later.

Update

Just taking the liberty of updating Claus's post here. If anyone is skeptical, and thinks that Claus and I are exaggerating the significance of all of this, just check out this link from News Bulgaria (which reproduces an article which previously appeared in the WSJ), it may help put your doubts to rest. And please note that while many articles now refer to ageing workforces here, few have yet drawn the link back downstream to the longer term fertility issue which now underpins it.

Edward

Ukrainian Workers Headed For Poland?

This from Ukrayinska Pravda:

Poland Facilitates Entry for Ukrainian Workers


Polish government facilitates entry in the country for immigrant workers from Ukraine, Russia and Belarus.

It was announced by the deputy Minister of labor and social policy Kazimezh Kubersky, reports Interfax-Ukraine.

According to his words, on July 20 a respective decree comes into force allowing the residents of these three countries work “in all sectors” of the national economy.

When making a speech at the press conference Mr. Kubersky explained this decision by growing demand for workforce caused by economic growth.

According to the estimates of the Ministry of Labor, Poland needs 500 thousand foreign workers annually, predominantly in agriculture and construction fields, and qualified engineers and health care workers are also in big demand.

According to the new rules, Polish enterprises get a right to employ immigrants from Ukraine, Russia and Belarus twice a year for the term of up to three months.

With this aim a facilitated visa procedure is envisaged in Kyiv, Moscow and Minsk consulates.

Deputy Minister noted that even though the decree concerns three countries, at first it is planned to mobilize cooperation efforts in this field with Ukraine and only then extend the new rules to Russia and Belarus.

According to previous reports, Ukraine and Poland won the bidding process for common holding of Euro 2012 football championship and it was forecasted earlier that Poland may facilitate entry for working immigrants, in particular from Ukraine, for the reason of lack of its own workforce in the course of preparation for football championship.

Poland Ranked No 7 Worldwide for FDI

From Poland:

Poland ranked No. 7 among top worldwide FDI investment draws – Ernst&Young
16:05 03.07.2007
wtorek

Poland is now the world's seventh most attractive destination for foreign direct investment (FDI) – although the country is losing ground to attractive economies in Asia, according to a report by Ernst & Young and the Polish Information and Foreign Investment Agency (PAIiIZ), presented Tuesday.

"This is another year where we are one of the world's top 10 most attractive countries," said Agnieszka Talasiewicz, Ernst&Young partner for tax law, during a Tuesday press conference.

Poland was ranked No. 5 in 2006. The released report compiles information included in the annual Ernst & Young European Attractiveness Survey for 2007 with hard figures for 2006 provided by PAIiIZ.


REKLAMA Czytaj dalej



Ernst&Young based the study on the opinions of 809 international "decision makers," mostly from Europe, but also from the United States and Asian countries. FDI figures came from the company's database, which includes the results of monitoring of foreign direct investment projects.

Within Europe, which is seen as the world's most attractive region for investment, some 18% of respondents said Poland was the most likely destination for future operations. The country maintained its No. 2 spot in terms investment attractiveness in Europe, behind neighboring Germany with 20% of votes cast and ahead of the Czech Republic, whose popularity is growing, with 13% support.

The report shows, however, that European markets are beginning to lose out to more attractive economies in Asia.

Other factors may also undermine Poland's position in the future, the report reads. Among the top 15 European states for FDIs projects in 2006, Poland occupied the sixth place with 152 investments, compared with Britain, which held the top spot with 686 projects. In terms of the number of projects, Poland's result last year dropped 16%, and it also declined when compared to 2005 when it had 180 foreign direct investment projects.

Once known for low labor costs, Poland has also seen a steep increase of salaries of more than 8% since the beginning of the year. Moreover, companies are struggling with shortages in skilled labor force, as the unemployment rate continued on a downward path to 13% in May from more than 20% in January 2004.

FDI projects also contributed to the decline of unemployment Poland. In 2006, Poland maintained its lead in Europe as the number one destination for job creation through FDIs, with 31,115 newly created jobs from 37,745 positions the prior year.

"While Central and Eastern Europe attracted only 26% of investment projects [in Europe], they benefited from 51% of the new jobs created by foreign investors," the report reads. "This represented an average of 217 jobs per project, compared with 64 jobs per project in Western Europe. Poland was the largest creator of FDI jobs, with almost 15% of the total."

The FDI workplace figures for Poland resulted from a high number of labor-intensive industrial investments, which accounted for 65% of all FDI projects in 2006. Robust development of the manufacturing sector contradicts, however, the country's plans to switch on the highly advanced technology investments and research and development (R&D) centers, the report said.

"High-technology projects are a priority for us and this direction is unlikely to changes for years ahead," said Pawel Wojciechowski, Chief Executive Officer for PAIiIZ. "So far, Western Europe has attracted much more technologically advanced projects, and we're making our first steps in this area. This is the main challenge ahead."

Ernst&Young's Talasiewicz said Monday that to maintain its strong position, Poland should not only put more efforts into creating and promoting an attractive image of its economy abroad, but also improve the legal environment to make it more transparent, reduce bureaucratic procedures and develop its transport infrastructure, which 54% of respondents pointed as the factor playing the most important role for making decisions about investment destination.

Poland and The Euro

Breaking with its tradition of strongly advocating Poland's adoption of the euro, Poland's central bank under its new governor is to play a more neutral role.

According to press reports, Slawomir Skrzypek, who has been governor for just over six months, is creating an office to study the costs and advantages of joining the eurozone. Pol­and's finance ministry says Poland will meet the Maastricht criteria for joining by 2009 and according to Mr Skrzypek the earliest possible date for Poland adopting the euro is 2012 or 2013.

"I would like for a complete report treating this issue to arise in Poland and to try and look at all aspects of this issue and to try to reconcile as much as possible the opposed sides," he is quoted in the Financial Times as saying. "I think in order to achieve that, the bank at this stage should avoid becoming engaged on any side of the argument."

Mr Skrzypek's appointment in January was controversial. He is not an experienced economist and was chosen at the last minute after other candidates had been vetoed by President Lech Kaczynski and his twin brother Jaroslaw, the prime minister.

Mr Skrzypek's approach to the euro marks a dramatic break with the thinking of his predecessor, Leszek Balcerowicz. The former governor argued it made sense to remove as many fiscal policy levers as possible from the hands of Polish politicians.

"Until now the national bank has taken a very decisive and single-minded position, being de facto a side in this conflict,"........ "This sort of a decision should not be about breaking anyone; it should be about creating a consensus."

Mr Kaczynski, a political ally of Mr Skrzypek, has called for a referendum to be held on Poland's eventual accession date, and frequently identifies euro adoption as linked to price in­creases and other negative phenomena. Poland agreed to adopt the euro after joining the European Union in 2004 but has given no date for its adoption.

Mr Skrzypek is also seems to be more of an interest rate dove than his predecessor, who was one of the leading hawks on the 10-member interest rate setting monetary policy council. So far Mr Skrzypek has not been recorded as having once voted to raise rates, although the council as a whole raised rates, which now stand at 4.5 per cent, by a quarter point in April and in June. This week the council held rates steady but many analysts expect another increase in August or September.

Poland's economy grew by 7.4 per cent in the first quarter but growth in the second quarter is expected to be closer to 6 to 6.5 per cent. Unemployment has fallen to 12.4 per cent and is no longer the highest in the EU. Corporate wages are growing annually by 9.3 per cent. Inflation is now 2.6 per cent, just above the bank's 2.5 per cent target rate.


According to said Mr Skrzypek:

"

You can't say that the Polish economy is overheated. The wage increases are an area of concern, but it is a part of nominal convergence and it's not like what we're seeing in other new member countries because we are still seeing single digit salary increases,

"

He called the last two interest rate increases "an important pre-emptive strike to the economy".

Mr Skrzypek would not speculate on future rate rises, but did say he felt that, except for possible short-term movements, inflation would not stray beyond the bank's target range of 1 percentage point above or below 2.5 per cent.

Since becoming governor Mr Skrzypek has kept a fairly low profile.

Mr Balcerowicz, in contrast, was famous for his altercations with politicians and tried to prod the government to reform Poland's bloated public finances and undertake other reforms.

Straight Talking?

"I agree with the opinion that conditions in the economy support all sorts of reforms, including public finance reforms," Mr Skrzypek said. "But out of respect for the independence of the institution I lead, the national bank should not publicly express an opinion in this area."


FT interview with Slawomir Skrzypek.

The FT on the appointment of Slawomir Skrzypek.

FDI In Poland

In the BBV today:

Poland attracts record FDI in 2007 first five months


02 Aug 2007
bbj.hu

Poland attracted $6.4 billion worth of foreign direct investment between January and May this year, beating all records for a similar time period in previous years, Warsaw said Thursday.

The Polish Information and Foreign Investment Agency (PAIiIZ) said that during the period, the PAIiIZ facilitated 31 foreign investment projects, expected to create a total 10,500 jobs. Investors from the US topped the list, with others from Japan and Germany coming a close second. Investments in the electronics, automotive and service centre sectors were the most popular. (monstersandcritics.com)