Labor Market Reform in Poland

Labor Market Reform in Poland was adopted in 1989, right after the state socialism had collapsed. The main aim of the labor market reform in Poland was to increase the rate of employment.

The main components of the labor market reform programs were macroeconomic stabilization and price stabilization and privatization of the state firms. Initially these policies had not got much success; the Gross Domestic Product fell drastically and the unemployment rate increased as well. A fall in the public revenue, increasing expenses on pensions and unemployment benefits disturbed the macroeconomic stability. So after 1992, some new reform plans were implemented.

• Reform Phases:

  Sectoral Changes of Employment:

  The economic reform in Poland had displaced the labor market. This displacement can be measured by the sectoral changes in the structure of employment. In Poland, displacement of employment was made relatively slowly in the agricultural sector than the service. Huge structural changes dislocated the labor force in a large number. At the time of the labor displacement the labor market flexibility is very important for the labor to adjust.

  Size Distribution of the State Enterprises:

  The number of small and medium scale enterprises were increasing in Poland and by the end of 2001, 3.375 million enterprises registered themselves of which, maximum enterprises had less than ten workers only. The remaining state enterprises’ shares were growing rapidly with their size.

  Development in the Labor Market:

  The changes in labor market in Poland had gone through four reform periods. The first one was between 1990 – 91 which resulted in an increased rate of unemployment. The second period started from 1992 and ended in 1993 which was not able to increase the rate of employment too much. In the third period that comprised the years 1994 – 97, the employment rate rose slowly which was followed again by a low rate of employment in the fourth period (1998 – 2003).

  Labor flexibility was one of the main target of the labor market reform in Poland. To make the labor market flexible the Polish government increased the availability of the part time labors and made the hiring process simple and easy. Part time employment in Poland was regulated by the general rules of employment contract.

  Besides, this type of employment, a substitution of the contractual system had been introduced for employment contracts in Poland due to high social security contributions costs. In this case, the labor worked like a self employed person.

  Labor Law reform:

  The labor laws of Poland had been through several changes during the nineties. Labor law reform had a great impact on the labor market reform, and it helped to reduce the unemployment rate in Poland.

• Effects of Labor Reform:

  Through labor market reform,they were trained to increase their probabilities to get employed. Therefore the rate of employment increased in Poland. Therefore, a positive economic growth had been achieved and the government’s revenue also increased, which made Poland a developed economy.