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The economic crisis and social dialogue in Poland

The economic crisis and social dialogue in Poland The economic crisis impact on industrial relations national systems: Policy responses as key recovery tools Jan Czarzasty, Dominik Owczarek Sofia, 16 November 2012. ECONOMIC SLOWDOWN rather than economic crisis. Success factors:

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The economic crisis and social dialogue in Poland

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  1. The economic crisis and social dialogue in Poland The economic crisis impact on industrial relations national systems: Policy responses as key recovery tools Jan Czarzasty, Dominik Owczarek Sofia, 16 November 2012

  2. ECONOMIC SLOWDOWN rather than economic crisis

  3. Success factors: • High mobility of polish entrepreneurs (transition period, the fluidity of the market and changes in the legal environment) • Acceptance of flexible labour conditions of polish employees • Implementation of the Structural Funds (EU) • Stable situation of banks (conservative and not innovative banking system) • Public debt thresholds in the Constitution (1997) and the Public Finance Act (2009) - 55% of GDP

  4. Social manifestations of the crisis BUT • Rise of unemployment, esp. among young people • Rise of share of the NEETs (not in employment education and training) group

  5. Social manifestations of the crisis BUT • Halt of real average wage increase • High share of temporary and civil law contracts

  6. Crisis in public finances • Growth of budget deficit (until 2011) • Growth of public debt

  7. Social dialogue in the times crisis Two phases: 1. Beforethe anti-crisislegislation the early period of global recession (late 2008 through 2009) marked by rapid activation of social dialogue both in bi- and tripartite configuration, 2. Afterthe anti-crisislegislation from late 2009 onwards, with growing désintéressement in social dialogue on the part of government, which instead turned towards unilateral decision-making as far as anti-crisis policies are concerned.

  8. Anti-crisis package (2009) • A. Pay and social security • Programme of crisis social support, in particular, for the least affluent families, and increasing social welfare benefits in response to the rising number of redundant employees; • Tax exemption of allowances paid by trade unions and benefits from enterprise social funds; • Exemption of vouchers convertible to goods or services from personal income tax; • Repealing the Act on Negotiation System of Fixing the Average Pay Growth in Corporations and revoking the Act on Remuneration of Management Executives in State-owned Companies (stipulating a “salary cap”); • Gradually increasing the national minimum wage up to the level of 50% of an national average pay. • B. Labour market and employment relations • Introduction of a 12-month working hours settlement period (with limitations applying to employers suffering from negative effects of the crisis); • Introduction of enterprise training funds; • Rationalizing 24-hour work cycle in the context of working hours settlement period; • Social packages as a source of labour law; • Flexible working hours as way of reconciling family and occupational duties; • Stabilising employment with constraints on fixed-time employment contracts; • C. Economic policy • Introduction of accelerated amortization; • Subsidized employment as an alternative to group dismissals.

  9. Anti-crisis legislation (2009-2011) – genesis and evolution • Act of on alleviation of economic crisis effects on employees and employerspassedintolegislation on 1 July2009. • due to expire at the end of 2011 • targeted ‘entrepreneurs’ only, • two categories of potential beneficiariesnamed: • all entrepreneurs, • entities in ‘temporary economic difficulties’, initially defined as “decrease in sales by at least 25% experienced over three consecutive months after 1 July 2008” (the period of reference against which the decrease would be calculated comprised the same three months between 1 July 2007 and 30 June 2008), in October 2010 the threshold was lowered to 10%. • ‘Entrepreneur’ was defined as any individual or legal person who conducted economic activities on their own.

  10. Anti-crisislegislation (2009-2011) – the measures • Working time • Extending working hours settlement period to 12 months • Flexibilisation of daily working time • Working time reduction • Unlimited number of fixed-time employment contracts allowed for up to 24 months • Public aid • Support to employees • Support to employers • Supporting vocational training and human capital development • Co-financing the costs of vocationaltraining for employees • Co-financing the costs of post-graduate courses at university level for employees • In the event of the employer being granted support, Labour Fund might also participate in the costs of scholarships and social security dues paid from such scholarships

  11. Anti-crisis legislation (2009-2011) – the effects: example of the “subsidized employment” measure

  12. Fiscal instruments - Convergence Programme (2004 – until now) • Introduction of expenditure disciplinary rule • long term budget planning also in local governments, • investing surplus funds of local governments in the account of the Ministry of Finance, • introduction of individual debt limits for particular local government units, establishing of limits for new spending in local government, • introduction of conditional increases in VAT rates depending on the level of public debt (Increase of VAT tax up to 23% (from the level of 22%) and up to 8% (from the level of 7%) in case of lowered tax threshold for following three years, 2011)

  13. Fiscal instruments - Convergence Programme (2004 – until now) • freezing of wage bill (fundusz płac) in the most public entities • reduction of spending on some, low-effective labour market activation programs • reduction of funeral allowance (since march 2011) • increase of excise tax on tobacco products • liquidation of tax relief on bio-components in motor fuels • introduction of cash registers for lawyers and doctors operating their own practice • reduction of entitlement to VAT deduction in case of purchase of cars with trucks certification and reduction of entitlement to VAT deduction for motor oil for such cars • LABOUR FUND FREEZE (2011) • Over 5 bn PLN (1.2 bn EURO) • 500 m PLN (120 m EURO) unblocked in July 2012

  14. PENSION SYSTEM REFORM (2011 – 2012) • Open Pension Fund reform(2011) • Reduction of the pension contribution from the current 7.3% to 2.3% initially and ultimately-from 2017- to 3.5% • Reduced contribution is transferred to Social Insurance Institution (ZUS) • Retirement age reform(2012, in force: 1st January 2013) • Rise up to 67 years of age for both men and woman • Increase by four months every year • Full introduction into force for men by 2020 and for women by 2040 • Partial retirement – 50% of pension: • women: 62 years of age, after 35 years of contribution period • men:65 years of age, after 40 years of contribution period • Retirement age of uniformed services (2012) • 55 years of age, after at least 25 years of service • amount of pension will depend on salaries in the 10 selected but subsequent years (currently it is calculated based on the last salary). The maximum pension will reach maximum 75 % of last salary.

  15. RETIREMENT AGE REFORM (2012) • History: • Announcement of retirement age reform – Prime Minister exposé, October 2011 • Legislative process March- June 2012 • Hasty public consultation in the Tripartite Commission – no consensus • Act on rise of retirement age signed by the President 1st June 2012 • Reform comes into force: 1st January 2013 • Massive protest against rise of retirement age • NSZZ ‘Solidarity’: • www.stop67.pl • 2 m signatures calling for referendum (requirement 0.5 mln signatures to introduce a referendum to be voted in the Parliament) – rejected, April 2012 • Protests: in front of the Prime Minister’s offices, Parliament, the Presidential Palace – following the legislative path of the draft • Alternative proposal addressing demography and public finances problems (details in report) • OPZZ proposal: to retire after 35 years of work for women, and 40 years for men • Public opinion (CBOS, March 2012): • 84% - against rise of retirement age for men, • 91% - against rise of retirement age for women

  16. Conclusions • Economic slowdown BUT social crisis and crisis in public finances • Anti-crisis package - success of autonomous social dialogue in Poland • Désintéressmentof the government with social dialogue • Effective financial policy BUT austerity measures, social costs

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