Friday, July 20, 2007

More on Poland ...

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.


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.



Anonymous said...

How the changing demographics are going to affect the trades is something that interests me for obvious reasons. Even here in America we are starting to see a shortage of skilled labor though nothing like what you are talking about in Eastern Europe.

In my area, they advertise on the radio for people willing and able to do roofing work and a local heating company has sent out a mailing offering to pay people to learn how to do HAVC work for two years in a row. Yet listen to some people talk and you would think that the Mexican are stealing all of our jobs.

On a more personal note; to get the unionized job that I hold now, men of my father's generation had about twenty years of working experience or so. But if you subtracted twenty years from my life, I would still be in second grade!!!

Scott said...

It seems to me that potential Indian guest workers might prefer Poland to the Gulf states, which has been a prime source of work for expatriate Indians. I have a hunch that the Indians would experience fewer racial issues in Poland than in the Gulf states.

Aslak said...

If Poland really wants to attract labor, I don't think they'll have any problems doing it. For a conservative, Catholic country like Poland, Latin America and the Phillippines immediately spring to mind as potential prime candidates. I think the real question is whether Poland is willing to make the effort required. Then again, in a few years they may not have any choice.