EUROPEAN SOCIAL POLICY NETWORK (ESPN)

In-work poverty in Poland

Irena Topińska Agnieszka Chłoń-Domińczak

Social Europe

EUROPEAN COMMISSION

European Social Policy Network (ESPN)

ESPN Thematic Report on In-work poverty

Poland

2019

Irena Topińska Agnieszka Chłoń-Domińczak

Directorate-General for Employment, Social Affairs and Inclusion 2019

The European Social Policy Network (ESPN) was established in July 2014 on the initiative of the European Commission to provide high-quality and timely independent information, advice, analysis and expertise on social policy issues in the European Union and neighbouring countries.

The ESPN brings together into a single network the work that used to be carried out by the European Network of Independent Experts on Social Inclusion, the Network for the Analytical Support on the Socio-Economic Impact of Social Protection Reforms (ASISP) and the MISSOC (Mutual Information Systems on Social Protection) secretariat.

The ESPN is managed by the Luxembourg Institute of Socio-Economic Research (LISER) and APPLICA, together with the European Social Observatory (OSE).

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Quoting this report: Topińska, I., Chłoń-Domińczak, A., (2019). ESPN Thematic Report on In-work poverty – Poland, European Social Policy Network (ESPN), Brussels: European Commission.

In-work poverty Poland

Contents

SUMMARY/KEY FINDINGS/SUGGESTIONS ...... 4 1 ANALYSIS OF THE COUNTRY’S POPULATION AT RISK OF IN-WORK POVERTY ...... 5 1.1 Overall trends ...... 5 1.2 Determinants of in-work poverty ...... 7 2 ANALYSIS OF THE POLICIES IN PLACE...... 9 2.1. Direct policies influencing in-work poverty ...... 9 2.1.1 Personal income taxes ...... 9 2.1.2 Social insurance: contributions and coverage ...... 10 2.1.3 Minimum wage ...... 11 2.1.4 Active Labour Market Policies ...... 13 2.1.5 Lifelong learning ...... 13 2.2. Indirect policies influencing in-work poverty ...... 14 2.2.1. Early childhood education and care ...... 14 2.2.2. Long-term care ...... 15 2.2.3. Income support ...... 15 3 POLICY DEBATES, PROPOSALS AND REFORMS ON IN-WORK POVERTY AND RECOMMENDATIONS ...... 16 4 ASSESSING DATA AND INDICATORS ...... 18 REFERENCES ...... 20 ANNEX ...... 22

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In-work poverty Poland

Summary/Key findings/Suggestions There were around 1.6 million working poor in Poland in 2017, which was 9.9% of all employed persons. The factors that increase the risk of in-work poverty1 (IWP) are: type of employment, including self-employment (principally in agriculture); working on non- standard contracts; lack of education or adequate skills; and living in households with low work intensity or a relatively high number of children. Between 2012 and 2015, the IWP rate slightly increased in Poland (from 10.4% to 11.3%), after which it started to decline. The most important challenges in the area of IWP include reducing the risk of IWP among the self-employed (particularly farmers, but also those with low human capital), and limiting the use of non-standard contracts. Another policy area that requires attention is the combination of income from paid work and social benefits. This requires that the issue of tackling IWP be mainstreamed in policy debates, official documents and strategies, and that more evidence be gathered to support policy choices. The issue of IWP is not addressed directly in policy documents and instruments in Poland. The National Reform Programmes (NRPs) for Poland have raised this issue only in response to the European Commission’s recommendations (in 2013-2015 and 2018-2019). The main policy instrument in this area referred to in the NRPs is the minimum wage (MW), despite a wide range of other policy measures proposed by the social partners. The main policy measures that have an impact on the level of IWP include tax and social insurance rules, the MW, active labour market policies (ALMPs) and lifelong learning programmes. Taxes and social insurance contributions, according to research studies, have a moderate impact on IWP. The MW in Poland has been increased in recent years, which particularly affects low-wage earners. A significant increase in the MW and a minimum hourly rate for non-standard contracts were introduced in 2016. However, it is still difficult to say to what extent these changes affected the level of IWP. ALMPs are available to job-seekers who register at public employment offices, including the working poor, but the number of people using this opportunity is negligible (fewer than 20,000 people). From the end of 2017 low-income workers have been included as a target group for projects funded by the European Social Fund (ESF). Currently, there is no information available on the coverage of ESF support for these groups. Since 2014 access to lifelong learning for low-income earners has been eligible for support by the National Training Fund, but it is not widely used by the employers, due to lack of awareness of the fund and the cumbersome application procedures. Indirect policies, such as early childhood education and care and long-term care, might help to reduce IWP; however, there is no assessment of the impact of these policies. Income support measures, particularly the new family benefit under the Family 500+ programme, have also reduced the risk of IWP; but on the other hand they have led to reduced labour market activity, which might have negative long-term consequences. Many stakeholders in Poland, including social partners, NGOs and research institutions, are raising the issue of IWP, which is becoming more visible in the public debate. There is a need to mainstream the issue of IWP, and its associated challenges, in public policies in Poland, and to develop policy measures (including tax-benefit policy) targeted at reducing the number of working poor. This should be accompanied by a detailed impact assessment. Finally, monitoring of IWP in Poland should be strengthened, by developing indicators based on household budget results. More research on the factors affecting the level of IWP is also needed.

1 For ease of reading, we will refer to the notion ‘at risk of in-work poverty’, and to the indicator that measures it, using the generic term of ’in-work poverty’ (IWP).

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In-work poverty Poland

1 Analysis of the country’s population at risk of in-work poverty Although it is unemployment that often drives people into poverty, being in employment does not always allow people to avoid it. The ‘working poor’ are not a marginal group in numerical terms: in 2017 they accounted for approximately 1.6 million people in Poland, representing 9.9% of the population aged 18-64 (defined as employed but living in poor households, with disposable incomes below the national at-risk-of-poverty threshold2). The main trends in in-work poverty (IWP) in Poland, and the factors behind it, are examined in this section − based on the EU SILC (Statistics on Income and Living Conditions) statistics, supplemented with findings from national studies. This allows the main challenges in this area to be identified.

1.1 Overall trends In recent years, the extent of IWP has been changing slightly in Poland (Fig.1). Between 2012 and 2015, the in-work at-risk-of-poverty rate rose, from 10.4% to 11.3%; but it fell thereafter, to 10.9% (2016) and 9.9% (2017).3 These fluctuations, and more specifically the most recent decline, reflect the overall performance of the economy (and the labour market in particular) as well as the effectiveness of social policy instruments (strengthened in 2016-2017). Self-employed people have a much higher risk of IWP (more than five times higher) than employees. In 2017 it was at its highest point over the period analysed, at 28.5%. The IWP rate for self-employed people in Poland remained above the EU level, whereas for employees it remained below the EU average.

Fig. 1. In-work poverty (IWP) in 2012-2017 in Poland and the EU for the age group 18-64 by employment status (%) Poland

Poland Employed Poland Employees Poland Self-employed 30 28.5 26.4 25

20

15

10 10.4 9.9

6.4 5 5.3

0 2012 2013 2014 2015 2016 2017

2 More precisely, for the purpose of statistical research based on the SILC survey, people are at risk of IWP if they are aged 18-64 and (a) were in employment (or self-employed) for at least six months in a year covered by the SILC and (b) are at risk of poverty, i.e. the equivalised disposable income of their household is below 60% of the national median. The (approximate) number of the in-work poor displayed in this and the following paragraphs is calculated using the employment figure from the Labour Force Survey (employment definition differs from SILC) for the age group 20-64, and the IWP rate estimated using SILC data. 3 Note that the year reported indicates the date when the SILC was conducted; the data relate to incomes, and therefore IWP rates, for the previous calendar year.

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In-work poverty Poland

European Union

EU 28 Employed EU 28 Employees EU 28 Self-employed 30

25 21.7 22.2 20

15

10 8.9 9.4 6.9 7.4 5

0 2012 2013 2014 2015 2016 2017 Source: Eurostat, based on SILC [ilc_iw01]. Note: All rates are for the population aged 18-64.

In the period analysed, there were similar trends in the IWP and overall at-risk-of-poverty (AROP) rates in Poland, with the IWP rate always clearly below the AROP (Fig. 2) − by about 6 pp or more in 2012-2016, although slightly less (5.7 pp) in 2017. This difference suggests that employment contributes significantly to reducing the risk of poverty. At the same time, the at-risk-of-poverty or social exclusion (AROPE) rate was falling, from 26.7% to 19.5%, mostly due to non-income components (shrinking material deprivation). Fig. 2. In-work poverty (IWP) and at-risk-of-poverty (AROP) rates in Poland in 2012-2017, age group 18-64

AROP IWP 17.6 18 17.3 16.5 16.7 16.7 17 15.6 16 15 14

% 13 11.3 12 10.8 10.9 10.4 10.7 11 9.9 10 9 8 2012 2013 2014 2015 2016 2017

Source: Eurostat, based on SILC. Note: All rates are for the population aged 18-64.

In 2012-2017, the trend in the EU28 as a whole was different. The average IWP rate showed a small increase, from 8.9% to 9.4%, although the Polish rates remained higher throughout. In the EU as a whole, the gap between the AROP and IWP rates was above 7 pp, showing a stronger impact of employment on poverty reduction than in the case of Poland.

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In-work poverty Poland

1.2 Determinants of in-work poverty The factors behind IWP are rather clear and relatively stable. Some of them relate to people’s position in the labour market (employment status, type of job contract, and working time) and to individual features (sex, age and education); others relate to household characteristics (household composition and work intensity). The list is not complete but is a good basis for analysis. For this, all the relevant IWP rates are put together in the Annex (Table A1 and Figs A1-A8). Employment status, as mentioned earlier, is one of the best predictors of IWP rates. More specifically, those who are employed but do not hold an employment contract (non- employees, including self-employed people)4 are much more likely to experience poverty than employees. Moreover, whereas in 2012-2017 trends in the IWP rate for employees were rather smooth, with a drop in 2017, they were irregular for employed people who were non-employees, with an increase in 2017 (Fig. 1 in main text above). These fluctuations may suggest that the latter group is heterogeneous, and that it needs closer examination to establish who is at risk of poverty. There are 2.8 million self-employed people in Poland, according to the Labour Force Survey, of whom 2.1 million do not have any employees. The self-employed represented 17.5% of the total number of people in employment in the fourth quarter of 2017. The self-employed group includes farmers or contributing family workers. Estimates of the Ministry of Finance (Dudek et al., 2018) show that around 30% of self-employed people (excluding farmers) have income from self- employment below the minimum wage (MW) within any one year (and 12% in the course of three years). However, the type of self-employment or the section of the economy may be important factors. In Poland, as national studies show, (self-)employment in agriculture (farming) should be treated separately. Both previous national research on IWP and the poverty figures estimated by Statistics Poland5 suggest that while self-employment in agriculture is linked to a higher rate of IWP (or poverty in general), the opposite is true for self-employment outside agriculture. It is therefore important to disaggregate the figures accordingly. Lewandowski and Kamińska (2014) estimated that half of the working poor in Poland were employed in agriculture. The share estimated by Lis and Potoczna (2013) was somewhat lower due to the different methodology/definitions used: 42% farmers, 5% self-employed, 53% employees.6 Working time is the next important factor influencing IWP. As may be expected, the IWP rate was much higher in 2017 for those working part time than for the full-time employed (21.7% and 9.0%, respectively − a gap of 12.7 pp). One should add that whereas in 2014- 2017 the IWP rate increased for those working part time, it was rather stable for people employed full time, with a drop in 2017 (Fig. A2), possibly reflecting policy changes (provision of social benefits) at that time. Note, however, that part-time employment is rare in Poland (6.3% of those employed, and in decline), so it accounts for only around 12-14% of the in-work poor. The type of employment contract – permanent versus temporary – is important as well. Permanent contract holders are better protected against income poverty than those on temporary contracts. In 2017, the IWP rates were estimated at 4.0% for permanent contracts and 9.1% for temporary ones. After increasing (with some fluctuations) between 2012 and 2016, both rates fell in 2017 (Fig. A3), possibly following improvements in the labour market. But temporary contracts were really widespread in Poland in 2017, applying to over 3.3 million people or 25% of all employees – one of the largest shares in the EU.

4 Eurostat calls this group ‘employed persons except employees’, which does not exclude heterogeneity. 5 See for instance GUS [Statistics Poland] (2018) and the previous editions. Using national methodology, GUS provides estimates of poverty (not IWP), separately, for the households of farmers and for those living on income from self-employment outside agriculture, finding the former much higher, and the latter lower than the national poverty. Szarfenberg (2015) discussing IWP also refers to these poverty rates. 6 Both studies that are quoted explore IWP in Poland prior to 2011. They use the data from the GUS household budget surveys and various definitions of the poverty threshold.

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In-work poverty Poland

This meant that people on temporary contracts made up a relatively large proportion (41%) of the in-work poor in 2017 (equal to over 300,000 people). Additionally, temporary contracts in Poland are based not only on the labour code but also on the Civil Code, taking the form of commission contracts (umowa zlecenia) or contracts for a specified task (umowa o dzieło).7 These two forms involve considerable instability of employment. Unfortunately, respective estimates are not available, but it has been shown that work instability leads to a higher rate of IWP, and may be seen as one of the factors behind the higher rate of IWP in the private compared with the public sector (Lewandowski and Kamińska, 2014). For employees, wage differentiation also counts, in particular the share of low-waged earners (with wages below 2/3 of the national median wage). In Poland, this share is substantial: in 2010, it reached 24.2%, slightly declining to 23.6% in 2014.8 In both years, these figures were the fourth highest in the EU (the respective EU28 averages were only 17% and 17.2%). Finally, work intensity in the household − the level of employment activity of all household members aged 15-59 − shows a considerable impact on IWP. While the IWP rate for households with low work intensity was extremely high over the period examined – around 40% or more in 2012-2016, and 33.6% in 2017 – it was only around 6% for those living in households with very high work intensity (5.6% in 2012, and 6.3% in 2017) (Table A1 and Fig. A8). The pronounced fall in 2017 for households with low work intensity may, once again, suggest the influence of the enlargement of social/child income support after 2015. Polish researchers have also found that high household work intensity strongly reduces the risk of IWP (Lewandowski and Kamińska, 2014). Moreover, it is more important than the wage level of those employed (Lis and Potoczna, 2013). Among individual characteristics of the employed, educational attainment is definitely the most important determinant of IWP (Table A1, Fig. A6). Tertiary education almost fully protects against IWP (with a rate as low as 2.3-3.0% in most years examined, and 3.5% in 2017). Having lower secondary education or below increased the IWP rate in 2017 to 23.2% (it had reached a peak of 30.6% in 2015). In terms of shares of the working poor, in 2017 those with the lowest and the highest educational attainment made up around 24% (12% each group). People with upper- and post-secondary education were the largest group among the working poor (76%). Interestingly, IWP rates increased between 2015 and 2017 for those with tertiary education, whereas it fell for other groups. In addition, as the Polis studies show, the possession or otherwise of specific skills is also an important variable (Lis and Potoczna 2013). Sex and age have a smaller impact on IWP rates than the factors discussed above (Table A1, Fig. A4 and A5). Between 2012 and 2017 women were somewhat less likely to fall into IWP than males, as shown by IWP rates respectively of 9%-10% and 11%-12%. This gender gap (throughout the period, around 2-3 pp) may be attributed to the fact that quite often women are second earners in the household, which is not the case for men (Lis and Potoczna 2013; Lewandowski and Kamińska 2014). Age does not seem to result in major variations in IWP rates either: for all groups they were roughly in the range 9.5%-12%. In 2017, they were around 11.5% both for the youngest (18-24) and oldest (55-64) workers; those aged 25-54 were somewhat less likely to be in IWP. This pattern changed slightly over the period examined, possibly due to the changes in family policies. The IWP pattern by household type and parenthood seems clearer (Table A1, Fig.A7). Raising children translates into higher IWP rates, although after increasing in 2014-2016 the size of the differential shrank in 2017, mostly due to the improved position of single parents. After 2012, the IWP rate for single parents (although not a very large group in total) was highest, peaking at 23.1% in 2016 before falling back to 15.0% in 2017). The

7 In 2015, over 1 million Poles were working under civil law contracts (Lewandowski et al., 2017). 8 Data from the structure of earnings survey (SES) for employees aged 18+. They refer to enterprises with at least 10 employees, operating in all areas of the economy except public administration.

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In-work poverty Poland

IWP rate for those in the households with two or more adults and no children was consistently the lowest (around 6-7.5%). The rate for single persons without children was next lowest (around 10-11%). In 2012-2016, those living in households with two or more adults with dependent children had an IWP rate of 12.5-13.5%, but the rate fell to 11.1% in 2017. Once again, family policy might have influenced these trends. In summary, the analysis of IWP statistics allows us to identify the key factors in IWP in Poland. These are: self-employment (especially in agriculture), working on temporary (including civil law) contracts, a lack of educational or other skills, and living in households with low work intensity or with a relatively high number of children.

2 Analysis of the policies in place There are no specific policy measures in Poland that intentionally address IWP. The impact on IWP of instruments such as the MW, income taxes, tax reliefs and social contributions is sometimes taken into consideration. The same is true of labour market regulations such as those aimed at reducing the scale of insecure job contracts, reducing market segmentation or allowing people to develop a solid professional career (through skills improvement, for instance). Social protection measures – such as income and family support, childcare or long-term care – are rarely seen as remedies for IWP, but they play some role, too. Below, the most visible policies that may shape IWP in Poland are discussed. They are tentatively split into two groups. The first group includes policies that are targeted predominantly at people of working age and that directly influence IWP. The MW, personal income tax and social insurance rules, as well as active labour market and lifelong learning policies are considered (see Section 2.1). Some other measures that are in place and may influence IWP indirectly, such as childcare and long-term care or income support, are put in the second group and are examined separately (see Section 2.2).

2.1. Direct policies influencing in-work poverty 2.1.1 Personal income taxes Description of the general rules The general rules of personal income tax (PIT) involve a progressive scale of rates, and a number of deductions and exemptions.9 Since 2009, there have been two PIT bands: 18% for annual incomes under PLN 85,528 (or around EUR 20,100) and 32% for higher incomes. But because of widely used tax reliefs this progressivity is not very effective. Each year, 97-98% of taxpayers enjoy the lower tax rate (MF 2017 and the previous editions), so the impact of tax progression on IWP is debatable. The general PIT rules cover all residents earning taxable incomes. They do not cover incomes from farming (with some exceptions) or from rents and interests – all these are taxed using various flat rates. Farmers have their own specific, quite favourable, taxation system. Self-employed people outside agriculture (samozatrudnieni) may choose either to remain under the general PIT regime or opt for special PIT rules (a single 19% scale, but no deductions − favourable for high-income earners). Non-contributory social benefits (such as social assistance, family allowance, childraising benefits within the Family 500+ programme, and funeral grants) are tax-exempt. The taxable amount of incomes is computed as revenues minus deductible expenses for working individuals (related to the work performed and designed to cover necessary costs). These deductible amounts are therefore important for employed people and may directly influence IWP. The level of deductible expenses since 2008 has been set rather low by law:

9 Act on personal income tax of 28 July 1991 (Ustawa z dnia 26 lipca 1991 r. o podatku dochodowym od osób fizycznych), Dz.U. No 80 item 350, as amended: http://isap.sejm.gov.pl/DetailsServlet?id=WDU19910800350.

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In-work poverty Poland

PLN 1,335 (around EUR 317) per year (it is more for commuters and for those who hold more than one job: these can claim up to PLN 2,502.56 (around EUR 589) per year). It applies to employees on ‘regular’ contracts, be it permanent or temporary, and to the self- employed paying regular PIT. In the case of people working on commission contracts(umowa-zlecenie), deductible expenses are equal to 20% of their revenues. In the case of people working on contracts for a specified task(umowa o dzieło), the level of deductible expenses may be as high as 50% of their revenues (additional conditions apply), but with an upper limit (during 2012-2017 it was PLN 42,764, or EUR 10,062, per year; in 2018 it was twice this level).10 At the same time, there are various deductions from income (such as social insurance contributions, expenses for rehabilitation, expenses for the internet, and donations for special purposes) and also various tax deductions (such as universal tax credit, health contributions, and child tax credit).11 Universal tax credit is the most important deduction, but it covers all taxpayers and this means that it influences IWP both directly and indirectly. Universal tax credit results from setting the level of non-taxable annual income. This was PLN 3,091 (around EUR 736) per year in 2007-2016, and was equal for all taxpayers. In 2017, it was increased to PLN 6,600 (EUR 1,571) and in 2018 to PLN 8,000 (EUR 1,900), but with a gradual reduction of this amount to zero as income increases. Recent changes have therefore been favourable for low-income earners: but the level of the tax-free allowance is still often seen as too low.

2.1.2 Social insurance: contributions and coverage

The overall level of the tax wedge is also affected by social insurance contributions. Total social insurance contributions paid by employees are 13.71% of gross wages (9.76% for old-age pensions, 1.5% for disability pensions, and 2.45% for sickness benefit). Furthermore, employees pay 9% of their income in the form of health insurance contributions (of which 7.75% is tax-deductible). Those who earn more than 2.5 times the average annual wage (PLN 127,890, or EUR 30,450) do not pay pension contributions above this ceiling. As a result, the overall tax wedge in Poland is rather similar across the income scale. Social insurance rules specifically may affect the type of employment contract used. At the beginning of 2016, the rules of social insurance coverage for workers under civil law commission contracts changed.12 If an employee is covered by more than one contract with a rate of remuneration lower than the minimum, the social insurance contribution is now paid on the basis of all relevant contracts, up to the required minimum. This provision has reduced the ability of employers to hire non-standard employees on a very low base contract covered by social insurance and combine it with another one with a higher base not covered by social insurance: this has contributed to a reduction in the use of civil law contracts (commission contracts or contracts for specified task), which carry a higher risk of IWP. Actual impact on in-work poverty rates As research studies show, the impact of income tax payments on IWP is moderate in Poland. Usually, it is analysed together with the social benefit system. Myck, Kundera and Oczkowska (2013) showed that while the IWP rate in 2010 was 10.9% (based on the CSO), it would have fallen to 6.1% without tax payments, but also without social insurance and other social benefits (in principle, non-contributory). The benefits seem to play the major

10 Commission contracts and contracts for a specified task are atypical forms of contracts, regulated by the civil code rather than the labour code. They are temporary and are not subject to the rules of the labour code on things such as health or social insurance coverage, leave, and notice periods). 11 Note that there is also the possibility of joint taxation for couples or single parents with children, under certain conditions. 12 The Act of 23 October 2014 amending the Act on the social insurance system and other acts (Ustawa z dnia 23 pażdziernika 2014 r. o zmianie ustawy o systemie ubezpieczeń społecznych oraz niektórych innych ustaw), Dz. U. 2014, item 1831, http://isap.sejm.gov.pl/isap.nsf/DocDetails.xsp?id=WDU20140001831.

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role. Lewandowski and Kamińska (2014) support such a general conclusion, using their own research. However, Arak, Lewandowski and Żakowiecki (2013) argue that raising the level of tax-deductible expenses relating to paid work, in particular under a regular employment relationship, would not only increase the (net) income of low-earners but might be used as a vehicle to decrease the incentive to replace employment contracts (based on the labour code) with alternative forms of employment.

2.1.3 Minimum wage A MW has been set since 1956, most recently governed by the law of October 2002, which was substantially revised in 2005 and in 2016.13 The law assumes that each year the MW is negotiated between the social partners − that is, the government, representative trade unions (three organisations) and employers organisations (five organisations) in the Social Dialogue Council (Rada Dialogu Społecznego).14 Negotiations are based on a draft government proposal, which should take into consideration predicted inflation, GDP growth, the ratio of the minimum to the average wage and some other parameters. If the Council does not reach agreement, the government proposal is enforced, assuming all legal requirements are met.15 In fact, such a situation is quite common. Until 2016, the MW was set only as a monthly rate, and it applied to employees on regular contracts (permanent or temporary, part-time or full-time). From 2017, the new MW regulations were extended to include people working under commission contracts; and for these contracts a minimum hourly rate was established16 at PLN 13 (EUR 3.10) in 2017 and PLN 13.70 (EUR 3.28) in 2018. Changes in the hourly rate should follow the growth of the monthly MW. Another important change effective from 2017 is the removal of a separate rate for first-year employees. In the past, this was set at 80% of the regular minimum, with the aim of facilitating the entry of young people into the labour market. All these recent changes strengthen the role of the MW as an instrument shaping wages and incomes, with a possible impact on IWP. Altogether in 2016 there were approximately 1.5 million employees who were paid the MW or less, which was 13% of the total number of employees.17 In 2013-2016, this share was stable, but the absolute number of recipients was rising due to the increase in the MW and in the number of employees. Figures displayed in the Annex Table A2 and in Fig. 3 (below) allow us to study the development of the MW in recent years. They show that in 2012 the monthly MW was equal to PLN 1,500 (about EUR 355), constituting less than 43% of the average wage. In 2012-2017, the MW experienced a considerable increase both in absolute and in relative terms: to PLN 2,000 (EUR 470), or almost 47% of the average wage, in 2017.

13 The Act of 10 October 2002 on the MW, as amended (Ustawa z dnia 10 października 2002 r. o minimalnym wynagrodzeniu za pracę) Dz.U 2002. № 200 item 1679, as amended: http://isap.sejm.gov.pl/DetailsServlet?id=WDU20022001679 14 See Section 3 on this Council. 15 The rate of increase of the MW level should be at least equal to the predicted rise in the consumer price index, and if the ratio of the minimum to the average wage is below 50%, 2/3 of the predicted GDP growth should be added. This is intended to allow for a steady increase in the minimum-to-average ratio up to 50%. 16 The Act of 22 July 2016 amending the Act on the MW and other laws (Ustawa z dnia 22 lipca 2016 r. o zmianie ustawy o minimalnym wynagrodzeniu za prace oraz niektórych innych ustaw) Dz. U. 2016 item 1265: http://prawo.sejm.gov.pl/isap.nsf/download.xsp/WDU20160001265/U/D20161265Lj.pdf. 17 CSO data quoted from https://www.bankier.pl/wiadomosc/Niemal-1-5-mln-Polakow-zarabialo-co-najwyzej- minimalna-krajowa-7565055.html.

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Fig. 3. Minimum wage in Poland relative to the average wage (%), 2011-2017

48 46.8 47 45.7 46 44.9 45 44.4 43.8 44 43 42.6

% 42 40.8 41 40 39 38 37 2011 2012 2013 2014 2015 2016 2017

Source: See Annex Table A2.

The MW is set in gross terms before deduction of taxes and social contributions. The net (disposable) MW, assuming ‘standard’ taxation and social contribution payments, may be estimated at PLN 1,459 (EUR 343) per month for 2017 (Table A2). This level was definitely higher than the subsistence minimum for a single-person household of PLN 574, or EUR 135 (roughly equal to the extreme poverty threshold used by CSO, of PLN 582, or EUR 137); and it was also higher than the social minimum income, calculated at PLN 1,134 (EUR 266), that protects employees living alone against IWP. In fact, in the whole period 2012-2017 an employee earning the MW and living alone was protected against IWP (compare the net MW with the respective poverty threshold and social/subsistence minima – Table A2). This conclusion does not hold for larger households, such as a one-earner couples with children (see figures in Table A2). Also, it might not hold for those who are working part time, or on atypical contracts. One may add that working on a regular job contract may bring additional remuneration gains. For instance, companies that employ 50+ full-time workers, or between 20 and 50 workers where requested by the trade unions, are obliged to establish a so-called Company’s Social Benefits Fund (Zakładowy Fundusz Świadczeń Socjalnych).18 The fund’s revenues come from contributions deducted from wages (the exact level is regulated by law), and the fund may finance a number of fringe social benefits for employees (such as holidays and childcare) − usually but not exclusively for lower-income earners. The support provided is rather small (contributions to the fund made up around 1.5% of total labour costs in 2016) but it might help beneficiaries to stay out of IWP. Actual impact on in-work poverty rates In general, it is hard to say whether and how the MW, at either its current or previous level, has affected either poverty in general or IWP in particular. Specific empirical studies are scarce and their findings are ambiguous. Usually, no more than a weak link between the MW and poverty has been found, depending on the relative level of the MW and on some other conditions.19 However, recent studies (Gradzewicz et al. 2016) show that increases in the MW are one of the factors underlying the faster increase in wages for low- income workers. In particular, 30% of those employed in small companies saw a wage increase due to the rise in the MW, and this seems to be really important.

18 The Act of 4 March 1994 on Company’s Social Benefits Fund (Ustawa z dnia 4 marca 1994 o zakładowym funduszu świadczeń socjalnych) Dz.U. No 43 item 163, as amended: http://isap.sejm.gov.pl/isap.nsf/download.xsp/WDU19940430163/U/D19940163Lj.pdf. 19 Evidence quoted by Rutkowski (2003) but see also Eurofound (2010 and 2018).

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In-work poverty Poland

2.1.4 Active Labour Market Policies Active labour market policies (ALMPs) in Poland are administered by the public employment services (PES), according to the Act of 20 April 2004 on the Promotion of Employment and Labour Market Institutions. According to the provisions of the Act, job-seekers registered at a PES office can have access to ALMPs, including vocational courses, training and apprenticeship. Similarly, low-income workers can have access to them provided they register as a job-seeker. There are several groups of low-income workers that are potentially covered by such ALMPs: those serving a notice period for reasons related to their workplace or where the employer is in the process of bankruptcy or liquidation; participants in the Centres of Social Integration organising courses focused on employment activation; and employees aged 45 and over. However, relatively few people use this opportunity. In October 2018, only around 14,000 job-seekers did so, including 1,700 employees aged 45 and over (see Table A.3 in the Annex). In the period examined, the number of job-seekers registered with the PES fell by one third. There is no information on the type of ALMPs that are offered to low-income job-seekers. Given the very limited access of the in-work poor to ALMPs, it is not an instrument that can effectively lead to a reduced risk of IWP in Poland. At the end of 2017, low-income workers, those employed on civil contracts and those leaving agriculture were added to the target groups for European Social Fund (ESF) intervention, mainly under regional operational programmes. There is no information available on the coverage of ESF support for these groups.

2.1.5 Lifelong learning The participation of adults in education and training in Poland is one of the lowest in the EU. In 2017 the participation rate in education and training lasting four weeks or more was 4.0%, compared with 10.9% in the EU. Those with low educational attainment (ISCED levels 0-2), many of whom were low-income workers, were practically absent from lifelong learning activities (1.2% in Poland, compared with 4.3% in the EU). According to the assessment of Chłoń-Domińczak et al. (2015), the risk of having low skills (including literacy, numeracy and problem solving) increases for adults with the following characteristics:  basic vocational education attainment or lower,  aged 47 years or older,  having 10 or fewer books in the household,  living alone,  working in agriculture. Additionally, those with lower educational attainment (ISCED 3c and lower) don’t feel the need for further education and lifelong learning. A low level of literacy and numeracy skills increases the risk of IWP. One of the measures to support the participation of workers in lifelong learning, including those with low skills and low earnings, was the establishment in 2014 of the National Training Fund (Krajowy Fundsz Szkoleniowy – KFS). KFS is a part of the labour fund that is used to support employers in financing the education and training of their employees. The main objective of the KFS is to prevent job loss among those whose skills are inadequate to the requirements of a dynamically changing economy. All employers, regardless of their legal status, can apply for KFS funding. Support can be given to employees on various types of job contract (including atypical ones) and to those working part time. KFS funds provided to employers constitute de minimis aid within the meaning of EU competition law.20 In 2018 the KFS budget was around PLN 105 million (EUR 25 million) and the priorities of the KFS included supporting lifelong learning for those: in

20 State aid of no more than EUR 200,000 granted to an enterprise over a period of three years.

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In-work poverty Poland

deficit jobs; in companies introducing new technologies and tools; in jobs in special conditions or of special character; and above age 45. In 2019 the KFS budget is being increased to PLN 228 million, and priority group status is being extended to those who: have qualifications below secondary level (that is, do not have the school-leaving (matura) exam); are at risk of social exclusion; are social economy workers and are at risk of losing their jobs; or are workers with disabilities. The KFS, similarly to ALMPs, does not seem to be a decisive instrument in reducing the risk of IWP, due to its relatively limited coverage. An initial evaluation of the implementation of the KFS21 indicated that knowledge of the KFS among employers is limited, the procedures of applying for funding are cumbersome, and the very short time for the application of the funding. Furthermore, the lower age limits on the workers who can receive funding also limit the potential use of KFS funds.

2.2. Indirect policies influencing in-work poverty

2.2.1. Early childhood education and care Given its potential impact on IWP, the development of early childhood education and care (ECEC) seems particularly important. Access to formal care services for the youngest children opens the way for parents to enter the labour market. This principally concerns mothers, who have a chance to take a paid job, and often become a second earner in the family. In such a case, work intensity in a household increases, eventually leading to a considerable decline in its IWP rate (see Table A1 and the discussion in Section 1). Lewandowski and Kamińska (2014) have examined this potential effect and suggested that policies aiming at increasing women’s employment via ECEC should be treated as one of the key vehicles for addressing IWP in Poland. This recommendation was based on an extensive empirical study of IWP rates.22 In fact, in recent years ECEC has been developed considerably in Poland. At the same time, policy instruments aimed at facilitating access to it for the poor – and thereby eventually influencing the IWP rate – have remained rather weak. ECEC for children aged between 3 and 5 (or 6) is provided mainly in kindergartens, which are run and financed by municipalities, with a certain degree of support (subsidy per child) from the central budget. Enrolment is obligatory only at age 6; but from 2017-18, places in pre-school facilities were guaranteed for all those aged 3-5. As a rule, admission to public kindergartens should be open to all local residents, but additional criteria may be imposed. Importantly, municipalities may use income as a criterion, making access easier for poor families. In general, attendance at kindergartens is paid for by parents, and fees are decided upon by municipalities. For this, clear limits are imposed. Namely, five hours of instruction per day in a (public) kindergarten is free of charge (parents pay only for meals), and a maximum fee for parents of PLN 1 (EUR 0.24) for each additional hour. Free education for children at age 6 was only introduced from January 2017. Working parents may also enjoy a mild relief in the form of an income tax exemption of up to PLN 200 (EUR 47) per month in respect of fees for kindergartens provided by their employer. Altogether, the use of formal care for children between age 3 and the minimum compulsory school age remains low in Poland. SILC indicators showed an increase from 36% in 2012 to 57.7% in 2017, but this was still far below the EU 28 average of 95.7%.23

21 https://epsz.zielonalinia.gov.pl/ewaluacja-dzialan-psz. 22 The effects of the increase of child enrolment in kindergartens on women’s participation in the labour market in Poland, and in turn on the decrease in the national poverty rate (but not specifically IWP rate), have been studied in the context of Europe 2020 targets – see Ajwad et al. (2013) on this.. 23 The usage data are for 1-29 and 30+ hours of care combined, and are derived from SILC (see Eurostat website). Note that enrolment rates shown by official/administrative data are much higher - see the volumes Oświata i wychowanie (Pre-school education) published every year by the Central Statistical Office.

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In-work poverty Poland

The development of formal care for children under 3 is even poorer, despite some government efforts and strong support from EU funds. The establishment and maintenance of care facilities, such as nurseries and children’s clubs, remains a municipal responsibility. Financing is shared between the local and central administration, with a substantial contribution from parents in the form of fees. Fees are set at the local level and there are no general rules for the financial support to parents that might be available (such as reductions or limits on fees). There is, however, a mild relief for working parents in the form of an income tax exemption of up to PLN 400 (EUR 94) per month in respect of fees for nurseries provided by their employer. Since 2011, the availability of care facilities for children under 3 has been significantly strengthened by the national programme ‘Toddler’ (Maluch), financed from the state budget and other funds. This has allowed an increase in the number of facilities and places available. But as many as 70% of municipalities in 2016 did not provide any formal care. Moreover, despite some improvement, the take-up rate remains very low: it was 6% in 2012 and rose to 11.6% in 2017, compared with the EU 28 average at 33.2%.24 Further development of formal care for the youngest children seems necessary and might bring positive effects. Evaluation of the Toddler programme by the Supreme Audit Office (NIK 201) shows that 77% of parents using formal care for their children 0-3 years old were fully active in the labour market, and only 5% were not active. This indicates that in fact labour market activity is positively correlated with childcare, and ECEC development might help in reducing IWP. But the relatively high costs of care borne by parents, the quality of services provided at nurseries, and the shortages of facilities make many parents reluctant to use formal care for the youngest children.

2.2.2. Long-term care Long-term care (LTC) cannot be treated as an important measure influencing IWP in Poland. The correlation between LTC and IWP via household work intensity is less well recognised and seems not to be strong. Moreover, long-term care is certainly less widespread and less time-consuming than ECEC. In Poland, it remains predominantly a family domain, although recently the government has undertaken initiatives aimed at increasing access to day and home care services. The number of daycare centres slowly increased from 260 in 2015 to over 300 in 2016, as a result of the governmental programme called Senior-WIGOR (renamed in 2017 as Senior+). Along with the development of long-term care, consideration could be given to labour market reintegration measures for people of working age who need LTC, namely people with disabilities. Although it is hard to say how these measures might influence IWP, they would be beneficial for the disabled and their families. However, such measures are underdeveloped in Poland, especially as regards integration into the open labour market. So far, protected employment has been promoted instead, such as in sheltered employment institutions or occupational activity facilities, all financed from the State Fund for Rehabilitation of the Disabled People (Państwowy Fundusz Rehabilitacji Osób Niepełnosprawnych - PFRON). Despite this, the shortages of places is acute and the very low employment rates of people with disabilities remain a challenge.

2.2.3. Income support Using the data from the Polish household budget survey, Myck, Kundera and Oczkowska (2013) showed that social benefits (excluding pensions), have a visible impact on IWP. In 2010, they allowed a reduction in the IWP rate from 13.1% (the rate without social benefits) to 10.9% (the actual rate). It is quite possible that the impact of social benefits has recently become larger, given the expansion of social benefit payments, mainly in the form of childraising benefits under the

24 Again, the usage data are for 1-29 and 30+ hours of care combined, and are derived from SILC (see Eurostat website).

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Family 500+ programme (Rodzina 500+). Child/family income support, which was weak in the past, has been strengthened significantly with this programme. It was launched in April 2016, offering benefits at a high monthly rate of PLN 500 (EUR 120) per child, subject to an income test, for the first child in the family. In mid-2017, it was slightly modified (the income test was made stricter and the procedures were refined). Almost 4 million children under 18 are covered (55%), with higher coverage in rural than in urban areas. The annual cost of the programme is very high (PLN 23 billion, or around EUR 5.5 billion) but it results in poverty and inequality reduction. Between 2015 and 2016 the rate of extreme child poverty fell from 9% to 5.8%, and to 4.7% in 2017.25 One should remember, however, that its impact on labour activity has been negative, with 90-100,000 women leaving the labour market by mid-2017. At the same time, income support through social assistance remained modest and unreformed. In the period 2013-2016 it absorbed around PLN 2.6 billion (EUR 0.6 billion) annually, and in 2016 there were 1.6 million recipients. Social assistant grants cash benefits mainly to people unable to work who pass an income test. Therefore, it is hard to expect that social assistance – if not reformed – could have a significant impact in IWP in Poland. The same is true of monetary benefits paid to family members who care for disabled dependants (benefits for carers, caring allowance etc.). At present, they cannot be combined with work and this does not help to reduce either poverty in general or IWP specifically.

3 Policy debates, proposals and reforms on in-work poverty and recommendations In recent years, addressing IWP has not been a policy priority in Poland. Until the end of 2015, high unemployment, the growing number of pensioners and child poverty were seen as the major challenges for social policy. After the new government of the Law and Justice party took power, the focus has definitely been on family/child income support, which – together with solid economic growth and wage increases – has led to a reduction in both poverty overall and IWP. But the prevalence of non-standard labour contracts, one of the major factors behind IWP, has continued to be seen as a challenge, and there are visible efforts to address it. In-work poverty in policy documents Official policy documents, such as the Europe 2020 NRPs, refer directly to the IWP issue only occasionally, usually in response to Commission recommendations (CSR 2012 and 2013) on combating labour market segregation and IWP, including limiting the excessive use of civil law contracts. Such references may be found in the NRPs submitted in 2013- 2015, and reappear in the NRP for 2018-2019. An examination of these documents shows that setting the MW level has always been treated as the most important vehicle for counteracting IWP in Poland. Next in importance comes the development of formal care for children aged 0-3 (also seen as a measure to increase women’s labour market participation). Furthermore, a limit on the use of civil law contracts, mainly through changes in social insurance rules (coverage and contributions imposed on all contracts below the MW limit) has been implemented since 2016, which has led to a reduction in the number of workers employed under them. However, the social partners expected much more. The list of policy instruments that they have proposed is quite long and exhaustive (Box 1).

25 Statistics Poland estimates, using national methodology, published in GUS [Statistics Poland] (2018).

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Box 1. Policy instruments to reduce in-work poverty proposed by the social partners for the NRP 2014-2015:  introducing measures to promote collective agreements in sectors showing a high incidence of low wages,  introducing tax benefits,  paying benefits to low-income workers through the tax system, with the benefit decreasing proportionally to the wage level,  decreasing the level of social insurance contributions in the case of low wages,  increasing tax progressivity,  further increasing the availability of nursery and pre-school care (including action on costs),  reducing work disincentives caused by the family benefit system and related supplements,  increasing the possibility of combining part-time work with maternity and parental leave without loss or reduction of benefits,  extending the payment of unemployment benefits to one year,  increasing family benefits (in particular, the supplement for large families), making it easier to combine benefits with wages. Source: NRP 2014-2015 Only a few of these policy proposals have been implemented. They include an increase in the tax-free allowance (already implemented, with a further increase planned). However, a number of suggestions related to social benefits, such as making it possible to combine benefits with wage, were not considered and implemented. As regards income taxes, there is a proposal to increase tax progression (not implemented and not planned). The national programme for counteracting poverty and social exclusion 2020 (RM 2014) is also worth discussing. This is, it seems, the only official document that clearly shows and analyses IWP statistics: but in the end it does not consider the in-work poor as an at-risk group, and therefore does not propose any specific measure to address the problem. According to the Partnership Agreement covering ESF investment in Poland, Regional Operational Programmes also include measures targeting those in IWP, those employed on civil contracts, people leaving agriculture and those returning to work after a period of childcare. Stakeholder activity and debates Stakeholders are prominent in the debate on IWP and related issues: principally trade unions, but also various non-government organisations (such as EAPN PL), research institutions (recently, the Institute of Structural Research26) and academics. The IWP issue also appears in public debate, as reflected in press articles and media interviews (Klinger 2014, Lewandowski 2015), although only to a limited extent. Trade unions are the most active in demanding an adequate MW level and proper wage bargaining in various sections of the economy. They are fighting against the overuse of non-standard work contracts – specifically those based on the civil code but also fixed- term contracts. They do not always specifically refer to IWP, but the IWP context appears in the trade unions expectations (NRP 2014-2015). Trade unions and selected NGOs are consulted during the process of drafting the Europe 2020 NRPs and various regulations that tackle labour and social issues (obligatorily in some cases). At the company level, trade unions are involved in, among other areas, wage negotiations and the management of company social benefits funds. But the main forum for the trade unions to express their opinions, and to negotiate the way social challenges

26 See for instance Arak, Lewandowski and Żakowiecki (2014), Lewandowski and Kamińska (2014) and a number of research studies reported in Bukowski and Magda eds (2013). Some of them are quoted in this report.

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such as IWP are addressed, is the Social Dialogue Council (Rada Dialogu Społecznego, RDS). The Social Dialogue Council was established in 201527 and replaced the Tripartite Commission for Social and Economic Issues. It is the main institution of social dialogue in Poland. The topic of wage-setting and the incomes of workers, which includes IWP, is within the responsibility of the Task Team on Budget, Remuneration and Social Benefits (Zespół problemowy ds. budżetu, wynagrodzeń i świadczeń socjalnych) of the RDS. The taskforce focuses on developing common positions and opinions on matters related to budget policy, including fiscal and tax control as well as social wages and benefits. The tasks that are relevant to tackling IWP include: (i) reviewing draft laws and preparing assumptions to the laws and draft laws, (ii) and issuing opinions on government programmes and other documents related to budget policy, including fiscal policy, tax and fiscal control, remuneration and social benefits; and (iii) reviewing and seeking agreement on government proposals on the MW − including analysing the impact of the MW on the financial situation of employees and the functioning of the labour market, and formulating solutions to problems. In recent years the RDS has not succeeded in reaching agreement on the level of the MW, with the result that it has been unilaterally decided by the government. Recommendations Given the recent approach in Poland to addressing the IWP challenge, the following proposals may be suggested. 1. There is a need to mainstream the notion and challenge of IWP in official documents and strategies, as well as in policy debates generally. 2. There is a need to enlarge the list of policy measures used to address IWP − going behind the MW, mild reform of the income tax system, limiting non-standard work contracts, or childcare. 3. Deeper income tax reform has the potential to reduce IWP, through strengthened progressivity, special measures for the self-employed, increases in the tax-free allowance and in the limits for deductible expenses. 4. There is a need to rethink the options for combining social benefits, particularly benefits for carers or social assistance, with paid work. 5. The process of designing new instruments should be backed up by solid research on their impact. More empirical studies covering IWP specifically are needed.

4 Assessing data and indicators IWP in Poland is not regularly monitored. Various poverty indicators (estimated using the national methodology and based on the annual household budget surveys) are published every year,28 but IWP rates are not provided. Poverty rates split by household income source can be used as a proxy. On the other hand, raw data from household budget surveys have been used for research on IWP. They are usually very useful, given the sample size and the abundance of information that the surveys deliver. Eurostat provides several indicators designed for examining IWP. Such examination is certainly possible but faces some problems resulting from the limited number of (published) indicators and the definitions adopted.

27 Act of 24 July 2015 on the Social Dialogue Council and other institutions of social dialogue (Ustawa z dnia 24 lipca o Radzie Dialogu Społecznego i innych instytucjach dialogu społecznego), Dz.U. 2018 item 2232: http://prawo.sejm.gov.pl/isap.nsf/download.xsp/WDU20180002232/T/D20182232L.pdf. 28 GUS [Central Statistical Office, CSO] (2018).

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Eurostat indicators are limited to the (in-work) at-risk-of-poverty rates calculated for the whole population of employed persons aged 18-64, using a SILC-specific definition of the employed. The rates are disaggregated by selected employment features (employment status, type of contract, working time), as well as individual and household characteristics (age, sex, educational attainment, household composition/parenthood and work intensity). 1. Based on this information it is difficult to calculate/estimate the number of the in- work poor, either in total or within sub-groups. This calculation would be easier if SILC and LFS (Labour Force Survey) indicators on employment were directly combined, which they are not: instead, each set of indicators uses a different employment definition and offers different disaggregations – at least in the publicly available data. Moreover, SILC data on incomes and poverty are published one year in arrears (this is a more general problem with social statistics) so it might be difficult to harmonise time periods. Given all this, only very rough estimates of the number of in-work poor (analysed by groups) may be obtained at present. 2. Eurostat indicators do not allow the study of IWP for various important groups. In the case of Poland, these groups include self-employed people in agriculture (farmers), people employed on civil law contracts, and workers with disabilities (the latter group is small in Poland but should nonetheless be covered). Also, there are no indicators of IWP broken down by territorial unit (NUTS − region or voivodship), by degree of urbanisation (rural versus urban areas), or by economic sector (such as private versus public). 3. Finally, income information is missing. It would be useful to analyse the share of income from work in total household income, or to examine whether the working poor are low-income earners. Additionally, well designed public opinion polls could be useful in (for example) establishing needs and formulating suggestions as to what measures might be effective; but they are conducted in Poland only occasionally - see CBOS (2008) and Morawski (2013).

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References Ajwad, M. I., Simler, K., Mehtabul Azam, M., Basab Dasgupta B., Bonch-Osmolovskiy, M. and Topińska, I. (2013), Simulating Poverty in Europe. The Potential Contributions of Employment and Education to Reducing Poverty and Social Exclusion by 2020, Policy Research Working Paper 6600, the World Bank. Arak, P., Lewandowski, P. and Żakowiecki, P. (2014), Dual Labour market in Poland – proposals for overcoming the deadlock, IBS Policy Paper No 1/2014. http://ibs.org.pl/en/publications/dual-labour-market-in-poland-proposals-for- overcoming-the-deadlock/ Bukowski, M. and Magda, I., eds, (2013), Ubóstwo a praca [Poverty and work], Instytut Badań Strukturalnych, (IBS), Warsaw. http://ibs.org.pl/publications/zatrudnienie-w- polsce-2011-ubostwo-a-praca/ CBOS [Public Opinion Research Centre] (2008), Pracujący biedni [The working poor]. https://www.cbos.pl/SPISKOM.POL/2008/K_182_08.PDF Chłoń-Domińczak, A., Grygiel, P., Holzer-Żelażewska, D., Humenny G., Maliszewska, A. Palczyńska, M., Sitek, M. and Świst, K. (2015), Polacy z niskimi kompetencjami: aktywność zawodowa, uczenie się przez całe życie oraz wykluczenie społeczne – raport analityczny. Badań Edukacyjnych, Warsaw. Dudek, S., Chrostek, P., Skawiński, M. and Stolarczyk, K. (2018), Działalność gospodarcza w świetle danych podatkowo-ubezpieczeniowych [Enterpreneurship and self- employment in the light of tax and social insurance data], Presentation at ZUS Co- Operation Forum, October 2018, Ministry of Finance, Warsaw. Eurofound (2018), Concept and practice of a living wage, Publications Office of the European Union, Luxemburg. https://www.eurofound.europa.eu/sites/default/files/ef_publication/field_ef_document /ef18064en.pdf Eurofound (2010), Working Poor in Europe – Poland. https://www.eurofound.europa.eu/print/publications/report/2010/working-poor-in- europe-poland Gradzewicz M., Saczuk, K., Strzelecki, P., Tyrowicz, J. and Wyszyński, R. (2016), Badanie ankietowe rynku pracy. Raport 2016 [Survey of the labour market. 2016 report] Narodowy Bank Polski. https://www.nbp.pl/publikacje/arp/raport_2016.pdf GUS [Statistics Poland] (2018), Zasięg ubóstwa ekonomicznego Polsce w 2017 r. (Extent of economic poverty in Poland in 2017) http://stat.gov.pl/obszary-tematyczne/warunki- zycia/ubostwo-pomoc-spoleczna/zasieg-ubostwa-ekonomicznego-w-polsce-w-2017-r- ,14,5.html Klinger, K. (2014), Polish style: In-work poverty. http://visegradrevue.eu/polish-style-in- work-poverty/ IMF (2016), Cross-country report on minimum wages. https://www.imf.org/en/Publications/CR/Issues/2016/12/31/Cross-Country-Report- on-Minimum-Wages-Selected-Issues-43961 Lewandowski, P. (2015), Coraz biedniejsi pracujący. https://www.forbes.pl/csr/ubostwo- w-polsce/vxwe493 Lewandowski, P. and Kamińska, A. (2014), In-work poverty in Poland. Diagnosis and possible remedies, Institute of Structural Research [Instytut Badań Strukturalnych, IBS], Warsaw. http://ibs.org.pl/en/publications/in-work-poverty-in-poland-diagnosis- and-possible-remedies-piotr-lewandowski-agnieszka-kaminska/ Lis, M. and Potoczna, M. (2013), Praca a nierówności i ubóstwo [Work versus Inequality and Poverty], in: Bukowski, M. and Magda, I. eds (2013), pp.101-151.

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MF [Ministry of Finance] (2017), Informacja dotycząca rozliczenia podatku dochodowego osób fizycznych za rok 2016 https://www.finanse.mf.gov.pl/documents/766655/6084784/Informacja Morawski, R. ed. (2013), Zagrożenie ubóstwem wśród osób pracujących w województwie podlaskim, Wojewódzki Urząd Pracy w Białymstoku. http://sai.rot.wrotapodlasia.pl/GetFile.aspx?reportId=1388 Myck, M., Kundera, M. and Ostrowska, M. (2013), Państwo i nierówności – Polityka publiczna wobec problemu wykluczenia i ubóstwa [The state and inequalities – Social policies addressing exclusion and poverty], in: Bukowski M. and Magda, I. eds (2013), pp.152-182. NIK [Supreme Audit Office] (2017), Informacja o wynikach kontroli. Wpływ realizacji programu ‘Maluch’ na zwiększenie aktywności zawodowej rodziców i opiekunów https://www.nik.gov.pl/plik/id,14477,vp,16946.pdf. RM [Council of Ministers] (2014), Krajowy program przeciwdziałania ubóstwu i wykluczeniu społecznemu 2020. Nowy wymiar aktywnej integracji [National Programme for counteracting poverty and social exclusion 2020. New dimension of active integration], Monitor Polski 2014, item 787. http://isap.sejm.gov.pl/DetailsServlet?id=WMP20140000787 Rutkowski, J. (2003), The Minimum wage: curse or cure?, Human Development Economics, Europe and Central Asia Region, The World Bank. http://siteresources.worldbank.org/INTECONEVAL/Resources/MinimumWageNoteJul03 v2.pdf Szarfenberg, R. (2015), Ubóstwo osób pracujących w Polsce [Working poor in Poland], presentation at the conference Rzecznik praw pracowniczych – instytucja chroniąca ludzi pracy [Ombudsman for workers and employees], Gdańsk 10 January 2015 (ppt). http://rszarf.ips.uw.edu.pl/pdf/workingpoor.pdf Wóycicka, I. (2010), In-work poverty and labour market segmentation, Network of Independent Experts on Social Inclusion, CEPS INSTEAD, report for the EC, DG Employment, Social Affairs and Inclusion.

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Annex Table A1. In-work at-risk-of-poverty rate* in Poland, 2012-2017** (%)

2012 2013 2014 2015 2016 2017

Overall, population 18-64 10.4 10.8 10.7 11.3 10.9 9.9

By employment status Employees 6.4 7.1 7.2 7.0 7.1 5.3 Self-employed 26.4 25.5 24.3 28.2 26.1 28.5 By type of employee contract Permanent contract 5.1 5.1 5.5 5.6 5.6 4.0 Temporary contract 10.3 12.2 11.4 10.8 10.9 9.1 By working time Part time 18.1 20.2 17.1 18.3 20.4 21.7 Full time 9.6 9.7 10.0 10.7 10.2 9.0 By sex Males 11.9 11.9 11.8 12.5 12.0 10.7 Females 8.7 9.4 9.3 9.9 9.5 9.1 By age group 18 to 24 years 11.6 11.7 10.9 10.3 10.9 11.4 25 to 54 years 10.4 10.8 10.6 11.2 10.9 9.5 55 to 64 years 10.1 10.3 11.0 11.8 10.6 11.6 By educational attainment Lower secondary or below 25.6 27.7 28.6 30.6 28.0 23.2 Upper and post-secondary 12.3 12.9 12.9 13.6 13.3 12.2 Tertiary 2.3 2.3 2.3 2.7 3.0 3.5 By household type and parenthood Single person 11.3 10.7 9.5 11.6 10.6 11.3 Single person with children 10.5 15.6 14.8 16.6 23.1 15.0 2+ adults without children 7.0 6.1 7.6 6.7 6.4 7.4 2+ adults with children 12.6 13.7 12.5 13.6 13.2 11.1 By work intensity (population 15-59) Very high work intensity 5.6 6.0 5.9 6.5 6.5 6.3 High work intensity 12.8 11.3 9.1 11.4 11.0 10.5 Medium work intensity 23.2 20.7 25.5 25.3 22.5 19.2 Low work intensity 37.7 42.3 42.3 40.9 45.7 33.6 Memo At-risk-of-poverty rate, age 18-64 16.5 16.7 16.7 17.6 17.3 15.6 Source: Eurostat, based on EU SILC.

Notes: *See definition in footnote 1 to main text above. **See footnote 2 to main text.

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In-work poverty Poland

Table A2. Development of the minimum wage, 2011-2017 (PLN, per month)

2012 2013 2014 2015 2016 2017

Average wage* (gross) 3,522 3,650 3,783 3,900 4,047 4,272

Minimum wage (gross) 1,500 1,600 1,680 1,750 1,850 2,000

Minimum wage (net) 1,112 1,181 1,237 1,286 1,356 1,459

Poverty threshold**, per household

 Single person 1,081 1,120 1,162 1,231 1,297 x

 2 adults, 2 children 2,269 2,352 2,441 2,585 2,724 x

Subsistence minimum, per household

 Single person, in employment 521 542 544 546 555 574

 Employee household (2 adults, 1 child) 1,382 1,443 1,446 1,447 1,472 1,522

 Employee household (2 adults, 2 children) 1,772 1,851 1,855 1,856 1,888 1,954

Social minimum, per household

 Single person, in employment 1,027 1,061 1,071 1,080 1,098 1,134

 Employee household (2 adults, 1 child) 2,654 2,693 2,643 2,647 2,700 2,815

 Employee household (2 adults, 2 children) 3,379 3,450 3,409 3,422 3,489 3,633

Source. Average wage: GUS/Central Statistical Office http://stat.gov.pl/obszary-tematyczne/rynek- pracy/pracujacy-zatrudnieni-wynagrodzenia-koszty-pracy/przecietne-miesieczne-wynagrodzenie-w-gospodarce- narodowej-w-latach-1950-2017,2,1.html?pdf=1; Poverty threshold: Eurostat, Social and subsistence minimum IPiSS/Institute of Labour and Social Studies https://www.ipiss.com.pl; Minimum wage (gross): legislation,

Minimum wage (net): http://www.wynagrodzenia.pl/kalkulator_oblicz.php Notes: *Average wage and salary in the economy (regardless of company's size, sector etc). All components of remuneration are included. **The poverty threshold is set at 60% of the national median equivalised income, for the calendar year prior to the SILC survey.

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In-work poverty Poland

Table A3. Number of job-seekers registered at a public employment institution (excluding those not employed and receiving social transfers)

Job-seekers Employees excluding non- Employees of being in the Participants of employed employers period of classes at the Family people with who declared termination of Centre for Employees members of disabilities bankruptcy or Year employment or Social in age farmers, who and in liquidation, employment Integration or group 45 plan to seek beneficiaries excluding relationship for individual and over employment of social liquidation for reasons related integration outside programmes, the purpose of to the programme agriculture of which: privatisation workplace 2012 20,861 24 6 45 1,914 94 2013 21,930 28 3 78 1,843 94 2014 19,662 20 3 97 1,668 80 2015 18,045 14 1 71 1,759 73 2016 16,309 11 0 79 1,785 51 2017 15,678 11 0 105 1,835 51 October 2018 14,110 6 0 127 1,695 34 Source: Authors’ estimates based on http://psz.praca.gov.pl/rynek-pracy/statystyki-i-analizy/bezrobocie- rejestrowane.

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In-work poverty Poland

Fig. A1. In-work poverty rate (%) in Poland by employment status 30.0

25.0

20.0 Employees

15.0 Self-employed (employed, not employees) 10.0

5.0 2012 2013 2014 2015 2016 2017

Fig. A2. In-work poverty rate (%) in Poland by working time

30.0

25.0

20.0 Part-time

15.0 Full-time

10.0

5.0 2012 2013 2014 2015 2016 2017

Fig. A3. In-work poverty rate (%) in Poland by type of contract 13.0 11.0 9.0 Permanent contract 7.0 Temporary contract 5.0 3.0 2012 2013 2014 2015 2016 2017

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In-work poverty Poland

Fig. A4. In-work poverty rate (%) in Poland by sex 13.0 12.0 11.0 10.0 9.0 Males 8.0 Females 7.0 6.0 5.0 2012 2013 2014 2015 2016 2017

Fig. A5. In-work poverty rate (%) in Poland by age 13.0 12.0 11.0 10.0 18 to 24 years 9.0 25 to 54 years 8.0 55 to 64 years 7.0 6.0 5.0 2012 2013 2014 2015 2016 2017

Fig. A6. In-work poverty rate (%) in Poland by educational attainment 35

30

25 Lower than secondary 20 Upper- and post- 15 secondary Tertiary 10

5

0 2012 2013 2014 2015 2016 2017

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In-work poverty Poland

Fig. A7. In-work poverty rate (%) in Poland by household type and parenthood, 25.0

20.0 Single person

Single person with 15.0 children 2+ adults without children 10.0 2+ adults with children

5.0 2012 2013 2014 2015 2016 2017

Fig. A8. In-work poverty rate (%) in Poland by work intensity of the household 50 45 40 35 30 Very high work intensity 25 High work intensity 20 Medium work intensity 15 Low work intensity 10 5 0 2012 2013 2014 2015 2016 2017

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