Copyright by Polska Agencja Rozwoju Przedsiębiorczości, Warszawa 2010

REPORT ON THE CONDITION OF SMALL AND MEDIUM-SIZED ENTERPRISE SECTOR in Poland in the years 2008-2009

This is the English version of The Report on The Condition of SME Sector in Poland in The Years 2008-2009, PARP 2010. It does not include Chapter 9 Regional profiles of SMEs and attachments with statistical data as well as symbols of The Polish Classification of Activities (PKD).

Report on the condition of small and medium-sized enterprise sector in Poland in the years 2008-2009

The report has been prepared under supervision of Aneta Wilmańska

Note! The numbers presented on the diagrams are written in a European format in which a coma separating decimals or hundredths should be interpreted in the same way as the decimal point used in the English language system. In the text outside diagrams all numbers are written according to the English language system, where a point serves to separate decimals or hundredths.

2 Contents

Introduction ...... 5

Part I Situation of the small and medium-sized enterprise sector in the years 2008- 2009…………………………………………………………………………………………… 9 Chapter 1. Macroeconomic situation of Poland in 2009, Anna Tarnawa ...... 10 Chapter 2. Share of small and medium-sized enterprises in GDP and gross value added production, Robert Zakrzewski ...... 27 Chapter 3. Registered and active SMEs in 2008-2009, Jacek Łapiński ...... 31 Chapter 4. The number of employed persons and average employment and remuneration in SMEs sector, Jacek Łapiński ...... 42 Chapter 5. SMEs revenues and financial situation, Jacek Łapiński ...... 53 Chapter 6. Investments and fixed assets in SMEs, Jacek Łapiński ...... 66 Chapter 7. Small and medium-sized enterprises in the export of Poland in 2008 – 2009, Zdzisław Wołodkiewicz-Donimirski ...... 73

Part II Role of human capital in developing entrepreneurship ...... 95 Chapter 9. Workers' skills and professions of the future in the light of foresight research, Joanna Orłowska ...... 956 Chapter 10. Monitoring the labour market in Poland as a tool for supporting the social policy, Beata Michorowska, Maja Dobrzyńska...... 115 Chapter 11. Effect of education on entrepreneurship and the preparation of young Poles to carry out business activity, Dorota Węcławska, Paulina Zadura-Lichota ...... 1232 Chapter 12. Obtaining strategic information by small and medium-sized enterprises in Poland, Robert Zakrzewski ...... 159 Chapter 13. Improving human resources of companies as the orientation of activities funded by the European Social Fund, Maciej Szałaj ...... 170

Dear Readers, The Polish Agency for Enterprise Development (PAED) celebrates its tenth anniversary this year. Over this time the Agency has successfully supported entrepreneurs in completion of projects related to the development and implementation of new technologies, development of human resources and development of foreign cooperation, which are all aimed at improving innovativeness and efficiency. The scale of support we have offered is reflected by the fact that in this period the Agency has concluded nearly 12 thousand support agreements for the amount of nearly PLN 8 billion, while over half a million workers have taken part in training courses and post-graduate studies co-financed from PAED resources. These actions, resulting in the improved competitive position of the economy, are mostly addressed to small and medium-sized enterprises. Support for SMEs, the Agency is focused upon, reflects the role they play in the Polish economy. SMEs sector is not only the most numerous group of companies in Poland, but also a significant employer, employing over 60% of enterprise workers in Poland and generating nearly a half of Polish GDP. This sector has considerably developed in the recent 10 years. The number of SMEs has grown by nearly 100 thousand, whereas the number of SMEs workers has grown by almost 750 thousand persons. Significance of this sector for the development of economy and social welfare is a key issue, while its growth rate indicates that this will be the case also in the future. An important role of SMEs in the domestic economy results from the relatively well- developed entrepreneurship of the Polish society. The Poles are perceived as up-and-coming individuals proud of their companies and own achievements. This inclination to take matters in own hands results in the fact that microenterprises, employing no more than one worker on average, dominate in the economy. On average, these companies are smaller than in the EU and the USA. However, the size of an enterprise does not have to be a key success-driving factor. Observations of the current transformations in the global economy indicate that traditional sources of competitive advantage become less important against completely new competitiveness factors. Economic success is achieved to an ever greater extent by small, young, innovative companies which can flexibly react to changes of the surroundings, competition and specific client requirements. Such companies are capable of rapid development. However, in order to get involved in the dynamic developmental stream, one needs to rely on innovation-oriented human capital. It seems that it is becoming the most valuable developmental factor as never before. Since 2001, the Polish Agency for Enterprise Development has been issuing an annual Report on the condition of small and medium-sized enterprise sector in Poland. Its task is to deliver a reliable and in-depth picture regarding the functioning of SMEs sector in Poland, which could be an inspiration and a valuable contribution in the discussion on the enterprises‘ functioning conditions. This edition addresses the issue of human capital. We encourage you to contact us and share your suggestions with us, so that the following editions of the Report include issues that are of greatest significance to you and inspire a vast group of our Readers to reflect on these aspects.

Bożena Lublińska-Kasprzak President of the Polish Agency for Enterprise Development

Introduction

We are presenting the thirteenth edition of the Report on the condition of small and medium- sized enterprise sector, a publication initiated by the Polish Foundation for the Development of Small and Medium-Sized Enterprises, which has been continued since 2001 by the Polish Agency for Enterprise Development. Similar as in the previous years, the Report is divided in two parts - a statistical one and an expert one. The first part – a statistical one – presents basic data concerning the small and medium-sized enterprise sector, as well as in-depth analyses related to the condition of particular companies and industry branches, including the comparison with large enterprises. Presented analyses have been prepared on the basis of data ordered by PAED and prepared by the Central Statistical Office. Moreover, the Report uses subsequent editions of CSO study entitled: „Operation of non-financial enterprises‖, as well as data from PONTINFO database, constructed on the basis of on the CSO data. The years 2008-2009, despite a visible global economic slowdown, were beneficial for the Polish economy. In 2008 the number of active enterprises grew – in all groups of companies and branches. Similar case was observed in 2009, when an evident recovery took place when it comes to the growth in the number of newly established companies. A decline in the number of large companies was observed in the discussed period, which may indicate negative symptoms of the economic crisis experienced by large enterprises with best- developed links with the Western European economies or the United States. In 2008 the demand on labour continued to grow, which resulted in the increased number of workers, employment rate and remuneration in the entire enterprise sector. It is worth emphasizing that the largest share in the increased number of workers was observed in small enterprises (between 10 and 49 employees). Unfortunately, data available for 2009 show a considerable slowdown of this trend and the decline in the number of workers in the enterprise sector. In 2008 the enterprises also observed favourable financial results – in the scope of total revenues, gross financial result and the values of main economic indicators: profitability, financial liquidity and debt ratios. However, these positive effects were visible mostly in the group of small companies and micro-enterprises; medium-sized and large enterprises observed a slightly deteriorated economic and financial situation. Detailed information concerning the abovementioned issues are presented in Chapters 2-6 of the Report. A large part of the Report is dedicated to the analysis of SMEs sector broken down by voivodeships. A separate sub-chapter is devoted to each region and it presents the data on the business breakdown structure, investment expenditure, trade exchange and operation of active enterprises. A synthetic ratio depicting the entrepreneurship level in particular voivodeships has been presented in the summary concerning regional profiles. The voivodeship ranking created on its basis have undergone only slight changes in recent years. Since 2005 (when the first calculations of synthetic ratio were made) Mazowieckie Voivodeship has remained a leader. It is followed by Pomorskie Voivodeship which has systematically increased its ratio in subsequent years (in 2005 – 62% and in 2008 – 72%). Wielkopolskie Voivodeship has also remained among the first three. Lowest ratio values have been observed in the following voivodeships: Lubelskie and Warmińsko-Mazurskie, which visibly yield to other regions as

5 regards all variables composing this ratio. A noticeable economic slowdown in 2009 may infringe this reasonably stable configuration, however, the distance between particular voivodeships may grow. Economic slowdown itself had been signalled in the previous edition of the Report, although statistical data presented had not covered this period. At the moment, the expert and entrepreneurs are talking about either an end to the economic crisis or a temporary rebound, indicating that changes in economic trends will be ever more frequent. As a result, the factor of negative and sudden changes of the economic situation should be introduced to the operation of enterprises as one of the numerous risks related to economic activity. Reality outruns – which is only natural – statistical data collected in a time-consuming manner, which we would like to present in our Report. We would like to show the freshest available data from the years 2008-2009, which confirm the economic downturn we experience, but on the other hand, they do not indicate the economic rebound which took place in the fourth quarter of 2009. The second part of the Report contains studies resulting from selected PAED activities in the field of human resources development. This issue is beginning to be analysed more often in the context of the functioning of societies and enterprises. The most important ones include: demographic changes, progressive environmental pollution, an ever more intense activity of emerging economies playing a significant role on the global economic map (among others, China, India, Brasil).A proper reaction to these aforementioned global challenges requires actions at the national level, civil society and enterprises themselves. They include increased investments in human capital, introducing relevant changes in companies‘ management organization and production processes. The awareness that market success in the global economy will also be determined, apart from employees‘ and employers' skills, by appropriate social attitudes and competences, is not universal among Polish enterprises. On the other hand, as indicated by results of Polish and international analyses, appropriate social competences, such as teamwork, openness to changes, ability to quickly adapt to new working conditions will be equally important as the knowledge in the field specific for a given company. This means that the education system should, apart from transferring knowledge, influence the attitudes of young persons when preparing them for future work and in the case of continuing education, on the attitudes of employees and employers. The basic determinant of success in the global economy will be entrepreneurship understood not only as performing business activity, but also as an independent search for ways to solve problems and organisation of own work. Innovativeness (organisational, product, process and marketing) concerning all types of enterprises, including the services sector will remain invariably crucial. Fostering such harmonisation of entrepreneurship and innovativeness will require on the one hand, constant learning ability, and on the other hand, social support. In such reality, it will be indispensable to introduce new ways of human resources management, based on cooperation and information exchange, which will result in the transformation of enterprises into intelligent organisations optimally utilising human capital. Taking into account the challenges of the globalising economy, the Agency prepares analyses concerning necessary skills of employees and entrepreneurs in the modern market. They are supplemented by projects diagnosing the current state of human capital in the labour market, analysing the level of advancement within the field of knowledge management among Polish enterprises and attitudes towards entrepreneurship and innovativeness among various social groups. The obtained knowledge is used in information and promotion campaigns concerning

6 entrepreneurial and innovative attitudes, as well as in various support instruments, such as training courses and counselling as regards supplementing necessary competences. Articles presented further in the Report are based on the results of analyses and knowledge collected by PAED. The objective of the Agency‘s operation in the field of research is on the one hand to collect data necessary to proper programming of public policy based on data and evidence. On the other hand PAED supplies entrepreneurs and persons planning to start their business activity with information which may be expedient in responding to challenges of the global market in the best way and also useful while functioning in the information society. The aim of the second part of the Report is to extend the discussion on the role and directions of human resources development, which are crucial from the point of view of the future Polish position in the global economy.. Data collected by PAED during the research execution reflect well the state of education (as regards entrepreneurship and innovativeness), as well as the scope of actions undertaken by entrepreneurs and employees to enhance their own competences. By presenting five analytical studies concerning the issue of human capital in this Report, we would like to draw Readers‘ attention to several issues, i.e. directions of labour market development and demand for competences, as well as the influence of education on staff potential and human-based development of enterprises. The first three studies cover issues related to the labour market – analysis of present and future changes on this market as well as competences useful for employees and entrepreneurs. The issues presented by authors are addressed at two recipient groups. The first one is individuals who would like to get acquainted with forecasts regarding specific competences, which, according to experts, should be taken into account upon preparing to enter the labour market or to improve own situation on the market. The other group of addressees is institutions, both public and non-governmental, which can influence the adjustment of the labour market to economic changes and enterprises, who acquiring workers update their knowledge on competences that are in demand in the market. The first chapter of this part, entitled Staff competences and prospective professions in the light of foresight research, presents opinions of Polish and foreign experts concerning directions for the development of staff competences and future professions. This chapter uses, among others, the results of PAED Project entitled: Foresight of personnel in modern economy in which the abovementioned topic was analysed with respect to particular branches and overall economy. The perspective for specifying competences is the year 2020. The second chapter – Monitoring the labour market in Poland as a social policy supporting tool – presents the near future and the involvement of PAED in the establishment of labour market monitoring system. This part presents the assumptions of the Agency‘s project entitled: Human capital balance (Bilans Kapitału Ludzkiego, BKL) and the purpose it serves. The chapter presents possible analyses of human capital in terms of specifying its current features (attitudes and competences) from the point of view of demand reported by labour market participants and the possibility to use this knowledge in respect to implementing active labour market policies. The third chapter, entitled: Impact of education on entrepreneurial attitudes and preparing young Poles to perform business activity is dedicated to personnel of the future economy – youth in education at various education levels. Authors present the way education influences entrepreneurial attitudes and whether young Poles are willing to undertake challenges related to their own business activity. The starting point of the chapter are the results of international studies in the field of entrepreneurship and initial results of the PAED project entitled

7 "Entrepreneurial attitudes of the young Poles". The study presents those areas of education process which influence entrepreneurial attitudes of young persons the most and those which are important in choosing professional career by them. The following two chapters concern analyses from the perspective of enterprises. Authors concentrate on the issue of acquiring information and knowledge by enterprises with regard to strategic information which determines competitiveness of companies and on the impact of acquired information resources on companies‘ efficiency. Each of these issues is specifically based on the role of human capital in the process of acquiring, selecting and using information. The chapter entitled: Acquiring strategic information by small and medium-sized enterprises in Poland – the issue of acquiring and using knowledge has been formulated with the aid of empirical results of PAED research conducted in 2009. By discussing the importance of acquiring information for strategic management in an enterprise, the author indicates that this process requires investments in human capital. These investments will allow better utilisation of strategic information and will enhance efficiency of the company's operation in the market, including the preparation and better reaction to changes. The last chapter – closing this part of the Report, shows evidence of the efficiency of training activities undertaken by entrepreneurs. The study has been prepared on the basis of the results of the evaluation of support programs offered by PAED in the field of training courses for entrepreneurs implemented within the framework of two operational programs - ―Human Resources Development Operational Program 2004-2006‖ and ―Human Capital Operational Program 2007-2013‖. The author shows, among others, to what extent and how the condition of a company and staff potential have improved as a result of undertaking efforts aimed at additional training.

Part I

Situation of the small and medium-sized enterprise sector in the years 2008-2009

9 Anna Tarnawa

Chapter 1. Macroeconomic situation of Poland in 2009

1.1. Economic growth The year 2009 was a period of economic downturn in the U.S. and in the Eurozone as a result of the global financial crisis. In 2009 the results of the crisis translated themselves on the lower economic growth rate also in Poland. However, we have recorded a positive economic growth as the sole country in Europe. Gross Domestic Product (GDP) growth in Poland in 2009 declined to 1.8% compared to a considerably higher economic growth rate in 2008 which amounted to 5.1%. The main factor of lower economic growth in Poland was the decline in domestic demand – by 0.9% per annum, compared to a dynamic growth (by 5.5%) in 2008. The effect of limiting reserves by enterprises contributed the most to the decline in internal demand (GDP reduction by 2.7%). Investment decrease, by 0.3%, compared to the growth by 8.2% in 2008, also had a significant negative effect on the internal demand. The result of crisis was also a worsened situation on the labour market (manifesting itself in the increased number of the unemployed and reduced employment in the economy), as well as a decrease in the dynamics of household income, which in turn translated itself into a slowdown of private consumption rate to 2.3%, compared to 5.9% in 2008. The factor which allowed the achievement of positive GDP growth was a rapid reduction of deficit in foreign trade – a positive impact of the external balance on GDP amounted to 2.9% in 2009. Such result was an effect of a higher slowdown of imports (decline in real terms according to National Accounts by 13.6%, compared to growth by 8% in 2008) than exports (decline by 7.9%, compared to growth by 7.1% in 2008). Such a visible decline in imports was an effect of a few factors, e.g. high dependence of Polish exports on imports, lower domestic demand and depreciation of PLN exchange rate.

Diagram 1.1. GDP growth dynamics in Poland in the years 2000-2009 (in %)

Source: CSO data, the previous year = 100, average annual prices of the previous year

The lowest result of GDP dynamics in 2009 was observed in the first quarter, when it amounted to 0.7%. In the following quarters, along with better global economic trends, a gradual economic growth acceleration took place, to the level of respectively: 1.1%, 1.8% and 3.3%. This took place mostly due to the slowdown of limiting reserves (followed by their rebuilding process) by enterprises and exports growth. In 2009, gross value added in industry fell by 1% compared to growth by 6.8% in 2008, mainly due to a slowdown in foreign demand on the Polish export. Gross value added in construction grew by 4.8%, compared to 4.6% in 2008, mostly due to the continuation of infrastructural projects co-financed from EU funds, as well as completing housing construction projects initiated in the years 2007 and 2008. Gross value added in market services sector grew by 2.5% compared to 5.9% in 2008.

1.2. Inflation In 2009 inflation measured by average annual prices of consumer goods and services rate fell from 4.2% in 2008 to 3.5% in 2009. Analysing the shaping of the inflation rate in particular months, a one-time decrease in this rate to 2.8% in January 2009 is visible, while in the remaining period this rate oscillated between 3.0% and 4.0% (it is worth emphasizing that inflation rate oscillated around 3.5%, i.e. the upper limit of acceptable deviations from NBP inflation target, for the most part of this period).

Diagram 1.2. Inflation in Poland in 2000-2008 (in %)

Source: CSO data; price rate at the basis the previous year = 100 The continuing increased level of domestic inflation, particularly compared to the decline in inflation observed globally in 2009 (1.0% for EU-27, - 0.4% the U.S., - 1.4% Japan1) was an effect of several factors, i.e. significant increase in regulated prices (including electricity, which grew by 11% on average per annum), food prices (by 4.1%) and depreciation of PLN exchange rate at the beginning of the year, which translated itself into imported goods‘ prices

1 Source: Eurostat

11 growth. On the other hand, the factor which influenced the limited inflation growth per annum was the decline in fuel prices (by 6.9%) caused by the decline in global petroleum prices (end-2008 and I half of 2009) resulting from the slowdown of global economic growth.

1.3. Monetary policy In accordance with „Assumptions for the monetary policy for 2009‖, the aim of monetary policy was to maintain inflation at 2.5% with an acceptable fluctuation range +/- 1 percentage point. Economic growth slowdown, particularly at the beginning of the year, followed by continued relaxation of this policy in the global scale in 2009, made the Monetary Policy Council (MPC) continue the interest rates cutting initiated in end-2008. As a result, in the first quarter of 2009, MPC cut interest rates four times by the total of 150 basis points to the level of 3.50% for NBP reference rate. At the same time, NBP undertook actions supporting the stability of the banking sector during the crisis on international financial markets by: – providing financial liquidity in PLN to banks via repo transactions for 3 and 6 months, – providing financial liquidity in foreign currency (in Swiss Franc) by currency swap operations, – reduction of obligatory reserve rate from 3.5% to 3%, – previous purchase of the so-called NBP liquid bonds from commercial banks.

1.4. Condition of public finance In 2009 the public finance sector deficit2 abruptly increased to the level of 7.1% GDP compared to 3.7% GDP in 2008. Such a result was influenced by a number of factors, among others, economic slowdown and reduced income of government and local-government institutions sector (among others, reduction of disability pension contribution in previous years, lowering the tax scale since 2009, changes in VAT accounting methods). Such a high level of public finance sector deficit in 2009 means exceeding the reference value of Maastricht fiscal criteria for joining the Eurozone (3.0% GDP) for the second time in a row. A consequence of exceeding the reference level in 2008 was the Ecofin Council deciding on the excessive deficit in Poland and issuing recommendations, in accordance with which Poland should reduce excessive deficit until 2012 in a reliable and durable way. At the same time, public finance sector debt amounted to 51% of GDP in 2009, remaining below the reference value of the Maastricht criterion (60% of GDP).

2 In compliance with EU ESA95 methodology.

Table 1.1. Deficit and public debt of the government and self-government institutions sector in 2006-2009 according to ESA95 (PLN billion)

Item 2006 2007 2008 2009

Gross Domestic Product (GDP) 1 060.0 1 176.7 1 272.8 1 342.6

Deficit of government and self-government institutions sector 38.5 22.1 46.9 95.7

% GDP 3.6 1.9 3.7 7.1

Debt of government and self-government institutions sector 506.0 529.4 600.8 684.4

% GDP 47.7 45.0 47.2 51.0

Source: CSO A significant slowdown of economic growth dynamics (noticeably below assumptions made in the Budget Act), including in particular, the decrease in domestic demand in 2009, negatively influenced the collection of budgetary income, which took place way below expectations. At the same time, the execution of budgetary expenditure took place more quickly than expected. As a result, national budget deficit implementation in 2009 took place considerably more quickly compared to an initial schedule. In the face of worsening economic conditions, visible in macroeconomic data and budget implementation in 2009, the amendment of the Budget Act was necessary, as well as increasing the planned national budget deficit by PLN 9 million to PLN 27 million, at the same time introducing considerable budgetary expenditure savings. Finally, national budget deficit was implemented in 2009 at the level of nearly PLN 24 billion. At the same time, the level of public debt, according to SNA93 domestic methodology, amounted to PLN 670 billion, i.e. 49.9% GDP, which is below the first danger threshold for the level of public debt from the Act on public finance (50%).

Table 1.2. National budget in the years 2006-2009 (PLN billion) according to SNA93

Item 2006 2007 2008 2009

Total income of the national budget 197.6 236.4 253.6 274.3

Total expenditures of the national budget 222.7 252.3 277.9 298.2

Result (balance) of the national budget -25.1 -16.0 -24.3 -23.8

Source: CSO

1.5. Labour market Economic slowdown in 2009 negatively influenced the situation on the labour market. In 2009 the registered unemployment rate grew by 2.4pp to 11.9 as of end-year, which resulted from the decrease in foreign and domestic demand, initiation of mass dismissals and stoppages in enterprises' operation, as well as gradual limiting of job offers.

13 During the year, the number of the unemployed grew by ca. 420 thousand persons to 1.9 million, at 3.1 million newly registered persons and 2.7 million of persons deleted from the lists of the unemployed. Consequently, the number of persons without work grew by ca. 420 thousand as of end-2009 to 1.893 million persons compared to 1.474 million persons as of end-2008. The number of persons not entitled to an unemployment benefit grew by ca. 310 thousand in the year to 1.5 million and their share in the number of the unemployed amounted to 79.9% as of end-2009. During the entire 2009 the number of permanently unemployed grew by ca. 20 thousand persons to 770 thousand, however, due to a higher growth rate of the total number of the unemployed, the share of long-term unemployed in the total number of registered ones decreased by ca. 10pp in 2009 to 40.9%. In 2009 ca. 900 thousand employment offers were filed, by ca. 20% fewer than in 2008. Diagram 1.3. Unemployment rate in Poland in 2000-2009 (%, as of end-December)

0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Source: CSO Data, registered unemployment

In 2009, the territorial diversification of unemployment persisted. The difference in unemployment rate between the region with the lowest one (Mazowieckie Voivodeship 9.0%) and the region with the highest one (Warmińsko-Mazurskie Voivodeship 20.2%) amounted to 11.2 pp. In 2009, average employment in the enterprise sector amounted to 5.3 million persons, declining by 1.2% per annum. Above all, the reduction of the number of employed in manufacturing (by 6.7% per annum), as well as in real estate (by 1.9%) and in production and supply of electricity, gas, steam and hot water (by 0.4%) contributed to the reduced number of employed in enterprises. On the other hand, employment grew in the following sections during the year: professional, scientific and technical activity (by 10.3%), accommodation and catering (by 6.7%) and construction (by 5.3%).

1.6. Remuneration In 2009 average monthly remuneration in national economy amounted to PLN 3 103, whereas in the enterprise sector it was PLN 3 325. In the previous year, a considerable slowdown of the annual remuneration growth rate in the national economy to 5.4% took place, compared to 9.4% in 2008. (to 2.1% from 5.9% in real terms). In the enterprise sector, an even lower remuneration growth rate dynamics was observed, as it fell to 4.4% in 2009 from 10.3% in 2008 (from 6.1% to 1.1% in real terms).The highest annual remuneration growth in

14 enterprises took place in the following sections: administration and support activities (by 7.5%), electricity, gas, steam and hot water supply (by 7.1%), water supply, waste and wastewater management, reclamation (by 6.2%), whereas the wages growth was the slowest per annum in accommodation and catering (by 2.4%), transport and storage (by 2.6%) and in construction (by 2.8%). A significant divergence between remuneration levels in particular sections persisted – from PLN 2 057 in administration and support activities to PLN 5 942 in information and communication. Remuneration was also territorially divergent, the highest level was noted in Mazowieckie Voivodeship (PLN 4 340), the lowest in Podkarpackie Voivodeship (PLN 2 822).

1.7. Foreign trade In 2009 a substantial slowdown of exports and imports dynamics growth took place, while the strongest effect was observed in the second quarter of 2009 (decrease in exports in real terms according to National Accounts by 11.3%, at the decrease in imports by 18.6%). Only in the 4th quarter of 2009, along with global economic recovery, growth in exports took place (1.9%) with the continuing decrease in imports (-3.1%). As a result of the greater decrease in imports than in exports, there was a decline in total foreign trade deficit from EUR 25.7 billion in 2008 to EUR 8.7 billion in 2009, however, when it comes to trade with developed countries, a surplus in the amount of EUR 10 billion took place instead of a deficit of EUR 1.8 billion observed in 2008, whereas in relations with the European Union countries, a surplus grew from EUR 2.7 billion in 2008 to EUR 11.9 billion in 2009. When it comes to trade relations with other groups of countries: developing countries and Central and Eastern European and former USSR countries, Poland experienced deficits, albeit in the smaller scale than in 2008.

Diagram 1.5. Foreign trade dynamics of Poland in the years 2000-2009

Source: CSO data

In 2009, among the largest Polish trade partners on the exports side, Germany improved their position to 26.1% of total exports, followed by: Italy, France, Great Britain, Czech Republic.

15 When it comes to imports, the dominating position was also held by Germany (22.4% of total imports), followed by: China, Russia, Italy and France.

1.8. Financial market The bankruptcy of Lehman Brothers investment bank in September 2008 resulted in the abrupt collapse of the global financial market, which also had its impact on Poland. The effects of the financial crisis could be observed, among others, in freezing the interbanking market, abrupt decreases in prices of domestic financial assets, among others, shares, as well as PLN exchange rate weakness and economic downturn. As a result of lower mutual trust among banks, availability of market financing, both domestic and foreign, significantly declined, which resulted in the growth of competition among banks for stable financing sources in the form of deposits from non-financial entities. Limited availability of financing, as well as growing concerns of banks regarding the quality of credit portfolio under the expected further weakening of economic growth dynamics led to the fact, that in the last months of 2008 and in 2009 the availability of credits for business entities and households was limited. Greatest restrictions in credit availability concerned credits denominated in foreign currencies. At the same time, in the face of a worsened economic condition, as well as perspectives of economic growth under limited propensity to consume and invest, a decline in demand for credits by households and corporate entities took place. Consequently, the year 2009 saw a significant decline in new lending growth. In 2009 total credit growth amounted to only ca. 9.5% compared to nearly 37% in 2008, out of which credits for households grew by nearly 12% compared to nearly 45% in 2008, whereas credits for enterprises fell by 3.7% compared to a growth of nearly 30% in 2008. In 2009 trends on the Warsaw Stock Exchange (WSE) remained influenced by improved situation on foreign stock exchanges (after the share quotation collapse at the end of 2008) and expecting the fulfilment of a scenario of economic recovery in Poland and improved financial condition of quoted companies. This resulted in a strong upward trend of quotations on the shares market initiated in February 2009. During the entire 2009 basic WIG index grew by 47%, while index of most capitalised companies WIG 20 by ca. 34%. Indexes of small and medium-sized companies grew the most (sWIG80 by 62%, mWIG40 by 55%). As of end- 2009 WIG reached the level of 39 986 points and WIG Banks 5 869 points, returning to levels of September 2008. 13 companies were listed on WSE primary market in 2009 (compared to 33 in 2008), including two large share issues in the fourth quarter: PKO Bank Polski SA and Polska Grupa Energetyczna SA. In 2009 capitalisation of companies listed on the WSE primary market grew by 54% compared to 2008, to the level of PLN 716 billion. In the first months of 2009, under a very high changeability of currency exchange quotation on global markets resulting from the crisis on international financial markets, a strong PLN exchange rate weakening was observed (from over 12% against Euro to nearly 20% against the US Dollar, compared to end-2008). Consequently, as of end-March 2009, PLN exchange rate against Euro achieved PLN 4.70 for Euro, PLN 3.54 for US Dollar and PLN 3.10 for Swiss Franc. Stabilisation of the situation on international markets, resulting in the gradual return of foreign capital to the Polish financial market led to the gradual strengthening of PLN market value, beginning from the second quarter of 2009.As a consequence, as of end-2009, our currency strengthened compared to levels of end-2008: by 1.5% against Euro to PLN 4.10, by 3.8% against US Dollar to PLN 2.85 and by 1.3% against Swiss Franc to PLN 2.76.

1.9. Situation of Poland compared to the European Union The year 2009, compared to 2008, brought a further economic downturn in all European Union Member States. Economic growth rate in EU decreased in 2009 to – 4.2%, while in 2008 it was still positive (0.7%), while in 2007 nearly 3%. An abrupt economic downturn negatively influenced the situation on the European labour market, mainly due to the reduced demand of entrepreneurs for labour. In consequence of more negative expectations of entrepreneurs as regards demand for their goods and services and a limited access to financing from the banking sector, private sector investments significantly decreased. At the same time, worse economic trends translating itself into the decline in budgetary income, as well as governmental programmes aiming at stimulating the demand (e.g. in the car industry), led to an abrupt worsening of public finance of EU Member States – a growth in public finance deficit had been observed and, in consequence, a rapid public debt growth. Under economic slowdown pressure on prices growth reduced, owing to which a considerably lower inflation rate in EU Member States was observed, and even decline in prices in certain countries. The Polish economy has gone through the period of global economic slowdown relatively smoothly. Thanks to it, its effects on the Polish economy (labour market, public finance) were limited in the previous year in comparison to other EU Member States. Data concerning GDP dynamics gathered in table 1.5 indicate the deepening of effects of the global crisis of 2008 and 2009 which are negative to economy of all EU Member States. A particularly severe economic slump was observed in the following countries: Latvia, Lithuania and Estonia, where in 2009 GDP fell by ca. 15% compared to 2008.

Table 1.5. GDP and GDP per capita dynamics in the European Union Member States GDP dynamics* (y/y) GDP per capita according to PPS, Country EU-27 = 100 2007 2008 2009 2008 2009** EU-27 2.9 0.7 -4.2 100.0 100.0 Austria 3.5 2.0 -3.5 123 124 Belgium 2.9 1.0 -3.0 115 115 Bulgaria 6.2 6.0 -5.0 41 41 Cyprus 5.1 3.6 -1.7 96 98 Czech Republic 6.1 2.5 -4.1 80 80 Denmark 1.7 -0.9 -4.9 120 117 Estonia 7.2 -3.6 -14.1 67 62 Finland 4.9 1.2 -7.8 117 110 France 2.4 0.2 -2.6 108 107 Greece 4.5 2.0 -2.0 94 95 Spain 3.6 0.9 -3.6 103 103 The Netherlands 3.6 2.0 -4.0 134 130 Ireland 6.0 -3.0 -7.1 135 131 Lithuania 9.8 2.8 -14.8 62 53 Luxembourg 6.5 0.0 -3.4 276 268 Latvia 10.0 -4.2 -18.0 57 49 Malta 3.8 1.7 -1.5 76 78 Germany 2.5 1.3 -4.9 116 116 Poland 6.8 5.0 1.7 56 61 Portugal 2.4 0.0 -2.6 78 78 Romania 6.3 7.3 -7.1 : 45 Slovakia 10.6 6.2 -4.7 72 72 Slovenia 6.8 3.5 -7.8 91 86 Sweden 3.3 -0.4 -5.1 122 120 Hungary 1.0 0.6 -6.3 64 63 Great Britain 2.6 0.5 -4.9 116 117 Italy 1.5 -1.3 -5.0 102 102 Source: Eurostat, PPS – Purchasing Power Standards. *real dynamics of seasonally equalized gross domestic product **initial estimations for 2009 - June 2010 Adverse economic situation in the majority of EU Member States in the last two years has been particularly visible in comparison to 2007, when the population of the old Europe enjoyed the effects of rapid economic growth. The year 2009 ended with negative GDP dynamics values for all EU Member States excluding Poland – our economy, as the only one in Europe, achieved a positive result (diagram 1.6). The greatest economic breakdown was experienced by the following countries: Latvia (-18.0%), Lithuania (-14.8%) and Estonia (- 14.1%).

Diagram 1.6 GDP dynamics in EU Member States in 2009 (in %)

Source: Eurostat data Data concerning GDP per capita (according to purchasing power parity) for 2009 differed Źródło: Eurostat considerably between particular Member States - from 41% of EU average for Bulgaria to 268% for Luxembourg. At the same time, despite economic slowdown, the value of this index źródło: Eurostat in 2009 had not changed much compared to 2008. Countries where GDP per capita oscillated around EU average in 2009 were Finland, France, Spain, Italy, Cyprus and Greece. Countries such as Ireland, the Netherlands, Austria, Sweden, Denmark, Great Britain, Germany and Belgium experienced slightly better results. The leading country in 2009, similar as in the previous years, was Luxembourg, more than twice exceeding the EU average.

Diagram 1.7. GDP per capita in 2009 calculated according to PPS, EU-27 = 100

Source: Eurostat, PPS – Purchasing Power Standard Poland, similar as in the previous years, ranked one of the last (23) in the EU in 2009 when it comes to GDP per capita. Only four countries had worse results: Lithuania (53%), Latvia (49%), Romania (45%) and Bulgaria (41%). On the other hand, though, we need to note that in Poland this index grew by 5 pp compared to 2008, running at 61% of EU-27 average. However, in any case, we are one of the poorest EU Member States.

Adverse influence of the financial crisis in all EU Member States is also indicated by other macroeconomic indexes, i.e. value of executed investments, unemployment rate, inflation or fiscal indexes (table 1.6). Eurostat data for 2009 unequivocally point at the worsened situation compared to 2008 in all fields described by the abovementioned indexes, apart from prices. In 2009 the decline in private sector investments by 2.1pp from 18.4% GDP in 2008 to 16.3% GDP was observed for EU-27. Unemployment rate grew from 7.6% in 2008 to 9.4% as of end-2009, i.e. by nearly 20%. Inflation in 2009 for EU-27 amounted to 1.0% compared to 3.7% in 2008. Deficit of government and self-government institutions sector in relation to GDP EU grew almost three times, from -2.3% in 2008 to – 6.8% in 2009. Public debt for EU grew by ca. 20% – from 61.6% in 2008 to 73.6% in 2009.

Table 1.6. Selected macroeconomic indexes for EU Member States for 2008 and 2009 Government Government and self- and self- Private sector government government Unemployment Inflation investments in institutions institutions (%) XII of a (HICP) (%) relation to sector sector debt in Country given year GDP (%) deficit/surplus in relation to GDP relation to GDP (%) (%) 2008 2009 2008 2009 2008 2009 2008 2009 2008 2009 EU-27 3.7 1.0 7.6 9.4 18.4 16.3 -2.3 -6.8 61.6 73.6 Austria 3.2 0.4 4.2 4.8 20.8 19.7 -0.4 -3.4 62.6 66.5 Belgium 4.5 0.0 6.8 8.0 21.0 19.5 -1.2 -6.0 89.8 96.7 Bulgaria 12.0 2.5 5.3. 8.3 27.7 19.9 1.8 -3.9 14.1 14.8 Cyprus 4.4 0.2 4.2 6.1 20.4 16.3 0.9 -6.1 48.4 56.2 Czech 17.1 6.3 0.6 4.6 7.4 19.0 -2.7 -5.9 30.0 35.4 Republic Denmark 3.6 1.1 4.1 7.1 19.0 16.6 3.4 -2.7 34.2 41.6 Estonia 10.6 0.2 8.4 15.6 24.0 17.0 -2.7 -1.7 4.6 7.2 Finland 3.9 1.6 6.7 8.8 19.1 17.0 4.2 -2.2 34.2 44.0 France 3.2 0.1 8.3 9.9 18.5 17.2 -3.3 -7.5 67.5 77.6 Greece 4.2 1.3 7.8 10.2 16.6 13.9 -7.7 -13.6 99.2 115.1 Spain 4.1 -0.2 14.3 19.0 25.0 20.0 -4.1 -11.2 39.7 53.2 The 14.9 2.2 1.0 2.7 4.0 16.9 0.7 -5.3 58.2 60.9 Netherlands Ireland 3.1 -1.7 8.7 13.0 16.6 11.0 -7.3 -14.3 43.9 64.0 Lithuania 11.1 4.2 9.7 15.9 20.2 13.1 -3.3 -8.9 15.6 29.3 Luxembourg 4.1 0.0 5.5 5.4 16.1 13.8 2.9 -0.7 13.7 14.5 Latvia 15.3 3.3 11.4 20.4 24.5 17.5 -4.1 -9.0 19.5 36.1 Malta 4.7 1.8 6.0 7.1 14.1 12.0 -4.5 -3.8 63.7 69.1 Germany 2.8 0.2 7.2 7.4 17.5 16.2 0.0 -3.3 66.0 73.2 Poland 4.2 4.0 7.0 9.1 17.5 15.7 -3.7 -7.1 47.2 51.0 Portugal 2.7 -0.9 8.0 10.2 20.0 17.1 -2.8 -9.4 66.3 76.8 Romania 7.9 5.6 5.8 7.6 26.4 20.2 -5.4 -8.3 13.3 23.7 Slovakia 3.9 0.9 9.2 14.2 23.0 21.3 -2.3 -6.8 27.7 35.7 Slovenia 5.5 0.9 4.1 6.3 24.6 19.1 -1.7 -5.5 22.6 35.9 Sweden 3.3 1.9 7.0 9.0 16.8 14.3 2.5 -0.5 38.3 42.3 Hungary 6.0 4.0 8.4 10.6 18.0 17.3 -3.8 -4.0 72.9 78.3 Great Britain 3.6 2.2 6.4 7.7 14.5 12.2 -4.9 -11.5 52.0 68.1 Italy 3.5 0.8 6.9 8.4 18.5 16.5 -2.7 -5.3 106.1 115.8 Source: Eurostat data of June 2010 In many EU Member States the year 2009 saw a considerable decline in inflation compared to the previous year. Most noticeable changes of this index were observed in: Estonia (0.2%, decline by 10.4pp), Latvia (3.3%, by 12pp) and Bulgaria (2.5%, by 9.5 pp). Ireland, Portugal and Spain experienced deflation in the previous year (indexes respectively: - 1.7%, - 0.9%, - 0.2%). The highest prices growth in 2009 was observed in Hungary (4.0%), Lithuania (4.2%) and Romania (5.6%). In Poland the change of price index in 2009 was minor (0.2pp) in comparison to 2008 and amounted to 4% (according to Eurostat).

Diagram 1.8. Inflation in EU countries 2008-2009 (in %)

Source: Eurostat data of June 2010 Unemployment rate in EU Member States amounted to 9.4% as at end-2009. Greatest problems on the labour market persisted in Latvia (20.4%), Spain (19.0%), Lithuania (15.9%) and Estonia (15.6%). In Poland as at end-2009 this index amounted to slightly over 9%, which again placed our country among the countries with unemployment rate close to the EU average. The best situation on the labour market in 2009 was observed in Luxembourg (5.4%), Austria (4.8%) and the Netherlands (4.0%).

Diagram 1.9. Unemployment rate in the EU in the years 2008-09 (in %)

Source: Eurostat data of June 2010 The value of private sector investments in relation to GDP for EU-27 amounted to 16.3% GDP in 2009. This result was lower by 2.1pp compared to 2008 and a visible decline in private sector investments was observed also in particular Member States in 2009.Results for the majority of Member States in this category oscillate around EU average. Value of investment rate in relation to GDP for Poland amounted to 15.7%, which means a decline by 1.8pp compared to 2008. The leading countries in this category were: Slovakia (21.3%), Romania (20.2%), Spain (20.0%) and Bulgaria (19.9%). The fewest investments have been executed in Great Britain (12.2%), Malta (12.0%) and Ireland (11.0%).

23 Diagram 1.10 Private sector investments in EU Member States in relation to GDP in 2008-2009 (% GDP)

Source: Eurostat data of June 2010

Diagram 1.11. Public sector deficit/surplus in EU Member States in 2008-2009 (% GDP)

Source: Eurostat data of June 2010 Average public sector deficit for EU Member States amounted to – 6.8% GDP in 2009.The lowest values in this category were observed in Sweden (-0.5%), Luxembourg (-0.7%), Estonia (-1.7%) and Finland (-2.2%); on the other hand, the highest values were noted in Ireland (-14.3%), Greece (-13.6%), Great Britain (-11.5%) and Spain (-11.2%).The greatest change in the public sector result rate in 2009, compared to 2008, was observed in Ireland and Cyprus (both by 7pp), Portugal (by 6.6pp) and Finland (6.4pp), which in 2008 saw the highest public sector surplus among EU Member States.

25 Diagram 1.12. Public debt in the EU countries in 2008-2009 (%PKB)

Source: Eurostat data of June 2010 Government and self-government institutions sector debt amounted to 73.6% for EU-27 in 2009. Portugal (76.8%) and Germany (73.2%) saw a similar result in this category. Data presented in diagram 1.12 and in table 1.6 indicate particularly large deviations in debt rate values. Similar as in the previous year, the highest values in this category in 2009 were observed in Italy (115.8%) and Greece (115.1%). The lowest values of public debt rate were noted in Estonia (7.2%), Luxembourg (14.5%) and Bulgaria (14.8%). According to Eurostat, in 2009 Polish public debt amounted to 51% of GDP.

Robert Zakrzewski

Chapter 2. Share of small and medium-sized enterprises in GDP and gross value added production

2.1. Share of SMEs in GDP generation Contribution of SMEs in GDP3 generation amounted to 46.9% in 2008 (including microenterprises which generated 29.8%, small ones - 7.3% and medium-sized ones - 9.8%). Analysing the GDP structure generated by enterprise sector, the domination of microenterprises is visible; in 2008 they generated 42% GDP. Small (excluding micro enterprises), medium-sized and large enterprises generated respectively: 10%, 14% and 34% of GDP4. Between 2007 and 2008 the share of SMEs in GDP creation remained practically unchanged (oscillated around 0.1%). In the years 2004-2008 a slight decrease in the share of microenterprises was observed, which influenced a slight decrease in the share of the entire SMEs sector in GDP generation – changes in the share of enterprises of particular sizes are presented in Table 2.1. The share of particular categories of enterprises in GDP in 2008 is presented in diagram 2.1.

Table 2.1. SME share in the generation of GDP in 2004-2008 (%) 2004 2005 2006 2007 2008 Total SMEs 48.3 47.6 47.5 47.0 46.9 Micro 30.9 31.4 30.9 30.2 29.8 Small (without micro) 7.5 7.3 7.3 7.1 7.3 Medium 9.9 8.8 9.3 9.7 9.8 Source: Own study based on CSO data presented for the purpose of this publication.

3 The relation of gross value added generated by SMEs (excluding A and B sections of GDP) to overall GDP value is assumed. GDP is a sum of gross value added enhanced by taxes on products and reduced by subsidies to products. 4 In enterprise sector in 2008.

Diagram 2.1 Share of categories of enterprises in GDP generation in 2008

Source: Own study based on CSO data presented for the purpose of this publication.

Changes in the value of the share of small and medium-sized enterprise sector in Poland in GDP generation are indicated in table 2.2. These are mostly private enterprises. Among medium-sized enterprises, companies operating in financial intermediation section and industrial processing section significantly contribute to GDP. Small enterprises prevail in other sections. In the small and medium-sized enterprise sector, around 63.5% GDP is generated by microenterprises (employing up to 9 workers). In this group the following sections contribute the most to GDP generation in terms of value: trade and repairs, real estate and business activities and construction.

Table 2.2 GDP structure in 2007-2008 ITEM 2007 2008 PLN million GDP 1 176 737.0 1 275 432.0 including enterprises: 826 573.6 900 706.7 of which: micro – employing from 0 to 9 workers 355 582.8 380 272.3 small – employing from 10 to 49 workers 83 297.1 92 778.0 medium-sized – employing from 50 to 249 workers 114 423.7 125 613.7 large – employing over 249 workers 273 270.0 302 042.7

GDP 100.0 100.0 including enterprises: 70.2 70.6 of which: micro – employing from 0 to 9 workers 30.2 29.8 small – employing from 10 to 49 workers 7.1 7.3 medium-sized – employing from 50 to 249 workers 9.7 9.8 large – employing over 249 workers 23.2 23.7 Share of SMEs in GDP generation 47.0 46.9 Source: own study based on CSO data presented for the purpose of this publication.

The share of small and medium-sized enterprise section of Polish Classification of Activities (PKD) in generating Gross Domestic Product – presented in Table 2.3. – indicates the domination of the smallest enterprises among almost all PKD sections.

Table 2.3. Share of SMEs in GDP in 2008 (at current prices in PLN million) according to economy sections medium- micro – small – sized – Total employing employing employing Total GDP SMEs from 0 to 9 from 10 to from 50 to workers 49 workers 249 workers Total GDP (excluding A and B 1 275 432.0 598 664.0 380 272.3 92 778.0 125 613.7 sections)

Mining and quarrying 26 806.0 2 380.9 391.3 465.1 1 524.5 Industrial processing 208 030.0 90 101.3 32 373.0 22 043.1 35 685.2 Electricity, gas and water 36 199.0 4 125.0 368.4 1 071.6 2 685.0 production and supply Construction 81 074.0 69 444.6 46 825.9 10 832.4 11 786.3 Trade and repairs 201 936.0 174 139.3 129 401.7 23 426.4 21 311.2 Hotels and restaurants 13 595.0 10 427.9 7 106.3 2 205.6 1 116.0 Transport, stock management 76 807.0 37 879.7 24 151.6 5 309.1 8 419.0 and communications Financial intermediation 58 522.0 30 336.6 3 179.0 4 803.5 22 354.1 Real estate and business 158 773.0 138 017.1 106 931.5 14 409.5 16 676.1 activities Education 52 970.0 4 934.8 2 340.7 2 423.4 170.7 Health care and social assistance 42 902.0 14 394.4 10 380.6 2 573.0 1 440.8 Other municipal, community and 44 625.0 16 388.0 10.727.9 3 215.3 2 444.8 individual services Households employing workers 6 094.0 6.094.4 0.0 0.0 0.00 Source: own study based on CSO data presented for the purpose of this publication.

Assuming gross value added generated by enterprises as 100% (without A and B section), the share of GDP in this volume amounted to 66.5% in 2008 and was by 0.5% lower than in 2007. This was caused by the decline in the share of SMEs in gross value added, which occurred in the following sections of the economy: trade and repairs (from 87.8% in 2007 to 86.4% in 2008) and real estate and business activities (from 91.3% to 90.2%). At the same time, the growth in the SMEs share in construction (from 85.7% to 86.7%), industrial processing (from 42.3% to 43.3%) and transport, storage and communication (from 50.2% to 50.6%). It could not have compensated the decline in the share of SMEs in GDP generation by enterprises, as large enterprises developed more dynamically than SMEs.

Jacek Łapiński

Chapter 3. Registered and active SMEs in 2008-2009

3.1. The number of enterprises registered in REGON In 2009 the number of enterprises registered in REGON amounted to 3,880,237, which means the growth by 0.3% compared to 2008. Structure of enterprises by particular size groups was as follows: microenterprises – 3 672 853 (94.7% of all registered enterprises), small enterprises – 170 182 (4.4%), medium enterprises – 31 648 (0,8%) and large enterprises – 5 554 (0.1%). The number of SMEs amounted to 3 874 683, which amounted to 99.9% of all enterprises. The diagram below presents the quantitative trend of enterprises registered in REGON in 2003-2009.

Diagram 3.1. Number of enterprises registered in REGON in 2003-2009 in million PLN

Source: own study based on CSO data presented for the purpose of this publication.

In 2008 the number of enterprises according to REGON increased fairly significantly (by 1.9% compared to 2007). This constituted the highest growth in 2003-2007 that significantly surpassed the average growth in this period (1.0%). In 2009 the growth in number of enterprises registered in REGON visibly slowed down (to 0.3% compared to 2008). The reason for such negative result in 2009 was the slowdown of Polish economy as a result of an abrupt economic downturn in the United States and European Union Member States. The diagram below presents the number of enterprises registered in REGON by particular company groups and by size.

Diagram 3.2. Number of enterprises registered in REGON by size class in 2003-2007

Source: own study based on CSO data presented for the purpose of this publication.

Both in 2008 and 2009 the highest annual growth in enterprises group was experienced by small enterprises (3.4% and 3.3%, respectively). These results reflect a significant acceleration in the number of companies growth compared to the entire period 2003-2007, where average annual growth amounted to 2.5%. Apart from that, in 2008 only the number of medium-sized enterprises grew rapidly (by 3.2% compared to 2007), but their dynamics slowed down considerably in the following year (growth by only 1.4%). A visible slowdown took place also in other groups. In the group of microenterprises the growth, which amounted to 1.9% in 2008, declined and amounted to 0.2% in 2009. The case was similar among large enterprises, in 2008 the number of enterprises grew by 1.6% per annum, whereas in 2009 it fell by 0.1%.

3. 2. Number and structure of active enterprises5 In 2008 there were 1,862,462 active enterprises, out of which 1,787,909 were microenterprises, 54,974 small enterprises, 16,327 medium-sized enterprises and 3,252 large

5 The group presented in Chapters 3-6 includes legal persons, entities without legal personality and natural persons who performed business activity in Poland in 2008. Presented data cover all entities, regardless of the number of workers, classified to the following sections according to the Polish Classification of Activities (PKD 2004): forestry (section A – division 02), fishery and fishing (section B – division 05), industry (sections C, D and E), construction (section F), trade (section G), hotels and restaurants (section H), transportation, storage and communications (section I), real estate, renting and business activities (section K), education (section M), health care (section N - classes 85.12-85.20, group 85.3), other community, social and personal service activities (section O – divisions 90,92,93).

32 ones. Consequently, the number of SMEs amounted to 1,859,210. In 2008 the number of active enterprises visibly grew (by 4.8% compared to 2007). This result was way above the average annual growth in the years 2003-2007 (0.7%). This was caused by a continuingly favourable economic trends in 2008 and the improved situation of enterprises in 2008 and in the entire period 2003-2008. Data on the number of active enterprises are presented in the diagram below.

Diagram 3.3. Number of active enterprises by size class in 2003-2008

Source: own study, based on: Activity of non-financial enterprises in 2008, CSO (2010) Warsaw.

In 2008 definitely the highest growth in the number of enterprises compared to 2007 in the overall group of enterprises was experienced by small enterprises (21.7%), whose growth significantly increased compared to average annual growth in the years 2003-2007 (1.4%). A considerable growth in the number of small enterprises took place practically in all GDP sections. Microenterprises saw a slightly lower growth (4.4%) in 2008 compared to 2007 than the entire population (4.8%). However, the growth in the number of microenterprises in 2008 compared to 2007 was still over three times as high than their annual average growth in the years 2003-2007. Among microenterprises, the number of entities grew the most in health protection (12.9%), construction (11.8%), other services (11.0%). In 2008 the number of large enterprises remained almost unchanged (growth by 0.2% compared to 2007). This result indicates an evident slowdown compared to the average annual growth in the years 2003-2007 (4.7%). Such a considerable slowdown as regards large enterprises in 2008 was related mostly to the decline in the number of enterprises in Construction (-8.6%) and Industry (-3.0%). Of all entrepreneurs, those operating in Industry have experienced the decline in demand for their goods outside Poland most quickly. In 2008 there was a rapid growth in the number of medium-sized enterprises (5.7%), compared to the average annual growth in the years 2003- 2008, which amounted to 2.6%. In this group, the number of enterprises operating in section Other services grew very rapidly (61.3%). Significantly lower growth levels in this respect were observed in the largest sections: Construction (9.4%), Real estate and business activities

33 (7.8%) and Trade and repairs (5.4%). The increase in the number of enterprises in particular groups by size in the years 2003-2008 is represented in the diagram below.

Diagram 3.4. Number of active enterprises by size class in 2003-2008

Source: own study, based on: Activity of non-financial enterprises in 2008, CSO (2010) Warsaw. Despite the highest growth rate of small enterprises in the entire enterprise group in 2008, the increase of enterprise quantity was affected to the greatest extent by increase of microenterprise quantity (a share of 87.5% in this increase). The impact of the growth in the number of small enterprises on the total number of enterprises was considerably lower (share of 11.5% in this growth). The increase in quantity of medium-sized enterprises affected this amount insignificantly (1.0%). As a consequence of a higher average annual dynamics of the number of small, medium-sized and large enterprises in the entire period of 2003-2008, slow changes in the structure of the quantity of enterprises were taking place. In the discussed period the share of microenterprises in the total structure of enterprises was slowly on decline, despite the reversal of this trend in the years 2006-2007. The share of other groups indicated a growing tendency. The table below shows the structure of active enterprises according to size in the years 2003-2008.

Table 3.1. Structure of the number of active enterprises by size class in 2003-2008 (%) 0-9 10-49 50-249 > 249 2003 96.53 2.48 0.83 0.16 2004 96.44 2.59 0.82 0.16 2005 96.33 2.66 0.85 0.17 2006 96.39 2.58 0.86 0.17 2007 96.41 2.54 0.87 0.18 2008 96.00 2.95 0.88 0.17 Source: own study, based on: Activity of non-financial enterprises in 2008, CSO (2010) Warsaw.

With regard to the rate of changes of the share of specific enterprise groups in the total number of enterprises growth in the years 2003—2008, it needs to be noted that the highest growing trend was observed among small enterprises despite a single-year breakdown in 2007. Average annual growth of the share of small enterprises in the total number of enterprises amounted to 0.01pp in the analysed period. However, only in 2008 the growth of the share of small enterprises amounted to as much as 0.41pp. In the case of medium-sized and large enterprises in the period 2003-2008, a slight but persisting growth trends as regards the share of these groups in the total growth of enterprises. The decline was observed only among microenterprises. Most entities of the enterprise sector operated in section Trade and repairs (32% of all enterprises). The share of other sections was visibly smaller. Real estate and business activities (16%) ranked second as far as the share in the number of enterprises is concerned, followed by Construction (12%) and Industry (11%). The share of the remaining sections was insignificant. When it comes to growth rate regarding the number of enterprises in particular sections, the fastest growing section was Health care (growth in the number of enterprises by 12.8% compared to 2007), Construction (12.5%) and Other services (11.6%). Diagram 3.5. presents the data in this regard.

Diagram 3.5. Structure of active enterprises according to PKD6 in 2008

Source: own study, based on: Activity of non-financial enterprises in 2008, CSO (2010) Warsaw.

Data for 2009 concerning the number o enterprises7 indicate the persisting growing trend of the period 2003-2007 – in 2009 the growth in the number of enterprises amounted to 7%. In 2009, the growth rate as regards the number of enterprises was the highest among small enterprises (8.5% compared to 2008)8. A slightly lower growth dynamics in this category was observed among medium-sized enterprises (by 6.5%). Only in the group of large enterprises a decline in the number of enterprises was observed in 2009 – it amounted to 5.0% compared to 2008.

3.3 Number of newly established and liquidated enterprises9 In 2009 an evident recovery took place when it comes to the growth in the number of newly established companies. It amounted to 18.3% compared to 2008. Positive changes in the analysed category were already visible in 2008 (growth by 8.3% in relation to the previous year). The growth in the number of newly established enterprises in the last two years is particularly visible in the period 2003-2009 (diagram 3.6). In 2009 a significant growth in the number of liquidated enterprises took place (by 45.2%), which should be partly recognised as a result of worsened conditions for performing business activity, as well as a result of the updating of REGON database by CSO due to the modification of Polish Classification of Activities. The number of enterprises liquidated in 2008 remained on a fairly similar level compared to 2007 (growth by only 2.7%). However, the data of 2009 indicate that the number of newly established enterprises was higher than the number of liquidated ones. Both these figures in the years 2003-2009 have been presented in the diagram below.

6 Data concerning particular sections of the economy are presented in this report in accordance with PKD 2004. 7 Financial results of economic entities I-IX 2009, CSO, Warsaw, May 2010. Data concern enterprises keeping accounting ledgers and employing over 9 workers. 8 Data for 2009 concern enterprises keeping accounting ledgers and employing over 9 workers. 9 Data have been taken from REGON CSO database.

36 Diagram 3.6. Number of newly established and liquidated enterprises in the enterprise sector in 2003-2009

Source: own study based on CSO data prepared for the purpose of this publication.

In 2008, the number of newly established companies grew the most among small and medium-sized enterprises10 (by 20% and 19%, respectively), whereas the figure was slightly lower among microenterprises (growth by 8.3%). In SMEs sector this growth amounted to 8.4%. On the other hand, the number of newly establihed enterprises fell among large enterprises (by 2.4%). When it comes to liquidated companies, in 2008 the number of such companies grew very noticeably among small, medium-sized and large enterprises (by 54.3%, 101.6% and 96.7%, respectively). In the group of microenterprises the number of liquidated enterprises remained at a similar level as in 2007 (growth only by 2.7%). The entire SMEs sector achieved the identical result. The analysis of the number of newly established and liquidated enterprises by size class in 2009 indicates that these data for microenterprises were changing in a totally different way tha in other groups. The number of newly established enterprises among microenterprises visibly grew in this period (by 18.6%), while among small enterprises it remained fairly unchanged compared to 2008 (growth by 1.2%). The number of newly established medium- sized and large enterprises fell significantly in 2009 (by 27.6% and 35.4%, respectively). In the case of a number of liquidated companies in particular categories of enterprises, a similar trend as among the newly established enterprises has been observed. The number of liquidated microenterprises considerably grew (by 46.6%) and it fell in other categories. The number of liquidated small companies fell by 8.5%, whereas medium and large ones by 38.1% and 24.2%, respectively.

10 It needs to be borne in mind that the growth of large companies newly registered in REGON can more often be a result of legal structure transformations than the establishment of completely new entities.

Diagram 3.7. Number of newly established and liquidated enterprises in the enterprise sector by size class in 2003-2009

Source: own study based on CSO data prepared for the purpose of this publication.

Similar to the previous years, in 2008 and 2009 the number of newly established enterprises was higher than liquidated ones only among micro and small companies. A reverse phenomenon was observed among large and medium-sized enterprises. In the case of large and medium-sized companies, the difference between liquidated and newly established companies has grown significantly. Among small enterprises, a surplus of newly established companies in 2008 and 2009 decreased compared to previous years. A similar phenomenon among microenterprises occurred only in 2009.

3.4. Enterprise survival rates The survival rate of enterprises, measured by means of the indicator of first year activity survival, remained relatively constant in the entire period 2001-2006 which has been presented in the diagram below. The spread of this indicator was insignificant (ranging from 61.5% to 67.6%). A significant growth was observed in the following years – 70.7% in 2007 and 76.4% in 2008.

Diagram 3.8. Indicator of first year survival rates of enterprises established in the years 2001-2008 and indicator of survival rates of enterprises established in the years 2004- 2008 until 2009 (%)

Source: own study based on the publication entitled: Conditions for establishment and operation, as well as development perspectives of Polish enterprises established in the years 2004-2008, CSO 2010, Warsaw.

Several conclusions may be drawn from the analysis of enterprise survival rate. Among enterprises which survived their first year of operation there were more legal persons than natural ones (88.3% and 75.7%, respectively) and more enterprises with employees than those without them. Highest survival rates were found among enterprises from Health care section (85.9%), Real estate and business activities (82.3%) and Construction (80.7%); the lowest rates were observed among companies operating in Financial intermediation (63.5%), Trade and services (71.7%) and Other services (74.5%). On the other hand, in 2008 a visible improvement of survival rates was observed - the highest in section Hotels and restaurants (14.2%) and Construction (9.5%). By analysing survival rates for a longer period one can see that those survival rates were dropping quite dramatically gradually throughout the following years of enterprises‘ activity. 76.4% of enterprises established in 2008 survived until 2009 and only 31.4% of those established in 2004. This phenomenon has been presented in diagram 3.8.

39 Diagram 3.9. Enterprises established in 2004 according to the basic classification of activities – survival rate until 2009

Similar conclusions as for 2008 could be drawn by analyising data concerning long-term survival rates of enterprises (2004-2009) according to PKD sections, with survival rates differing in particular sections. Analysing the situation of enterprises established in 2004 it needs to be said that enterprises operating in section Health care are characterized with highest survival rates until 2009 (66.7%). The following four sections, i.e. Transport, Real estate and business activities, Other services and Industry achieved results in the range between 35.7%-37.5%. The lowest survival rates were observed among companies from Trade (24.9%) and Hotels and restaurants (17.2%) sections. More detailed data in this respect have been presented in diagram 3.9.

3.5. Summary Despite a significant slowdown compared to 2007, economic situation in Poland in 2008 was still rather favourable (decline in the annual GDP growth rate from 6.8% in 2007 to 5.1% in 2008), similar as conditions for performing business activity. This translated itself into the tendency to perform business activity and thus, onto the number of active enterprises, which considerably grew in 2008 compared to 2007 (by 4.8%) and even more considerably compared to previous five years‘ trends (annual average growth by 0.7%). Compared to 2007, in 2008 the number of active small enterprises significantly grew (21.7%) (annual average growth in the years 2003-2007 - 1.4%). High growth in this group was observed in practically all PKD sections, however, the highest one in Construction (47.3%) and Other services (38.5%). A considerably lower growth in this period was experienced by microenterprises (4.4%) (annual average in the years 2003-2007 – 0.7%). Among them, the number of Health care enterprises (12.9%), Construction (11.8%) and Other services (11.0%) grew the fastest, whereas the number fell in Transport section (by 2.4%). In 2008 a high

40 growth in the number of medium-sized enterprises took place (5.7% compared to average annual growth of 2.6% in the years 2003-2007). In this group the number of enterprises operating in Other services section grew very rapidly (61.3%). The number of large companies has virtually remained at the same level (growth by 0.2% compared to 2007), which meant a slowdown in the trend from the period 2003-2007 (4.7%). This was related to the decrease in the number of enterprises in Construction (8.6%) and Industry (3.0%). In the year 2008 there was a significant improvement as regards enterprise survival rates. Survival rates after the first year of operation significantly improved in 2007 and 2008. In 2008 it grew considerably from 70.7% in 2007 to 76.4%, while it oscillated between 61.5% and 67.6% in the years 2001-2006. All sections experienced improvement of these rates. The greatest improvement was observed in Hotels and restaurants (14.2pp) and Construction (9.5pp). Highest survival rates after the first year of operation were found among enterprises from Health care section (85.9%), Real estate and business activities (82.3%) and Industry (80.7%); the lowest rates were observed in Financial intermediation (63.5%) and Trade and services (71.7%). Among companies established in 2004 the highest survival rates were found in Health care (66.7%), followed by Transport, Real estate and business activities, Other services and Industry (35.7-37.5%), the lowest ones in Trade (24.9%) and Hotels and restaurants (17.2%). As a consequence of a higher average annual dynamics of the number of small, medium-sized and large enterprises in the entire period of 2003-2008, slow changes in the structure of the quantity of enterprises were taking place. In the discussed period the share of microenterprises in the total structure of enterprises was slowly on decline, despite the reversal of this trend in the years 2006-2007. The share of other groups indicated a growing tendency. Data of 2009 for enterprises keeping accounting ledgers, with more than 9 employees indicate that compared to 2008 the dynamics of active enterprises was also high in this period (7.0%). The number of small (8.5%) and medium-sized (6.5%) enterprises grew noticeably. On the other hand, the number of large companies decreased (by 5.0%). This may indicate the experiencing of negative symptoms of the global economic crisis by large enterprises with well-developed links to foreign economies. In 2009 a very visible growth in the number of newly established enterprises (compared to 2008 – 18.3%) was observed after a high growth in 2008 (by 8.3% compared to the previous year).We may speculate that this is partly a result of the accelerated introduction of aid programmes for entities initiating and performing economic activity and increased interest in setting up own business, particularly among young persons. In 2009 a significant growth in the number of liquidated enterprises was observed (by 45.2%) after the stabilisation of this figure in 2008 (compared to 2007 – increase by only 2.7%). It seems that the growth in the number of liquidated enterprises in 2009 reflects the breakdown in demand and rapid economic slowdown which occurred in 2009. Similar as in the previous years, in 2008 and 2009 the number of newly established enterprises was higher than the liquidated ones only among micro and small companies. A reverse phenomenon was observed among other enterprises. In the case of large and medium- sized companies, the difference between liquidated and newly established companies has grown significantly. This trend confirms that the domestic and global economic downturn was experienced mainly by medium-sized and large companies.

Jacek Łapiński

Chapter 4. The number of employed persons and average employment and remuneration in SMEs sector

4.1. The number of employed persons11 in enterprise sector in Poland A reflection of a rather favourable financial condition in enterprise sector in 200812 was the high dynamics of the number of employed persons and their remunerations. In 2008 the number of employed in enterprise sector grew to 9 494.0 thousand persons (i.e. by 5.8% compared to 2007) (see diagram 4.1), which is consistent with the growing trend observed in the years 2003-2007 (when average annual growth amounted to 2.5%). Similarly, the employment growth in SMEs sector amounted to 6.4%, to 6,620,379.0 persons. Increasing demand for working force had impact on the increasing number of people employed. This demand resulted from advantageous effects of the upward business cycle tendency which have been: growing consumption and investment demand, and as a result, increasing production. Diagram 4.1. The number of employed persons in the enterprise sector in the years 2003-2008

Source: own study based on the publication entitled: Activity of non-financial enterprises in 2008, CSO (2010) Warsaw.

11 According to CSO, employed persons include: persons employed on the basis of employment relationship (employment contract, appointment, selection or nomination), i.e. full time and part time employees, employers and self-employers, as well as co-owners of entities running a business activity, including family members helping free of charge, and excluding corporate partners not working in a corporation, agents working on the basis of agency agreements and commission agreements (including family members helping free of charge and persons employed by agents), persons performing home based work, members of farming cooperatives and cooperatives of a different production profile established on their basis which function based on cooperative law. The employed also include persons working abroad (in favour of national entities in which they are employed), regardless of the duration of employment. 12 presented in the next chapter

42 Analysing the dynamics of the number of employed persons in particular groups of enterprises by size class in 2008 (compared to 2007), the increase in the number of persons employed in small enterprises (by 18.6%) draws special attention, compared to a very low average annual growth in the years 2003-2007 (1.4%). In 2008 medium-sized enterprises saw a moderate growth in the number of employed (4.9%, with average annual growth of 2.3%), as well as large enterprises (4.5%; against the same average annual growth). Microenterprises noted a slightly lower growth in the number of employed (3.7%, average annual growth of 1.4%) (see diagram 4.2). Thus, in 2008 all SMEs sector groups experienced a higher dynamics of growth in the number of employed persons compared to average annual growth in the years 2003-2007.

Diagram 4.2. Number of employed persons in the enterprise sector by size class in the years 2003-2008

Source: own study based on the publication entitled: Activity of non-financial enterprises in 2008, CSO (2010) Warsaw.

The group of small enterprises (35.7% of share in the growth) and micro-enterprises (25.6%) had the biggest impact on the growth of number of people employed in the enterprise sector in 2008. Such a good result of small enterprises was achieved due to a very high growth dynamics of the number of employed in this group of enterprises (18.6%) despite its very low share in the structure of the employed in overall enterprise sector (12.6%). The significant share of micro-enterprises in the increased number of employed was achieved owing to their large share in the structure of employed in the overall enterprise sector (39.3%) (see diagram 4.3.).

43 Large enterprises group had a slightly lower share in the growth of employment in enterprise sector (23.6%), which was related both to their very high share in the structure of total active enterprises (30.3%) and a relatively high growth dynamics of this figure (4.5%).

Diagram 4.3. Structure of the number of employed persons in the enterprise sector according to the size classification and PKD sections in 2008

Source: own study based on the publication entitled: Activity of non-financial enterprises in 2008, CSO (2010) Warsaw. Analysing both the structure and dynamics of the number of employed in particular PKD sections we may see that four largest sections by the number of employed (see diagram 4.3) also had the largest share in the growth in the number of employed of the enterprise sector. They included Real estate and business activities (share of 26.7%), Trade and repairs (24.6%) and Construction (18.1%). These sections still experienced good economic condition in 2008, unlike industrial branch, where the number of employed fell by 0.9% compared to the previous year. Consequently, industry had a negative share in the growth of the number of employed in enterprise sector (-5.3%). An analysis discussed above applied to microenterprises indicates that the largest share in the growth of the employed in this group belonged to construction companies (30.1%). In 2008 they employed by as much as 9.5% persons than in 2007. Still benefiting from favourable domestic consumer sentiment, Hotels and restaurants increased the number of employed the most (by 14.1%), Other services (by 11.4%), which partially indicates a continuingly good economic situation in these branches in 2008. The number of employed in Health care also grew significantly (by 10.2%). Industry, particularly manufacturing, saw a considerable decline in the number of employed in microenterprises (by 5.1%). The greatest decrease in the number of employed among all enterprise groups according to size classification was experienced in the group of microenterprises operating in industry. Among all groups of enterprises small companies increased the number of employed the most in the years 2007/2008. All sections of this group experienced very high increase in the number of employed, particularly in Other services (growth by 42.2%) and Construction (40.7%). However, the strongest driving factors under the increase in the number of employed in small enterprises were the following sections: Trade and repairs, Construction and Industry (share in the growth in the number of employed in enterprise sector by 25.5%, 22.9% and 17.7%, respectively. In the group of small companies the results of Industry section are most surprising, since other enterprise groups of this section saw a decrease in the number of employed. Compared to 2007, in 2008 the number of employed in medium-sized enterprises also grew relatively rapidly. The highest share in this growth belonged to Other services (27.0%, growth

44 dynamics in this period at 58.5%), Trade and repairs (23.6% and 6.1%, respectively), Construction (19.1% and 9.7%) and Real estate and business activities (18.8% and 8.4%). Apart from these sections, the number of employed in medium-sized enterprises noticeably grew in Hotels and restaurants section (by 14.3% in 2009 compared to 2007). The only section in this group which limited employment in this period was Industry (decline by 1.0%). Services had the greatest impact on the number of employed in large companies, particularly Real estate and business activities (76.9%) and Trade and repairs (30.4%). Industry (decline in the number of employed by 23.2%) and, to a small extent, Construction (decline by 2.7%), had a very high negative share in the growth in the number of employed in large companies. Other sections had no significant share in the growth in the number of employed in large companies. In relation to 2007, in 2008 the number of employed grew most rapidly in those sections in which the group of large enterprises is not strongly represented when it comes to the number of employees, i.e. Health care (by 42.0%) and Other services (by 21.4%).Apart from the abovementioned section, large enterprises operating in Trade and repairs (7.9%) and Hotels and restaurants (11.8%) saw relatively high growths in the number of employees.

Diagram 4.4. Share of particular PKD sections in the growth in the number of employed in enterprise sector in 2008

Source: own study based on the publication entitled: Activity of non-financial enterprises in 2008, CSO (2010) Warsaw.

Analysing the average number of employed per one enterprise in particular size groups of the enterprise sector we can see that five employees fall for one enterprise on average in the enterprise sector. Such a low rate for all enterprises results mainly from the very high share of microenterprises in the total number of enterprises (96.0% in 2008), among which only 2.1 employers fall for one company on average. Figures in this scope are significantly lowered also by small companies. Comparing the data concerning the average number of employees per one enterprise, we can see no significant changes between 2007 and 2008. Analysing available data concerning the number of employed in 200913, we can see that in 2009 the effects of economic slowdown were already visible. The number of employed in the analysed group of companies decreased in 2009 by 1.7% compared to 200814. The number of employed in large enterprises fell in this period by 5.1%. On the other hand, among small and medium-sized companies a visible slowdown could be observed (to 3.1% and 2.2%, respectively).

13 Data for 2009 concern enterprises keeping accounting ledgers and employing over 9 workers. 14 Financial results of business entities I-IX 2009, CSO, Warsaw, May 2010

4.2. Average number of paid employees In the years 2003—2008 we could observe similar tendencies in paid employment as in the case of employed persons. In 2008, the average number of paid employees15 in enterprise sector increased to 6 873.8 thousand persons (i.e. by 7.5% in relation to the previous year). For the SMEs sector, this figure grew to 4 172.4 thousand persons (by 9.9%). For both these groups, an average number of paid employees in this period evidently grew compared to average annual growth in the years 2003-2007, which amounted to 2.7% and 1.9%, respectively.

Diagram 4.5. Average number of paid employees in the enterprise sector in the years 2003-2008 (thousand)

Source: own study based on the publication entitled: Activity of non-financial enterprises in 2008, CSO (2010) Warsaw.

It is worth emphasizing that in 2008, the ―average number of paid employees‖ index grew the most among small enterprises (by 22.3% compared to 2007), with the average annual growth of this figure in the years 2003-2007 close to zero (0.7%). In other groups the paid employment increases in 2008 in relation to 2007 were not that significant. The highest was experienced by medium-sized enterprises, in which the average number of paid employees grew by 7.2%. Among micro and large enterprises, average number of remunerated employees grew a little less (by 4.6% and 4.1%, respectively). In 2008 the growth compared to 2007 was higher in all groups than the average annual growth in the years 2003-2007. The

15 According to CSO, paid employees include: persons employed on the basis of employment agreement, appointment, selection or nomination, excluding: persons performing home based work, employed abroad, on child care leave, on rehabilitation leave, employed at intervention works and public works financed from the Labour Fund, persons staying abroad on the basis of business assignment, juniors employed on the basis of employment agreement and not vocational education agreement, persons working in enterprises in the form of organised working groups, i.e. members of Voluntary Labour Corps (excluding persons undergoing vocational education), soldiers, convicts, civil defence members, industrial security service members and firefighters, persons undergoing alternative military service in enterprises.

46 highest growth acceleration, apart from small enterprises, was experienced by medium-sized enterprises (average annual growth of 2.0%) and microcompanies (2.8%).

Diagram 4.6. Average number of paid employees in the enterprise sector according to size classification in the years 2003-2008

Microenterprises (thousand) Small enterprises (thousand) 1 119,3 1 600 1 200 1 337,2 1 398,1 1 400 1 240,2 915,5 1 196,0 1 158,2 1 214,9 1 000 890,3 881,1 885,3 885,8 1 200 800 1 000 800 600 600 400 400 200 200 0 0 2003 2004 2005 2006 2007 2008 2003 2004 2005 2006 2007 2008

Medium-sized enterprises (thousand) Large enterprises (thousand) 2 000 3 000 2 701,5 1 654,9 2 594,1 1 544,5 2 296,6 2 407,8 1 429,4 1 399,7 1 421,9 1 465,8 2 500 2 220,1 2 235,3 1 500 2 000 1 000 1 500

1 000 500 500 0 0 2003 2004 2005 2006 2007 2008 2003 2004 2005 2006 2007 2008

Source: own study based on the publication entitled: Activity of non-financial enterprises in 2008, CSO (2010) Warsaw.

From the analysis of the average number of employed in 2008 in specific enterprise groups according to size, we may draw a conclusion that microenterprises, compared to the other categories, depend to a very large extent on workers who are not paid employees. The ratio between the number of paid employees to the total number of persons employed in this group amounted to only 37.5% in 2008, which indicates that nearly two out of three workers in this group were not employed on the basis of employment contract. These were mostly owners and co-owners of companies (with family members helping at no charge), as well as agents working on the basis of agency agreements or commission agreements. The number of paid employees to the number of employed persons ratio in the remaining enterprise groups was significantly higher and similar in all of them (93.7% - 97.5%). In 2007 this indicator amounted to 72.4% in the entire enterprise sector and to 63.0% in SMEs sector. No significant fluctuations of this ratio had been observed in the years 2003-2008. This picture is also confirmed by the structure of the average number of paid employees in enterprises broken down by size. The share of the number of paid employees in microcompanies in total paid employment in the entire sector in 2008 differed significantly from a corresponding number of employed persons (20% and 39%, respectively). Thus, the share of other enterprise groups by size in the paid employment of the enterprise sector was higher than in the case of the number of employed. Large companies employed 40% of all

47 paid employees of the enterprise sector (with 30% share in the number of employed), medium-sized companies 24% (18%) and small ones 16% (13%).

Diagram 4.7. Structure of the average number of paid employees in the enterprise sector according to size classification and PKD sections in 2008

Source: own study based on the publication entitled: Activity of non-financial enterprises in 2008, CSO (2010) Warsaw.

In 2008, similar as in the previous year, the largest share in the number of paid employees in enterprise sector belonged to Industry (41%) and Trade and repairs (23%), as well as Real estate and business activities (11%), Transport (9%) and Construction (9%). Compared to the previous year, in 2008 the employment in Other services grew the most (35.7%). The number of employed grew to a smaller extent in Construction (15.2%) and in Hotels and restaurants (12.9%). However, the largest share in the growth in the number of employed in enterprise sector belonged to Trade and repairs (26%), Construction (16.5%), Real estate and business activities (14%) and Industry (13.7%).

Table 2. Average number of paid employees per one enterprise in particular enterprise groups by size in the years 2003-2008 Total 0-9 10-49 50-249 > 249 0-249 2003 3.32 0.72 20.81 99.48 821.66 2.04 2004 3.31 0.70 19.86 99.96 811.65 2.01 2005 3.47 0.75 19.89 99.75 810.09 2.10 2006 3.50 0.75 20.03 99.66 807.72 2.10 2007 3.60 0.78 20.26 99.95 799.18 2.14 2008 3.69 0.78 20.36 101.36 830.72 2.24 Source: own study based on the publication entitled: Activity of non-financial enterprises in 2008, CSO (2010) Warsaw.

In 2008 the average paid employment in enterprise sector per one enterprise amounted to 3.7 persons, whereas in SMEs sector 2.2 persons. The lowest result belonged to microenterprises, which is understandable, for which an average number of paid employees amounted to 0.8. the average number of paid employees in the group of small companies amounted to 20.4,

48 101.4 in medium-sized and 830.7 in large ones. Growth trends of this indicator were observed in practically all company groups. However, these changes are insignificant. Table 2 presents the average number of paid employees per one enterprise in particular enterprise size groupsin enterprise sector in the years 2003-2008.

4. 3. Remuneration In 2008, the average remuneration in the sector of enterprises was PLN 3,000 and was by 9.8% higher than in 2007. This was a continuation of a growth trend observed in the years 2003-2007 with average annual growth of 6.3% (cf. diagram 4.5). This situation was influenced by a systematic economic recovery observed from 2003, growing demand for workforce in enterprises and, probably, growing wage requirements of workers.

Diagram 4.8. Average remuneration in the sector of enterprises according to size classification in 2003-2008 (PLN)

4 000 3 715 3 500 3 361 3 105 3 129 3 000 2 949 3 000 2 856 2 839 2 579 2 658 2 732 2 372 2 441 2 500 2 156 2 525 2 336 2 402 2 149 2 000 2 142 1 934 1 831 1 741 1 777 1 726 1 584 1 500 1 483 1 509 1 555 1 390 1 449

1 000

2003 Total 2004 2005 2006 2007 2008 Total 0-9 0-49 50-249 >249

Source: own study based on the publication entitled: Activity of non-financial enterprises in 2008, CSO (2010) Warsaw.

Taking into consideration the dynamics of average remuneration in 2008 compared to 2007, all enterprise groups recorded very similar results. Growth of this category in the sector of small enterprises (including microenterprises) amounted to 11.1%, among medium-sized enterprises – 10.2% and among large ones – 10.5%. Compared to 2007, in 2008 all groups observed remuneration growths which were evidently higher than average annual growth rate in the years 2003-2007, which amounted to 5.1%, 7.1% and 6.0% respectively for small, medium and large enterprises. Compared to 2007, in 2008 total gross remuneration grew considerably (by 18.1%). These remunerations grew the most in the group of small enterprises (by 31.5%). In other groups this growth was much lower: 18.1% in medium-sized enterprises, 16.1% in microenterprises and 15.1% in large companies.

49 The largest share in total remuneration growth in enterprises in 2008 belonged to large enterprises (31.7%), followed by medium-sized (25.1%) and small ones (22.7%). Microenterprises had a relatively low share in this figure (10.6%). This situation results, apart from the dynamics of remuneration growth in particular enterprise groups by size, from their share in remuneration structure. The largest share in this structure belongs to large enterprises (48%) and medium-sized enterprises (25%), the lowest belongs to small (15%) and microenterprises (12%). Structure of gross remuneration and share of the costs of remuneration in the sector of enterprises according to size group in 2008 is presented below.

Diagram 4.9. Structure of remuneration costs and share of remuneration in total costs in the sector of enterprises according to size group in 2008

Source: own study based on the publication entitled: Activity of non-financial enterprises in 2008, CSO (2010) Warsaw.

Share of overall remuneration in total costs of enterprise sector was running at the level of 8.2% in 2008. The biggest share in this value was achieved by large and medium-sized enterprises (9.6% and 9.3% respectively). Small enterprises achieved similar levels as the entire enterprise sector (share of 8.3%). The lowest share of remuneration in total costs was observed in microenterprises group (4.5%).

4.4. Summary Due to a continuing good financial and economic situation of enterprises in 2008, the growth in demand for labour in enterprises took place, and in consequence, also the number of employed and paid employees, as well as remunerations in the entire enterprise sector. Compared to the previous period, in 2008 the number of employed persons in enterprise sector grew quite significantly (by 5.8% to 9.5 million persons), which is consistent with the acceleration of a growing trend observed in the previous years (average annual growth in the years 2003-2007 – 2.5%). SMEs sector experienced a slightly more evident recovery in this regard (growth by 6.4%). Compared to 2007, in 2008 small companies employed the highest number of new workers (growth by 18.6%). All sections in this group of enterprises showed very high increases in this field. The number of employed persons grew the most in Other services (growth by 42.2%) and Construction (40.7%). However, the strongest driving factors behind the increase in the number of employed persons in small enterprises were the following sections: Trade and repairs (share in the growth in the number of workers in small enterprises – 25.5%), Construction (22.9%) and Industry (17.7%).

50 Compared to 2007, in 2008 the number of employed in medium-sized enterprises grew considerably (by 4.9%). The highest share in this growth belonged to Other services (27.0%), Trade and repairs (23.6%), Construction (19.1%) and Real estate and business activities (18.8%). The only section in this group which limited employment in this period was Industry (decline by 1.0%). The number of employed persons grew the least in microenterprises (3.7%), mainly construction companies (share in the growth in the number of employed persons in microenterprises – 30.1%). Hotels and restaurants (by 14.1%) and Other services (by 11.4%) contributed the most to the increase in the number of employed persons in microcompanies. Industry, particularly industrial processing, saw a considerable decline in the number of employed persons in microenterprises (by 5.1%). On the other hand, a relatively visible growth in the number of employed persons occurred in large enterprises (4.5%), which was mainly a result of service companies, particularly those operating in Real estate and business activities (share in growth – 76.9%) and Trade and repairs (30.4%). Enterprises operating in Industry (23.2% decline in the number of employed persons) and, to a small extent, Construction (decline by 2.7%), had a very high negative share in the growth of the number of persons employed in large companies. Data of 2009 concerning the number of persons employed in enterprises keeping accounting ledgers16 indicate that the effects of economic slowdown were already visible in 2009. The number of employed persons in the analysed group of companies decreased slightly in 2009 by 1.7% compared to 2008. The highest decline in this field was observed among large enterprises. On the other hand, among small and medium-sized companies a slower growth could be observed in this regard (to 3.1% and 2.2%, respectively). In the years 2003-2008 we could observe similar tendencies in paid employment as in the case of general employment. In 2008 the average number of paid employees in enterprise sector increased by 7.5% in relation to the previous year, and in SMEs sector by 9.9%. For both these groups, an average number of paid employees in this period evidently grew compared to average annual growth in the years 2003-2007, which amounted to 2.7% and 1.9%, respectively. Data concerning the number of paid employees indicate that microenterprises depend largely on the employed who are not paid employees, i.e. mostly company owners and their family members. The relation between the number of paid employees to the number of the employed persons in this group amounted to only 37.5% in 2008, which indicates that only one out of three employed persons in this group was employed on the basis of employment contract. The number of paid employees to number of the employed ratio in other enterprise groups was significantly higher (93.7% - 97.5%).

In 2008, the average paid employment in enterprise sector per one enterprise amounted to 3.7 persons, whereas in SMEs sector 2.2 persons. The lowest result belonged to microenterprises for which an average number of paid employees amounted to 0.8. Average number of paid employees in the group of small companies amounted to 20.4, 101.4 in medium-sized and 830.7 in large ones. Slowed growth trends of this indicator were observed in practically all company groups.

A still favourable situation of Polish enterprises in 2008 and probably growing workers‘ demands were reflected in the area of remuneration. In all enterprise groups the increase in

16 employing more than 9 workers

51 remuneration in 2008 was significantly faster in comparison with the previous years. Average remuneration in the enterprise sector grew very visibly in 2008 (by 9.8% to PLN 3,000) compared to 2007. Similar growth was observed in all enterprises: small (including micro) – by 11.1%, medium-sized – by 10.2% and large – by 10.5%.

52 Jacek Łapiński

Chapter 5. SMEs revenues and financial situation

5. 1. Revenues and costs In 2008, in compliance with trends observed since 2001, the consumption and investment demand continued to grow, which translated into GDP growth in relation to the previous year. GDP growth in 2008 was rapid enough to allow the improvement in the financial and economic situation of the enterprise sector, expressed by the most important financial figures and indexes. Total revenues of the enterprise sector in 2008 amounted to a total of PLN 3.214 billion with costs totalling PLN 3.002 billion. In the same period total revenues and total costs of the SMEs sector amounted to PLN 1.912 billion and PLN 1.749 billion, respectively. Compared to 2007, growth in total revenues of the entire enterprise sector and SMEs sector (11.3% and 12.1% respectively) was a little lower than of total costs (12.8% and 12.7% respectively). However, in the entire period 2003-2008 revenues grew more rapidly in both groups. Growth in total revenues in 2008 in comparison to 2007 was a continuation of a growing trend observed in the years 2003-2007, whose average annual growth amounted to 10.3% for all enterprises and 8.7% for SMEs, and of total costs (9.4% and 7.9% respectively).

Diagram 5.1. Total revenues and costs of enterprise sector in 2003-2008 in PLN billion

Source: own study based on Activity of non-financial enterprises in 2008, CSO (2010) Warsaw.

Compared to 2007, in 2008 revenues of small companies grew the most (by 21.5%), which indicates a significant acceleration of average annual revenues of this group in the years 2003- 2007 (6.2%). Revenues of microenterprises grew more slowly, but still above the average annual growth (growth by 11.2% at average annual growth of 7.8% in the years 2003-2007 for this group of enterprises). A reverse trend was observed among medium-sized and large enterprises in which the revenues growth was lower than average annual growth (7.4% among medium-sized at average annual growth of 11.5%, among large ones 10.2% and 12.8% respectively).

53 Diagram 5.2. Total revenues and total costs in enterprise sector in particular size groups in 2003-2008 in PLN billion

Microenterprises Small enterprises 464,3 800 746,5 500 433,5 671,1 645,9 636,7 382,2 585,3 400 541,4 553,1 566,3 324,3 340,2 353,5 600 496,6 489,5 300,8 322,5304,2 322,1 452,7 485,1 285,9 306,6 300 400 200 200 100 0 Total revenues Total costs 0 Total revenues Total costs 2003 2004 2005 2006 2007 2008 Total revenues TotalTotal costs costs 2003 Total2004 revenues2005 2006Total2007 costs 2008 Total revenues Total costs

Medium-sized enterprises Large enterprises 800 700,8 1 400 1 302,2 652,5 670,2 1 182,0 1 252,4 613,8 1 108,4 561,3 1 200 1 020,5 600 501,4 531,5 422,6 487,1 480,6 1 000 840,3 887,4 961,2 408,1 463,9 785,3 839,6 731,1708,8 400 800 600 200 400 200 0 0 2003 2004 2005 2006 2007 2008 Total revenues Total costs 2003 2004 2005 2006 2007 2008 Total revenues Total costs

Source: own study based on: Activity of non-financial enterprises in 2008, CSO (2010) Warsaw.

Due to the scale of conducted activity, in 2008, like in the previous years, the group of large enterprises had the highest share in the enterprise sector revenues (36.9%). Due to high dynamics of revenues, small enterprises also recorded a high share in revenues of the enterprise sector (25.2%). Due to a considerable number of microenterprises, also the share of this group in revenues of the enterprise sector turned out to be significant (23.1%). Medium- sized enterprises had the lowest share in the growth of revenues of the enterprise sector (14.8%). The structure of total revenues and total costs in the enterprise sector according to size categories and structure of revenues according to the Polish Classification of activities sections in 2008 is presented in the diagram 5.3.

54 Diagram 5.3. The structure of total revenues and total costs in enterprise sector according to size categories (in PLN billion) and structure of revenues according to the Polish Classification of Activities (PKD) sections in 2008

Source: own study based on: Activity of non-financial enterprises in 2008, CSO (2010) Warsaw.

The highest share in revenues of the enterprise sector in 2008 belonged to Industry (37%) and Trade and repairs (36%) (diagram 5.3). At the same time, the same sections had the largest share in the growth of total revenues compared to 2007: Trade and repairs - 30.1% and Industry - 26.3%. In this regard the following sections also stood out: Real estate and business activities (10% share in revenue growth) and Construction (11.5% share in growth). By branches, the highest revenues growth compared to 2007 was observed in: Other services (35.3%), Construction (21.6%) and Real estate and business activities (17.1%). Compared to 2007, in 2008 the following sections in the sector of microenterprises observed the highest revenues growth: Other services (39.1%), Health care (33.5%), as well as Construction (15.6%) and Real estate and business activities (11.5%). However, the largest share in revenue increase of microenterprises belonged to Trade and repairs (20.3%), which generated nearly a half (47.4%) of this group's revenues. Construction (11.7%) and Real estate and business activities (11.6%) also had a significant share in revenue growth among microenterprises. Compared to 2007, in 2008 total revenues in microenterprises group grew the most of all size groups of enterprises. Total revenues growth in this group was mainly a contribution of Trade and repairs (in 36.4%), Industry (in 22.4%) and Construction (in 17.1%) sections. However, the highest growth of revenues of small enterprises took place in Construction (50%) and Other services (43.9%). Very high growth in this area was observed also in Hotels and restaurants (32.7%), Health care (29.9%) and Real estate and business activities (29.2%). High growth in these sections was no exception among small enterprises, which increased their revenues very significantly in all PKD sections. Compared to 2007, in 2008 the slowest growth of total revenues was recorded by medium- sized enterprises. This was mostly related to a significant decline in revenues in Trade and repairs (by 15.8%). Medium-sized enterprises of other PKD sections also increased their revenues – they grew the most in Health care (20.9%), followed by slightly lower revenues in Construction (20.4%) and Real estate and business activities (13.4%), which along with Industry contributed to the fact that medium-sized enterprises noted the revenues growth in 2008 (share of these sections in revenues growth among medium-sized enterprises amounted to 19.7%, 14.4% and 14.9% respectively).

55 Large enterprises increased their revenues the most in Health care (by 51.7%), Other services (by 31.8%) and Real estate and business activities (by 23.6%). However, taking into account the share in revenues of large companies, it was Industry which generated nearly half of this group's growth (48%). Significant growth of revenues among large companies was also observed in Trade and repairs (29.0%). Therefore, both these sections generated over 80% of revenues among large companies. In 2008, total revenues per one enterprise in the entire enterprise sector amounted to PLN 1.7 million and PLN 1 million for SMEs, which is presented in diagram 5.4. Among microenterprises this index amounted to only PLN 0.4 million, in small companies – PLN 8.4 million and in medium-sized enterprises - PLN 42.9 million. Definitely the highest level of revenues per one enterprise was indicated by the large enterprise group (PLN 400.4 million). Diagram 5.4. Total average revenues per one enterprise (in PLN million), per one employee (in thousands PLN) and per PLN 1 of remuneration in the enterprise sector according to size classification in 2008 (in PLN million)

500,0 30,0 450,0 400,4 453,2 25,8 450,0 412,7 400,0 388,5 400,0 25,0 350,0 338,5 350,0 300,0 288,7 20,0 300,0 250,0 15,0 250,0 15,0 13,0 12,9 200,0 200,3 11,3 10,8 200,0 150,0 150,0 10,0 100,0 42,9 100,0 5,0 50,0 1,7 1,0 0,4 8,4 50,0 0,0 0,0 0,0

Source: own study based on Activity of non-financial enterprises in 2008, CSO (2010) Warsaw. A far more favourable picture for smaller companies can be seen in total revenues per one worker. It shows a better potential of smaller enterprises compared to larger ones. The highest value was reached by large enterprises (PLN 453.2 thousand), followed by medium-sized (PLN 412.7 thousand) and small ones (PLN 388.5 thousand). A significantly lower level of revenue per one worker was observed among microenterprises (PLN 200.3 thousand). In 2008 this indicator in the enterprise sector amounted to PLN 338.5 thousand and PLN 288.7 thousand in SMEs, which means that one worker in SMEs sector generated nearly PLN 0.3 million of revenue. Information on total revenues per one employee in the enterprise sector has been presented in diagram 5.4. If we analyse the volume of revenues per 1 PLN of remuneration in particular company groups by size, the outcome will be more favourable for small companies than for the large ones. Definitely the highest efficiency measured by means of this indicator was attained by micro-enterprises (PLN 25.8 thousand). Other company groups achieved considerably lower values of this index. Small enterprises people ranked second (PLN 12.9 thousand). Medium enterprises ranked at the subsequent position (PLN 11.3 thousand), followed by large ones (PLN 10.8 thousand). The entire enterprise sector reached the result of PLN 13 thousand per 1 PLN of remuneration, whereas SMEs sector achieved PLN 15 thousand. Total revenues per 1 PLN of the remuneration in the enterprise sector by size class in 2008 have been presented in diagram 5.4.

56 Data for 2009 concerning revenues of enterprises17 indicate a nearly total slowdown of total revenue dynamics in the enterprise sector (growth only by 0.7% compared to 2008). Negative total revenues dynamics was observed among small companies (-3.5%). Only slight revenue growths occurred in medium-sized and large companies (1.0% and 1.6%, respectively).

5.2. Financial result In 2008 gross financial result of the enterprise sector amounted to PLN 264.8 billion and was higher by 4.3% than in 2007. An analogous value for SMEs sector amounted to PLN 194.4 billion, with the growth of 12.4% at the turn of 2007 and 2008. To some extent these growths were the continuation of growing trends of 2003-2007, with the average annual growth of 17.6% for the enterprise sector and 15.6% for SMEs. Despite this slowdown the overall enterprise sector noted an improved gross financial result, however, not in all size classes of enterprises. Gross financial result in the enterprise sector according to size categories is presented in the diagram below.

Diagram 5.5. Gross financial result in the enterprise sector and by size classification in 2003-2008 in PLN billion

300,0

264,8 250,0 253,9

200,0 201,9 194,4 172,5 172,5 173,0 150,0 132,6 136,9 112,6 117,7 116,3 100,0 97,0 99,8 80,9 64,2 79,6 70,3 65,0 70,4 50,0 54,3 60,0 54,8 40,7 33,2 42,1 35,6 27,1 25,5 31,1 37,4 21,2 21,2 21,9 24,2 0,0 21,5 2003 2004 2005 2006 2007 2008 Total 0-9 10-49 50-249 >249 0-249

Source: own study, based on: Activity of non-financial enterprises in 2008, CSO (2010) Warsaw.

Analysing the gross financial result in the enterprise sector for 2008 an evident division between small and microenterprises and medium-sized and large enterprises can be seen. The first group experienced a very significant growth of the gross financial result compared to 2007 (by 20.4% and 16.6%, respectively). The other group saw a decrease (by 3.5% and 13%, respectively). Due to the abovementioned directions of growth rate changes in particular enterprises groups by size, a positive impact of the gross financial result in the enterprise sector was experienced by small and microenterprises (151.9% and 58.1%, respectively),

17 Data concern enterprises keeping accounting ledgers and employing over 9 workers.

57 while medium-sized and large enterprises experienced a negative impact (-13.5% and -96.5%, respectively). Data regarding gross financial result of 2009 in the enterprise sector18 indicate a visible growth of gross financial result (by 15.6%) compared to 2008. Revenue growth in 2009 in the enterprise sector was caused mainly by the growth among large companies (by 24.2%) and, to a lesser extent, medium-sized enterprises (10.7%). A fairly considerable decline took place in small companies (by 4.7%). 5.3. Profitability Beneficial financial situation of the enterprise sector and its particular groups in 2008 measured with the scale of revenues, costs and financial result exerted a direct, positive influence on the economic indicators of this sector, including profitability. In 2008 gross profitability rate of the enterprise sector amounted to 8.2%, which was slightly lower compared to 2007 (by 8.8%). Nevertheless, this indicator for 2008 was higher than in 2003- 2007. The higher the gross turnover profitability rate in 2008, the smaller the enterprises that noted it. However, only in micro-enterprises did profitability improve in relation to 2007 (growth by 0.7pp), while among small companies it remained at the same level. Other groups experienced deteriorated results. Among medium-sized companies, turnover profitability rate fell by 0.7pp, whereas among large companies it fell by 1,4pp. Detailed data concerning gross turnover profitability trends are presented in diagram 5.6. Diagram 5.6. Gross turnover profitability rate of the enterprise sector and according to size categories in 2003-2008 (in %)

18,0

16,0 15,6 14,9 14,0 12,7 12,0 12,5 10,4 10,0 8,8 8,8 8,2 8,0 8,1 6,9 7,6 7,9 8,1 7,1 6,8 7,1 6,8 6,5 6,4 6,0 6,5 6,2 6,5 5,8 4,8 5,1 5,9 5,4 4,0 4,8 3,4 2,0 3,1 0,0 2003 2004 2005 2006 2007 2008 Total 0-9 10-49 50-249 >249

Source: own study, based on: Activity of non-financial enterprises in 2008, CSO (2010) Warsaw.

Profitability as one of the best methods for measuring the efficiency clearly shows that smaller enterprises performed best in 2008. In the case of micro-enterprises 1 PLN of the turnover generated PLN 0.08 of gross profit whereas it was slightly over PLN 0.5 in large enterprises. Medium-sized enterprises generated almost PLN 0.6 of gross profit from each

18 Data concern enterprises keeping accounting ledgers and employing over 9 workers.

58 PLN 1 of turnover in the same period. Similar picture is drawn by data of 2008 regarding profitability of assets and initial capital19. The highest level of these indicators was experienced by small companies (6.0% and 12.5% respectively), whereas it was slightly lower among medium-sized ones (4.5% and 9.0%). The lowest profitability of assets and own capital was observed among large companies (3.5% and 6.9%). The overall enterprise sector achieved the value of these results at 4.1% and 8.2%, respectively. Data for 2009 concerning gross turnover profitability ratio in the enterprises20 sector indicate a minor improvement among all analysed enterprises. This rate for the entire population of enterprises grew from 4.3% in 2008 to 4.9% in 2009. The highest growth of this rate in 2009 compared to 2008 took place among large enterprises (from 4.3% to 5.3%). It was slightly lower among medium-sized companies (from 3.9% to 4.3%). Gross turnover profitability level of small enterprises in 2009 remained unchanged in relation to 2008 and amounted to 4.9%.

5.4. Financial liquidity21 Favourable financial results as regards revenues, costs and financial result for 2008, to a certain extent reflected in profitability rates, translated into the situation of analysed enterprises as regards financial liquidity. Compared to 2007, in 2008 financial liquidity measured by cash ratio of analysed enterprises remained at a safe, high level (growth from 34.5% in 2007 to 35.9% in 2008). High levels of cash ratio were noted among small, medium and large companies (36.8%, 36.3% and 34.3% respectively). The data concerning cash ratio in the enterprise sector has been presented below.

19 Data concern enterprises keeping accounting ledgers and employing over 9 workers. 20 Financial results of business entities I-IX 2009, CSO, Warsaw, May 2010 Data concern enterprises keeping accounting ledgers and employing over 9 workers. 21 The study regarding financial liquidity and debt does not include data concerning all business entities, but only entities keeping revenue and expense ledgers, which submitted profit and loss accounts for 2008 (excluding banks, insurance institutions, brokerage offices, higher education institutions, independent health care centres, individual agricultural holdings) employing more than 9 workers. These data are representative only for medium-sized and large companies. Data for small companies may not be fully representative.

59 Diagram 5.7. Cash ratio of the enterprise sector and according to size categories in 2003- 2008 (in %)

38,0 35,9 36,3 35,9 36,8 36,0 35,5 34,9 35,9 35,1 34,9 34,0 34,5 34,3

33,1 33,0 32,0 32,3

31,4 31,0 30,0

28,5 28,3 28,0 25,8 25,8 26,0 24,0 23,9 24,6 22,0 22,7 21,0 20,0 2003 2004 2005 2006 2007 2008 Total 10-49 50-249 >249

Source: own study based on CSO data prepared for the purpose of this publication. Quick ratio presents a similar picture encompassing, apart from cash and its equivalents, also less liquid assets i.e. current receivables. Financial liquidity understood in such a way for the entire population of analysed companies remained at a safe level in 2008 (growth from 101.5% in 2008 to 100.3% in 2007). Information on quick ratio in the enterprise sector is presented in diagram 5.8. Diagram 5.8. Quick ratio of the enterprise sector and according to size categories in 2003-2008 (in %)

109,2 110,0 108,5 106,9 105,0 105,3 102,0 100,6 102,1 101,5 100,0 99,1 100,5 100,3 98,3 98,0 97,3 97,3

95,0 97,6 90,7 90,0 89,9 87,4 88,9 85,0 84,3 83,5 82,9 80,0

75,0 74,8

70,0 2003 2004 2005 2006 2007 2008 Total 10 - 49 50 - 249 > 249 Source: own study based on CSO data presented for the purpose of this publication.

In 2008 all groups of analysed enterprises experienced quick ratio results at a safe level. The highest levels of quick ratio were observed by small enterprises (109.2%). Quick ratio for medium-sized companies was running above the optimal level (100%) and amounted to 105.3%. Value of this ratio for large enterprises was slightly lower than optimal (97.3%). We need to bear in mind, though, that large companies, especially those operating in services, can safely maintain their financial liquidity at a relatively lower level than other groups. In all groups only minor changes in quick ratio were observed in 2008 compared to 2007. Quick ratio of small enterprises slightly improved (growth by 0.7pp) while among medium- sized enterprises the improvement was more visible (growth by 3.3pp). Quick ratio of large companies remained at the level of 2007. Data of 2009 concerning quick ratio22 indicated an improvement from the point of view of safety of performing business activity compared to 2008. This rate for the entire population of analysed enterprises grew from 33.3% in 2008 to 38.6% in 2009. All enterprise classes by size saw an improvement in this field. In this period the quick ratio grew the most among small companies (from 33.1% to 39.4%) and large ones (from 34.2% to 40.1%). A slightly lower growth was observed among medium-sized enterprises (growth from 31.5% to 35.2%). High growth of quick ratio observed in 2009 indicates increasing available resources of liquid assets in companies which could be made available due to lower economic activity as a result of problems regarding demand observed in certain branches in 2009.

5.5. Debt Compared to year 2007, in 2008 short-term liabilities financing to a large extent the current activity of the enterprises, rose significantly (by 9.9% compared to year 2007) to the level of PLN 523.2 billion, which may confirm the favourable situation of the enterprises. The rise was higher than the annual average dynamics of the short-term liabilities in the period 2003 to 2007 (7.6%). In fact, all groups of enterprises experienced a rise in the short-term liabilities in 2008 compared to 2007. The most significant rise concerned small enterprises (16.9%). In 2008, it was also substantial for large enterprises (12.5%), but for medium-sized enterprises it was negligible (0.7%). The SMEs sector as a whole experienced an increase of 6.2%. The diagram below illustrates the situation of the short-term liabilities in the period 2003 to 2008.

22 Data concern enterprises keeping accounting ledgers and employing over 9 workers.

61 Diagram 5.9. Short-term liabilities in the enterprise sector and by size class between 2003 and 2008 (in PLN billion)

600,0

523 500,0 476

400,0 417 355,8 371 300,0 299 293 261 224 225 200,0 194 212 173178,6 174 191 159 138 125 140 141 100,0 100,4 111 72,2 85 72 84 52 63 66 0,0 2003 2004 2005 2006 2007 2008 Total 10 - 49 50 - 249 > 249 0 - 249

Source: own study based on the Central Statistical Office (CSO) data drawn up for the needs of this publication Similarly to the short-term liabilities, the long-term liabilities (financing the investment activity) of all the analysed enterprises also increased in 2008 compared to 2007 (by 15.6% to PLN 226.829 million). Such a dynamic increase showed that the long-term liabilities improved sharply compared to the period 2003 to 2007. The quickest rise in this field in year 2008 compared to 2007 was observed in large enterprises (23.1%). Small and medium-sized enterprises experienced a small increase in long-term liabilities (8.5% and 5.1% respectively), which meant that their rate of growth slowed down compared to the previous year (20.3% and 34.6% respectively). The diagram below illustrates the data on the long-term liabilities of the enterprises according to the size in the period 2003 to 2008.

Diagram 5.10. Long-term liabilities in the enterprise sector and by size class between 2003 and 2008 (in PLN million)

250 000 226 828,6

200 000 196 154,5 182 971,9 176 444,8 161 701,6 150 000

127 414,6 123 500,9 112 815,9 100 000 96 113,0 100 665,3 100 314,4 78 140,1 58 399,0 61 385,9 50 000 38 533,6 40 402,0 43 401,1 39 031,5 30 330,8 30 185,2 29 918,0 35 982,7 18 724,5 24 236,4 0

2003 2004 2005 2006 2007 2008 Total 10 - 49 50 - 249 > 249 Source: own study based on the Central Statistical Office (CSO) data drawn up for the needs of this publication

In 2008, total liabilities of a single enterprise in all the enterprises analysed reached PLN 14.5 million and equalled total liabilities from the previous year. The rise of this ratio in 2008 compared to 2007 was observed only in the group of large enterprises (by 15.2% to PLN 127.9 million). The total liabilities of a single company in the group of medium-sized enterprises reached PLN 13.8 million and in 2008 remained at the level of 2007. This ratio for small and medium-sized enterprises for the same period did not change and achieved PLN 3.9 million. The total liabilities of a single company and a single employee in the sector of enterprises in years 2003-2008 is presented in the diagram below.

Diagram 5.11. Average total liabilities per one enterprise (in PLN million) and average liabilities per one employee (in PLN thousand) in the enterprise sector and by size class between 2003 and 2008

140 170,0 120 160,0 100 150,0 140,0 80 130,0 60 120,0 40 110,0 20 100,0 0 90,0 2003 2004 2005 2006 2007 2008 2003 2004 2005 2006 2007 2008 Total 10 - 49 50 - 249 > 249 Total 10 - 49 50 - 249 > 249 Source: own study based on the Central Statistical Office (CSO) data drawn up for the needs of this publication.

In 2008, in the enterprise sector, the total liabilities per one employee in this sector attained PLN 144.7 thousand, which was an increase by 6.6%. The highest level of this ratio was

63 reached by small enterprises (PLN 162.7 thousand – increase by 1.5%). It was slightly lower in large enterprises (PLN 146.3 thousand – increase by 10.4%) and in medium-sized ones (PLN 129.6 thousand – increase by 1.0%).

5.6. Summary Favourable economic situation determined pretty good financial results of the enterprise sector in 2008. This is confirmed by the increase of basic financial data such as total revenues and gross financial result and still high values of main economic ratios, i.e. profitability, financial liquidity and debt. In 2008, small enterprises were in a good financial and economic situation. There was a significant increase in revenues (21.5%) among them and in gross financial results (20.4%) largely due to a good situation in Trade and repairs, Construction and Real estate and business activities. The revenue per one enterprise remained at similar level compared to the previous year. As a result, the profitability of a gross turnover of small enterprises group remained at the level of 8.1%. The financial liquidity ratios reached a safe though a bit too high levels (36.3% - quick ratio and 109.2% - cash ratio). In this group short and long-term liabilities increased rather considerably (by 16.9% and 8.5% respectively), which did not in general pose any threat to the enterprises‘ future. In 2008, the financial and economic situation of medium-sized enterprises slightly worsened compared to year 2007, however, not in all the analysed fields. During this period, total revenues of this group of enterprises increased by 7.4%, but the volume of revenues of a single enterprise remained similar to the previous year and the total gross financial result decreased by 3.5%. As a result, total gross turnover profitability ratio declined from 6.5% to 5.8%. This situation was connected with the deterioration in Trade and repairs (by 15.8%). Medium-sized enterprises had a safe level of cash ratio (34.3%) and of quick ratio (105.3%), however it was even too high from the point of view of effective use of financial reserves. Total short-term liabilities in 2008 remained unchanged compared to 2007 and long-term liabilities were a little bit higher (by 5.1%). Total liabilities per enterprise were at the previous year level, which shows that the operational and investment activity of medium-sized enterprises slowed down. In 2008, the financial and economic situation of large enterprises slightly deteriorated. However, total revenues in this group rose (by 10.2%) and per one enterprise rose (by 10.0%) compared to 2007, but gross financial result fell during this period by 13%. As a result, gross turnover profitability slipped from 6.8% to 5.4%. Similarly to all the groups analysed, in 2008 the liquidity ratios remained at safe levels, but they were slightly too high from the point of view of the effectiveness of disposable financial resources use. In 2008, short-term and short- term liabilities of large enterprises rocketed (by 12.5% and by 15.2% respectively) compared to 2007, similarly to total liabilities per one enterprise (increase of 15.2%). This resulted partly from the development of investment activity in this group of enterprises. In 2008, the situation of microenterprises was advantageous. These enterprises experienced positive changes compared to 2007, including the increase in total revenues (increase by 11.2%) and per one enterprise (increase by 6.6%), financial results (increase by 16.6%) and gross turnover profitability (increase up to 15.6%), which was the best result in the enterprise sector. It was the effect of a favourable situation in Trade and repairs, Construction and Real estate and business activities. Unfortunately, limited data available concerning microenterprises do not allow making a thorough assessment of their financial and economic situation.

64 Data for 2009 concerning enterprises keeping accounting ledgers and employing more than 9 persons illustrate a complete slowdown in total revenues in the enterprise sector (increase only by 0.7% compared to 2008). Negative dynamics of total revenues was seen in the group of small enterprises (-3.5%). Minor increases in revenues were observed in medium-sized and large enterprises (1.0% and 1.6% respectively). A slightly better situation is illustrated by the data concerning gross turnover profitability for 2009 for the same group of enterprises. The ratio for the whole group analysed increased from 4.3% in 2008 to 4.9% in 2009. The greatest increase of this ratio in 2009 compared to 2008 concerned large enterprises (from 4.3% to 5.3%). A slightly lower increase was observed among medium-sized enterprises (from 3.9% to 4.3%). The gross turnover profitability of small enterprises in 2009 did not change compared to 2008 and achieved 4.9%. In 2008, similarly to previous years, there was a vast total stratification of revenues per one enterprise in each group of the enterprise sector by size. This ratio for microenterprises reached the value of PLN 0.4 million, for small enterprises – PLN 8.4 million, for medium-sized enterprises – PLN 42.9 million and for large enterprises – PLN 400.4 million. The relation of total revenues to one employee working in each group of enterprises shows a slightly different picture. The highest ratio was achieved by large enterprises (PLN 453.2 thousand), and then by medium-sized enterprises (PLN 412.7 thousand) and by small enterprises (PLN 388.5 thousand). Microenterprises had a significantly lower level of revenues per one employee (PLN 200.3 thousand). It means that the larger the enterprise, the greater the effectiveness of its employees, which partly explains higher remuneration of employees in large enterprises. However, as it turns out, not completely. If we analyse the amount of revenues per 1 PLN of remuneration in each group of enterprises by size, we will get a reverse result compared to the previous two groups. The highest efficiency taking into account the value of this ratio was achieved by other groups of the enterprises. Small enterprises achieved the second result (PLN 12.9 thousand). Medium-sized enterprises were in the next place (PLN 11.3 thousand) and after them, there were large enterprises (PLN 10.8 thousand). This situation shows that microenterprises have the highest work effectiveness measured by the relation of effects (revenues) to outlays (remunerations). However, we must bear in mind that a great number of microenterprises do not employ people and rely only on the owners‘ work.

65 Jacek Łapiński

Chapter 6. Investments and fixed assets in SMEs

6.1. Capital investment

Economic situation in 2008 and in the period 2003 to 2008, which was still advantageous, but weaker than in 2007, influenced the investment activity of the enterprises. In 2008, compared to 2007, capital investment in the enterprise sector increased up to PLN 160,540 million, i.e. by 11.3%. It shows a slowdown in the growth which took place in years 2003-2007 and reflected by the annual growth of 16.8%. The capital investment in years 2003-2008 is illustrated in diagram 6.1.

Diagram 6.1. Capital investment in the enterprise sector in the period 2003 to 2008 in PLN million.

Source: own study based on Activity of non-financial enterprises in 2008, the Central Statistical Office (CSO), Warsaw.

In 2008, capital investment dynamics in enterprises by size compared to 2007 was significantly different. In small enterprises it remained at the same level compared to the previous year (20.1% in 2008 and 23.2% w 2007). In other groups this growth was considerably smaller compared with the previous period. In 2008, capital investment dymanics slowed down completely in medium-sized enterprises (increase by 0.5%) compared to 2007. Large enterprises and microenterprises had significantly lower dynamics compared to the previous year (14.4% and 11.1% respectively). Despite this, the investment activity remained at a decent level. Diagram 6.2 shows information on the capital investment in each group of enterprises.

66 Diagram 6.2. Capital investment in groups of enterprises by size in the period 2003 to 2008 in PLN million.

Source: own study based on Activity of non-financial enterprises in 2008, the Central Statistical Office (CSO), Warsaw The dynamics shown above does not reflect the real contribution of each group to the growth of investment in the enterprise sector. The greatest share in the investment growth at the turn of 2007 and 2008 belonged to large enterprises (66.8%). The contribution of other groups was less significant: small enterprises (19.6%) and microenterprises (12.5%). Medium-sized enterprises had virtually no influence on the growth of capital investement (1.1%). This situation, apart from a varied dynamics of capital investment in this period resulted from the capital investment structure in enterprises by size. Diagram 6.3. Capital investment structure in the enterprise sector by size class and according to Polish Classification of Activities (PKD) in 2008

Source: own study based on Activity of non-financial enterprises in 2008, the Central Statistical Office (CSO), Warsaw

67 The share of enterprises by size in the growth of the capital investment of the whole sector in 2008 compared to 2007, shown in diagram 6.3, resulted mainly from the structure of capital investment in this sector. Large enterprises had the greatest share in the capital investment in 2008 (53.7%). Other size-groups of enterprises had significantly lower shares. When we analyse the significance of enterpreneurs in each Polish Classification of Activities (PKD) section as regards the capital investment in the enterprise sector, we see that the largest share in the growth of capital investment belonged to companies from the field of Industry (53.6%), Trade and repairs (21.1%) and Construction (9.5%). This situation resulted from the large share of the first two sections in the capital investment structure in the enterprise sector (48% and 15% respectively – diagram 6.3.) and high dynamics of growth in capital investment in Construction (20%). When analysing the dynamics of the capital investment of the enterprises in each Polish Classification of Activities section in 2008 compared to 2007, we see that the highest growth among seven sections with the highest share in the capital investment structure was observed in Other service activities (48.8%), Hotels and restaurants (28.2%) and Construction. Other sections having high rate of growth include Trade and repairs (16.2%) and Industry (12.7%). When we analyse the share of enterpreneurs of each Polish Classification of Activities section in the growth of capital investment, we can see that Construction (share in the growth: 56.6%) and Trade and repairs (22.6%) and Hotels and restaurants (21.2%) were the driving force behind investments for microenterprises. Industry (26.6%) had a negative influence on the growth of capital investment in the sector of microenterprises. The largest share in the growth of capital investment in the sector of small enterprises in 2008 compared to 2007 was in Industry (29.1%), Real estate and business activities (22.6%) and Trade and repairs (16%). Other service activities and Healthcare had the quickest growth in the sector (101% and 44.1% respectively). In the group of medium- sized enterprises in 2008 compared to 2007, the capital investment fell sharply in the section of Real estate and business activities (31.4%). Considerable increases in this field concerned the enterprises from Other service activities (42.9%), Hotels and restaurants (by 26.2%), Construction (14.7%) and Healthcare (12.7%). Industry was the main driving force behind the growth of the capital investment in medium-sized enterprises. Similarly, in the group of large enterprises, the capital investment in Industry (the share in the growth of capital investment – 69.9%) was the main driving force in 2008 compared to 2007. The highest dynamics of capital investment growth in this group concerned the enterprises from the field of Healthcare (61.6%), Real estate and business activities (38.0%) and Other service activities (31.9%). In 2008, the average capital investment per one enterprise in the enterprise sector reached PLN 86.2 thousand and in SMEs – PLN 40.0 thousand. Microenterprises achieved the lowest result (PLN 11.4 thousand). Small enterprises invested much more per one enterprise (PLN 345.8 thousand). The highest capital investment per one enterprise was observed in large enterprises (PLN 26.52 million) and in medium-sized enterprises (PLN 2.14 million), which is understandable (diagram 6.4). Capital investment per one enterprise increased significantly in 2008 compared to 2007 (by 6.2%), however not in all groups. A high increase of capital investments was observed in large enterprises (14.2%). SMEs experienced an increase by 2.9%, however mainly due to microenterprises which increased their average capital investment by (6.5%). In other groups, there was a slowdown in capital investment per one enterprise. In medium-sized enterprises it reached 4.9% and in small enterprises – 1.3%.

Diagram 6.4 Average capital investment per one enterprise (in PLN million) (diagram A), per one employee (PLN thousand) (diagram B) and compared to total revenues (diagram C) (%) in the sector of enterprises by size class in 2008. A 40 B C 30 26,52 8% 25 30,0 5,8% 30 6% 5,0% 20 20,6 4,5% 16,9 3,4% 15 20 15,9 4% 2,5% 10 10 5,5 2% 5 2,14 0,09 0,01 0,35 0 0 0% Total 0-9 10-49 50-249 > 249 Total 0-9 10-49 50-249 > 249 Total 0-9 10-49 50-249 > 249

Source: own study based on Activity of non-financial enterprises in 2008, the Central Statistical Office (CSO), Warsaw Capital investment per one employee in the enterprise sector in 2008 equalled PLN 16.9 thousand. However, the larger the enterprise is, the smaller this value is, . As a result, the largest capital investment per one employee in 2008 was deployed by large enterprises (PLN 5.5 thousand), then by medium-sized enterprises (PLN 20.6 thousand), small ones (PLN 15.9 thousand) and by microenterprises (PLN 5.5 thousand). The whole sector of SMEs achieved a result of PLN 11.2 thousand. The differences in capital investment between groups of enterprises are smaller when we compare capital investment with total revenues, although the order remains the same. The largest capital investment compared to total revenues in 2008 was observed in large enterprises (5.8%), medium-sized enterprises (5.0%), small enterprises (3.4%) and finally microenterprises (2.5%). In the enterprise sector this ratio equalled 4.5%, which means that there is 4.5 grosz of capital investment per 1 zloty of revenues. 6.2. Fixed assets and sources of financing investments The structure of gross outlays for fixed assets has slightly changed in 2008 in relation to 2007. In 2008, the largest companies' outlays were definitely for buildings and structures (55,9% and 54.5% in 2007), then machines, technical devices and tools (32.6% and 33.4% respectively), then means of transport (10,7% and 11.8% respectively) and the remaining outlays (0.7% and 0.4%). Diagram 6.5 represents the structure of gross outlays for fixed assets according to the types of investments and sources of financing.

Diagram 6.5. Structure of outlays for fixed assets in 2008 according to groups of fixed assets and sources of financing investments in the enterprise sector in 2008.

Source: own analysis according to data from CSO being analysed for the purpose of this publication

The structure of sources of financing investment outlays in the enterprise sector has practically not changed in 2008 in relation to 2007. Own resources was the main source of investment in 2008 (70, 4% and 70.4% in 2007), then domestic credits and loans (12.8% and 13.5% respectively) foreign funds (6.5% and 6.7%) (see diagram no 7.5). The remaining sources were used insignificantly.

Diagram 6.6. Use of fixed assets in the enterprise sector according to volume categories in 2008 (%).

60 49,9 45,0 47,8 50 44,1 41,1 42,9 35,6 36,2 40 31,6 33,8 2008 30 20 2007 10 0 total 0-9 0-49 50-249 > 249 Source: Own study, based on: Activity of non-financed enterprises in 2008, CSO (2010), Warsaw

In 2008 the use of fixed assets in the enterprise sector has slightly decreased in relation to 2007 (from 45.0% to 44.1%). However, this decrease has occurred in all groups of enterprises and affected only large and medium-sized companies (decrease by 2.1 and 2.8 pp respectively). In small enterprises, and in particular in micro-enterprises the increase of fixed assets use took place (increase by 2.4 and 4.0 pp respectively). This might have resulted mainly from the fact that smaller enterprises to a relatively large extent invest in used fixed assets, and large enterprises mainly in new assets.

6.3.Summary The favourable financial results of enterprises in 2008 persuaded them to continue investment projects. However, the increase of investment outlays was not as considerable as in the previous period. These outlays for the enterprise sector have increased quite significantly in 2008 in relation to 2007 (increase by 11.3% to PLN 160.540 million). However, this increase was lower than the annual average increase in 2003-2007 (16.8%). All groups of enterprises increased investment outlays in 2008 compared to 2007. Investment outlays dynamics of small enterprises was running at a similar level (20.1% in 2008 and 23.2% in 2007). The biggest share in the increase of investment outlays of this group had companies operating in the following sections: Industry (29.1%), Real estate and business activities (22.6%) and Trade and repairs (16%). Whereas, the fastest increase was recorded by the companies from the sections: Other services (10.1%) and Health care (44.1%). In the remaining size groups of enterprises the increase in 2008 was lower than in the previous period and lower than the annual average increase in 2003 - 2007. The dynamics of investment outlays increase almost totally slowed down in medium-sized enterprises (0.5%). It resulted mainly from a very considerable decrease in outlays in Real estate and business activities (of 31.4%). The main driving force behind the increase in medium-sized companies were enterprises from Industry section (69.9% share). A high increase was recorded also by companies from Other services (42.9%), Hotels and restaurants (of 26.2%) and Construction (14.7%) sections. Large enterprises recorded a high increase rate in 2008 (14.4% - in relation to 2007) despite worse results in the previous years. The most important driving force behind the increase of investment outlays in this group were companies operating in Industry section (69.9% share in the outlays increase). However, the highest dynamics of increase of investment outlays had companies operating in Health care (61.6%), Real estate and business activities (38.0%) and Other services (31.9%). A little worse results were recorded in micro-companies (11.1% increase of investment outlays in 2008 in relation to 2007). It resulted from bad results of companies from Industry section which weighed unfavourably upon the increase of investment outlays in microenterprises sector. However, the driving forces behind the increase in this group were companies from Construction (56.6% increase share), Trade and Repairs (22.6%) and Hotels and restaurants (21.2%) sections. Together with the increase of investment outlays of the sector of enterprises altogether, there was also a quite considerable increase of investment outlays per enterprise (6.2% in 2008 in relation to 2007). However, the increase of investment outlays was not recorded in companies in all size groups. However, a high increase occurred only in large companies (14.2%) and much lower in SME sector (2.9%). The increase of investment outlays was recorded only in micro-companies (6.5%). The decrease was recorded in the other groups: - 4.9% in medium- sized enterprises and 1.3% in small enterprises.

71 An interesting picture is presented by the ratio of investment outlays to total income which shows the companies‘ involvement in investment activity regardless of the size of run business. The highest investment outlays in relation to total income in 2008 was recorded in large enterprises (5.8 - i.e. almost PLN 0.06 from each PLN 1.0 of income), then medium- sized enterprises (5.0%), small enterprises (3.4%) and finally micro-enterprises (2.5%). This data shows that bigger enterprises are more inclined to deploy investment activity. The structure of gross outlays for fixed assets in the sector of enterprises did not practically change in 2008 in relation to 2007. The sector still spent the most on buildings and structures, machines, technical devices and tools, as well as means of transport. In 2008 also the structure of the sources of financing investment outlays in enterprises did not practically change in relation to 2007. The biggest sources of financing investments used by entrepreneurs were still own resources and domestic credits and loans. In 2008 the use of fixed assets in the enterprise sector decreased slightly in relation to 2007 (from 45.0% to 44.1%). It may prove that companies assigned available funds for the replacement of fixed assets. However, the decrease in that rate did not occur in all groups of enterprises and affected only large and medium-sized companies. An insignificant increase in the use of these resources occurred in small enterprises and in particular in micro-companies.

72 Zdzisław Wołodkiewicz - Donimirski

Chapter 7. Small and medium-sized enterprises in the export of Poland in 2008 – 2009

Firstly, it should be stressed that for the purpose of this analysis the population of small and medium-sized exporting enterprises was set apart from the group of enterprises that submit F- 01 financial reports on income, costs, financial result and outlays for fixed assets to Central Statistical Office (CSO). The entities that employ more than 9 persons are obliged to prepare such reports. It means that data presented below do not cover micro-enterprises which employ less than 10 persons. The survey of those entities is carried out by CSO once a year on a representative sample and it is much less detailed than that one concerning entities that employ more than 9 persons. In particular, data on micro-enterprises divided into exporters and non-exporters is not available. Data on turnover from the foreign trade of micro- companies is also unknown. 7.1. Number and structure of SME-exporters. 23 The number of all enterprises that employ over 9 persons which filled in the F-01 report amounted to 50 828 of which 17 079 companies were exporters. In the second group of entities there were 15 178 companies recognized as small and medium-sized exporters (table 1). In 2009, during a clear slowdown of the Polish economy, the number of SMEs-exporters has increased by 6.5% in relation to the previous year. In the same period the number of large exporters (employing over 249 persons) has increased by 4.8%. As a result, the share of SMEs-exporters in the total number of exporters has increased from 87.5% to 88.9%. It is worth adding that in the several preceding years this share was uniquely stable, fluctuating between 87.0 and 87.8%. Table 7.1. SMEs-exporters compared to all surveyed exporters

Item 2003 2004 2005 2006 2007 2008 2009 Number of all surveyed 13 153 14 103 14 333 15 448 15 845 16 290 17 079 exporters

Number of SMEs - 11 519 12 387 12 583 13 553 13 785 14 249 15 178 exporters

Share of SMEs- exporters in 87.6 87.8 87.8 87.7 87.0 87.5 88.9 total number of exporters (in %)

23 Export includes export to non-EU countries as well as trade inside the Community.

73 Source: CSO data processed by Institute for Market, Consumption and Market Outlook Research and own calculation. Among 47 781 small and medium-sized enterprises operating in 2009 there were 15 178 exporters (31.8%) and 32 603 non-exporters (68.2%). In comparison to 2008 the number of exporters has increased by 6.5% and the number of non-exporters by 7.7%. Fast growth of the number of non-exporters in relation to exporters took place for the second time. The opposite trend took place in the years 2003-2007: the number of exporters in SME sector was increasing faster. The economic crisis which had been evidently occurring from the 4th quarter of 2008 might have had influence upon relatively low growth rate of the number of SMEs-exporters in the last two years. This crisis manifested itself inter alia in decreasing demand for goods exported from Poland24 which in turn caused difficulties for our small and medium-sized entities as regards export activity.

Table 7.2. SMEs divided between exporters and non-exporters (in %) Item SMEs-exporters SMEs-non-exporters Total SMEs 2003 28.9 71.1 100 2004 30.5 69.5 100 2005 30.8 69.2 100 2006 32.5 67.5 100 2007 32.7 67.3 100 2008 32.0 68.0 100 2009 31.8 68.2 100 Source: CSO data processed by Institute for Market, Consumption and Market Outlook Research and own calculations.

Among 15 178 SMEs-exporters operating in 2009, 7 615 entities may be categorized into small entities that employ from 10 to 49 persons and 7564 into medium-sized entities that employ from 50 to 249 persons. In the last two years the number of small exporters has increased faster than the number of medium-sized exporting companies. As a result the share of small exporters in the total number of SMEs-exporters has increased from 48.5% in 2007 to 48.7% in 2008 and to 50.2% in 2009 (table 7.3). Whereas, it turned out that the share of small enterprises has generally decreased, when we compare the period before accession to European Union to the period after that accession.

24 It is proved by the decrease of export volume in 2009 (9.3% decrease according to CSO). It is worth adding that the export value presented in Euro has decreased in the same time by 15.5 %, and that expressed in zlotys has increased by 4.5 % (effect of zloty depreciation).

Table 7.3. SME-exporters divided into small and medium-sized companies (in %) Item Small exporters Medium-sized Total SMEs - exporters exporters 2003 53.1 46.9 100 2004 47.2 52.8 100 2005 52.8 47.2 100 2006 52.6 47.4 100 2007 48.5 51.5 100 2008 48.7 51.3 100 2009 50.2 49.8 100 Source: CSO data processed by Institute for Market, Consumption and Market Outlook Research and own calculations.

In 2009 the most small and medium-sized exporters represented the following sections: industrial processing, trade, transport and storage, professional, scientific, technical25 activity and construction (diagram 1 and table 4). All in all, 80.6% of all SMEs-exporters belongs to the first two sections and 93.7% to all five sections. As regards other sections a significant number of SMEs-exporters operated in: information and communication (375 companies), agriculture, forestry, hunting and fishing (168 companies) and administration and support activities26 (134 companies).

25 This section covers inter alia: legal activity, central companies activity, management consulting, architecture and engineering activity, technical research and analyses, scientific research and development works, advertisement, market research and public polls, veterinary activity. 26 This section covers inter alia: rent and lease of machines, devices, cars, employment activity, tourist activity of touristic organisers and agents, detective and security activity, activity connected with keeping order in premises and green areas management.

The number of SMEs-exporters has increased by 929 entities in 2008-2009. Taking into account the 5 main sections with the largest number of SMEs-exporters one can state that in the period covered by the survey the number of SMEs-exporters has increased in all sections except for construction. The highest growth of the number of companies running export business – in percentage terms – took place in the section that covers professional, scientific and technical activity (20.3% growth). The number of SMEs-exporters in transport and storage has increased a little less (by 15.1%). The number of companies in industrial processing increased relatively insignificantly (by 3.3%).

Table 7.4. Number of SMEs-exporters according to volume categories and PKD section in 2008-2009

Item 2008 2009 Change (2009- 2008)

Total 14249 15178 929 27 Small entities 6946 7615 669 28 Medium-sized entities 7303 7563 260 Agriculture, forestry, hunting and fishing (A section) 188 168 -20 Mining and quarrying (B) 49 57 8 Industrial processing (C) 7690 7943 253 Electricity and gas production and supply 24 19 -5 Water supply; sewerage, waste management (E) 62 73 11 Construction (F) 471 459 -12 Trade and Repairs (G) 3904 4298 394 Transport and storage (H) 882 1015 133 Accommodation and food services (I) 11 15 4 Information and communication (J) 323 375 52 Financial and insurance activity (K) 29 36 7 Real estate activities (L) 30 37 7 Professional, scientific and technical activity (M) 418 503 85 Administration and support activity (N) 118 134 16 Education (P) 9 9 0 Health care and social assistance (Q) 6 6 0 Culture and entertainment (R) 10 8 -2 Other services (S) 25 23 -2 Notes: In brackets there are symbols of the Polish Classification of Activities (PDK) 2007.

27 Division into volume categories is made according to the number of employees indicated in the surveyed period. 28 ditto.

77 Source: CSO data processed by Institute for Market, Consumption and Market Outlook Research and own calculations.

Over 52% of all SMEs-exporters operated in industrial processing in 2009. In this section most numerously represented were small and medium-sized exporters from the following branches: - production of metal, finished goods excluding machines and devices – 1312 companies (1218 companies in 2008), - production of groceries – 910 (853), - production of rubber and plastic goods - 862 (841), - production of machines and devices which has not been classified elsewhere – 699 (662), - production of wooden and cork goods, excluding furniture - 490 (502), - production of furniture – 449 (425). All in all, 3/5 of SMEs-exporters operating in industrial processing belonged to six abovementioned branches. In all of these branches, excluding production of wooden goods (however not including furniture), the number of SMEs-exporters has increased in relation to 2008. In the SME export sector, the so called non-specialised exporters prevailed (i.e. enterprises whose share of profits from export in total income fluctuated at the level not higher than 50%). These companies have sold most of their production at the domestic market. The share of those companies in total number of SMEs-exporters amounted to 77.1% in 2009. The remaining 22.9% belonged to exporters which sell first of all at the foreign markets i.e. specialized exporters whose share of export in total income exceeded 50%. In 2009, 3 473 enterprises out of 15 178 SMEs-exporters were specialised entities. In comparison to 2008 the number of small and medium-sized specialised exporters has increased by 199 enterprises (table 5) i.e. by 6.1%. This relatively big growth of the number of SMEs-exporters may be justified by the effect of zloty depreciation29. Owing to that effect some of the enterprises become specialised exporters because their income from export converted into zlotys has exceeded 50% of total income, which has nothing to do with their activity at the international markets.

29 Annual average euro rate has increased from 3,5166 in 2008 to 4,3273, i.e. 23,1% growth, and average annual dollar rate respectively from 2,4092 to 3,1162, i.e. 29,3% growth.

Table 7.5. Number of specialised SMEs-exporters according to PKD section in 2008 - 2009 Item 2008 2009 Change (2009- 2008)

Total 3274 3473 199 Agriculture, forestry, hunting and fishing (A section) 40 43 3 Mining and quarrying (B) 1 2 1 Industrial processing (C) 2289 2342 53 Electricity and gas production and supply 2 1 -1 Water supply; sewerage, waste management (E) 9 8 -1 Construction (F) 114 120 6 Trade and repairs (G) 267 297 30 Transport and storage (H) 314 358 44 Accommodation and food services (I) 3 2 -1 Information and communication (J) 75 103 28 Financial and insurance activity (K) 2 5 3 Real estate activities (L) 0 2 2 Professional, scientific and technical activity (M) 105 127 22 Administration and support activity (N) 42 46 4 Education (P) 2 1 -1 Health care and social assistance (Q) 1 4 3 Culture and entertainment (R) 1 1 0 Other services (S) 7 11 4 Notices: In brackets there are symbols of the Polish Classification of Activities (PDK) 2007. Source: CSO data processed by Institute for Market, Consumption and Market Outlook Research and own calculations.

Over 2/3 of SMEs-specialised exporters operated in industrial processing (diagram 2) in 2009. 26% of SMEs-specialised exporters belonged to the next four sections i.e. transport and storage, trade, professional, scientific, technical activity and construction. Five of the abovementioned sections gathered cumulatively 3 244 entities i.e. 93.4% of all enterprises belonging to the group of SMEs-exporters in question.

In the industrial processing nearly 70% of specialised SMEs-exporters belonged to 7 branches in 2009: - production of metal, finished goods excluding machines and devices – 453 companies (2008 companies in 418), - production of wooden and cork goods, excluding furniture - 204 (213), - production of rubber and plastic goods - 203 (186), - production of furniture – 194 (189). - production of clothing – 191 (229); - production of machines and devices which has not been classified elsewhere – 191 (177); - production of groceries – 176 (176). In the industrial processing similarly to the other sections, small and medium-sized exporters were mainly entities belonging to non-specialised exporters i.e. companies that sell mainly at the domestic market. Only in the one branch of this section the specialised exporters were the majority of SMEs-exporters in this branch. It was the production of other transportation equipment. In the subsequent four branches the exporters selling mainly at the foreign markets constituted from 45 to 50% of all SMEs-exporters. It was the following branches: production of clothing, production of furniture, production of wooden and cork goods excluding furniture, and production of other goods. In the other branches of this section the specialised exporters constituted the clear minority among SMEs-exporters. Similarly like among specialised SMEs-exporters, also among non-specialised SMEs- exporters the most entities (5601) operated in industrial processing. A little less numerous were companies operating in trade (4001). 82% of all entities from this category (diagram 3) belong cumulatively to this two sections.

In 2009 among 15178 of small and medium-sized exporters there were 4170 entities (27.5%) with foreign capital share and 11008 entities without foreign capital share (72.5%). The share of companies with foreign capital in the group of SMEs-exporters has increased to 25.7% in 2007, to 26.8% in 2008 and to 27.5% in 2009. The same rate in the group of large exporters has increased from 42.6 to 45% and to 45.4% respectively. Small and medium-sized exporters with the share of foreign capital were the most numerous in the following sections: industrial processing (50.3%); trade (25.9%), professional, scientific and technical activity (6%); transport and storage (5.4%) and information and communication (4.3%). There was also relatively large number of companies in construction and administration and support activity (table 7.6).

Table 7.7. Number of SMEs-exporters with foreign capital according to PKD section in 2008 - 2009 Item 2008 2009 Change (2009- 2008)

Total 3820 4170 350 Agriculture, forestry, hunting and fishing (A section) 74 68 -6 Mining and quarrying (B) 10 13 3 Industrial processing (C) 1975 2098 123 Electricity and gas production and supply 5 4 -1 Water supply; sewerage, waste management (E) 19 19 0 Construction (F) 100 103 3 Trade and Repairs (G) 983 1079 96 Transport and storage (H) 195 226 31 Accommodation and food services (I) 6 5 -1 Information and communication (J) 144 179 35 Financial and insurance activity (K) 16 24 8 Real estate activities (L) 8 12 4 Professional, scientific and technical activity (M) 210 252 42 Administration and support activity (N) 53 68 15 Education (P) 4 4 0 Health care and social assistance (Q) 4 3 -1 Culture and entertainment (R) 3 3 0 Other services (S) 11 10 -1 Notices: In brackets there are symbols of the Polish Classification of Activities (PDK) 2007. Source: CSO data processed by Institute for Market, Consumption and Market Outlook Research and own calculations.

In the industrial processing SMEs-exporters with the share of foreign capital were represented in largest number in the following branches: production of metal, finished goods excluding machines and devices (17.7% of companies from this section), production of rubber and

82 plastic goods (11.9%) and production of machines and devices which has not been classified elsewhere (9.1%). The number of small and medium-sized exporters with the foreign capital has increased from 3820 entities in 2008 to 4170 entities in 2009 (9.2% growth). The impressive growth, as high as 24.3% was recorded in J section (information and communication). This result should be owed first of all to situation in branch 62 (activity related to software and IT consulting). The number of entities in question has increased in that branch from 69 in 2008 to 96 in 2009 (39.1% growth). The considerable growth of SMEs-exporters with the foreign capital was recorded also in M section (professional. scientific and technical activity). The number of surveyed entities in the section has increased by 24 (i.e. 20%), including branch 69 (legal, accounting and tax consulting activity) – by 14 entities, and in branch 70 (central companies activity, management consulting) – by 15 entities. In the group of small and medium-sized exporters with only the domestic capital the most important sections as regards the number of companies were: industrial processing (53.1% of all entities of this group of companies); trade (29.2%); transport and storage (7.2%) and construction (3.2%). Detailed data are presented in the table 7. In the industrial processing the most small and medium-sized exporters without foreign capital were in the following branches: production of metal, finished goods excluding machines and devices (16.1% of companies from this section), production of groceries (12.5%), production of rubber and plastic goods (10.5%) and production of machines and devices which has not been classified elsewhere (8.7%). The number of small and medium-sized exporters without foreign capital has increased from 10 429 entities in 2008 to 11 008 entities in 2009 (5.6% growth), i.e. considerably less than the number of entities with foreign capital. Among eminent sections the attention should also be paid to the increase of the number of companies in question (20.7% growth) in M section – professional, scientific and technical activity. Similarly to entities with foreign capital it was mainly caused by the increase of the number of entities being surveyed in branches 69 legal, accounting and tax consulting activity) and 70 (central companies activity, management consulting). Quite considerable increase of the number of companies without foreign capital was also recorded in branch 71 (architecture and engineering activity, technical research and analyses). In transport and storage the number of entities being analysed has increased in the analysed period by 14.8%. First of all it was connected with the situation in branch 49 (overland transport and pipeline transport) where the number of entities has increased from 562 to 660.

Table 7.8. Number of SMEs-exporters without foreign capital according to PKD section in 2008 - 2009 Item 2008 2009 Change (2009- 2008)

Total 10429 11008 579 Agriculture, forestry, hunting and fishing (A section) 114 100 -14 Mining and quarrying (B) 39 44 5 Industrial processing (C) 5715 5845 130 Electricity and gas production and supply 19 15 -4 Water supply; sewerage, waste management (E) 43 54 11 Construction (F) 371 356 -15 Trade and Repairs (G) 2921 3219 298 Transport and storage (H) 687 789 102 Accommodation and food services (I) 5 10 5 Information and communication (J) 179 196 17 Financial and insurance activity (K) 13 12 -1 Real estate activities (L) 22 25 3 Professional, scientific and technical activity (M) 208 251 43 Administration and support activity (N) 65 66 1 Education (P) 5 5 0 Health care and social assistance (Q) 2 3 1 Culture and entertainment (R) 7 5 -2 Other services (S) 14 13 -1 Notices: In brackets there are symbols of the Polish Classification of Activities (PDK) 2007. Source: CSO data processed by Institute for Market, Consumption and Market Outlook Research and own calculations.

Summing up, one can ascertain that the highest growth of the number of enterprises was in services section both in group of SMEs-exporters with foreign capital and SMEs-exporters without foreign capital. Whereas, the number of entities in industrial processing has only slightly increased.

7.2. Value and structure of SMEs export In 2009, the value of export of surveyed SMEs i.e. entities that employ from 10 to 249 persons amounted to PLN 103.8 billion 30 that is 3% more than in 2008. In the same time export of large companies decreased by 1%. In consequence, the share of SMEs in export registered in F-01 reports increased from 26.5% in 2008 to 27.3% in 2009. It is worth stressing that the trend was reversed in the previous five years (diagram 4).

The main role in SMEs export was played by medium-sized enterprises that employ from 50 to 249 employees (table 8). 78.3% of the total SMEs export belonged to them. In 2008-2009 the export of small companies has been increasing faster than the export of medium-sized companies. The growth rate of export of small companies in relation to the previous year amounted to 8.4% in 2008 and 9.4% in 2009. For medium-sized entities it was 2.4% and 1.4% respectively. In consequence, the share of small enterprises in total export of SMEs has increased from 19.6% in 2007 to 20.5% in 2008 and to 21.7% in 2009.

30 This export is registered in F-01 reports. It covers export of goods and services of enterprises that employ over 9 persons. Export registered in foreign trade statistics is the other category of export (gained from other sources and covering exportation only). The source of data for the second category of export are two parallel systems: INTRASTAT declaration system and SAD customs notification system.

85 In all sections PKD for which data are available31 the value of export of medium-sized enterprises exceeded export of small enterprises.

Table 7.9. SMEs export according to employment level (in PLN billion) Item Small entities Medium-sized entities Total SMEs 10-49 persons (50-249) 2007 19.03 78.27 97.30 2008 20.63 80.16 100.79 2009 22.56 81.26 103.81 Source: CSO data processed by Institute for Market, Consumption and Market Outlook Research and own calculations.

The industrial procession section has a prevailing role in SMEs export. 57.1% of SMEs export belonged to that section in 2009. The following sections had also a considerable share in SMEs export: trade, transport and storage, professional, scientific and technical activity, as well as construction (diagram 5). 95% of SMEs export in 2009 belonged to the abovementioned sections. As regards the other sections quite significant export was recorded in: information and communication (PLN 1.6 billion), as well as electricity and gas production and supply (PLN 1,4 billion).

Diagram 5. SMEs export structure according to PKD sections in 2009 industrial processing 57,1%

other sections 5,0%

construction 1,6% professional, scientific and technical activity transport and 2,7% storage 7,3% trade 26,3% source: same as in table

In 2009, the highest export was recorded in small and medium-sized entities from the following branches: production of groceries (PLN 10.7 billion), production of metal, finished

31 For some sections and branches data are not available due to the requirements of statistical confidentiality provided for by the Act of 29 June 1995 on Public Statistics.

86 goods excluding machines and devices (PLN 8.8 billion), production of rubber and plastic goods (PLN 6.3 billion) and production of machines and devices which has not been classified elsewhere (PLN 5.1 billion). As already mentioned, in 2009 there was 3% growth of the value of SMEs export in comparison to the previous year. In the main sections the situation varied. There was a considerable growth of export in transport and storage (19.8%) and professional, scientific and technical activity (9.1%). Moreover, there was a decrease in export in trade (7.3%) and construction (4.6%). In industrial processing – the section with the highest value of exportation - small and medium-sized enterprises export increased from PLN 56.7 billion in 2008 to PLN 59.2 billion in 2009 (4.4% growth). Within the sections for which data are available the highest export growth was recorded in the following branches: production of groceries (24.2% growth), printing and copying of recorded data carriers (11.9 growth), production of rubber and plastic goods (6.9% growth). The specialised exporters played the main role in SMEs export. The 3/5 of total surveyed export of SMEs belonged to that group of companies (table 7.9). In the last two years the share of export of specialised SMEs exporters in total SMEs export increased: from 59.1 in 2007 to 59.4 in 2008 and 60.1% in 2009. However, it was still much below the level of the rate recorded in 2003-2004.

Table 7.10. Share of export of specialized SMEs-exporters in SMEs export. Share of export of SMEs export Specialized SMEs export specialized SMEs- Item (in PLN (in PLN billion) exporters in SMEs export. billion) (%) 2003 39.32 60.05 65.5 2004 49.81 77.88 64.0 2005 48.69 78.91 61.7 2006 52.82 82.20 59.9 2007 57.52 97.30 59.1 2008 59.91 100.79 59.4 2009 62.43 103.81 60.1 Source: CSO data processed by Institute for Market, Consumption and Market Outlook Research and own calculations. In all main sections the largest part of the SMEs export belonged to specialized exporters in 2009. In construction, specialized exporters realized 65.4% of SMEs export, in industrial processing it was 65.1%, in professional, scientific and technical activity – 61.3%, in transport and storage - 61.9%, in information and communication - 60.5% and in trade - 57.7%. Non-specialized exporters, i.e. those whose export amounted at maximum to 50% of total income, prevailed in SMEs export only in two sections: in E section – water supply;

87 sewerage, waste management and activity connected with reforestation (54.3% belonged to non-specialised exporters) and K section – financial and insurance activity (55.6%). In industrial processing within 21 branches for which data are available, the specialised exporters accounted for the largest share of SMEs export in 19 branches. In 2009, the share of specialised exporters in SMEs export of given branch was the highest in the following branches: production of other transportation equipment (85.3%); production of furniture (78.2%); production of clothing (77.9%); production of wooden and cork goods, excluding furniture (77.9%), production of machines and devices which has not been classified elsewhere (76.4%). Whereas, non-specialised exporters prevailed in SMEs export in two branches: production of chemicals and chemical products (53.8% of total SMEs export in this branch) and printing and copying of recorded data carriers (53.7%). Both in the structure of export realised by enterprises selling mainly at foreign markets and the structure of export realised by enterprises selling mainly at the domestic market – the industrial processing prevailed (diagrams 6 and 7). 61.7% of total specialised SMEs export and 50% of total non-specialised export belonged to that section. G section (trade) came second in both cases. 31.8% of total export of non-specialized SMEs and 22.6% of total export of specialized SMEs belonged to commercial companies in 2000. In both group of companies set apart, small and medium-sized companies from transport and storage branches took third position as regards the value of export. As regards the value of export, the highest export was realised – in industrial processing, both in the group of specialised SMEs-exporters and the group of non-specialised SMEs-exporters – by companies of branch 10 covering production of groceries. In the first group of companies, the value of export amounted to PLN 6.9 billion, and in the second group to PLN 3.9 billion (data for 2009). The next branch of high value of export was production of metal, finished goods, excluding machines and devices (PLN 5.9 billion and PLN 2.9 billion).

Diagram 6. Specialized SMEs export structure according to PKD sections in

industrial processing 61,7%

professional, scientific and technical activity other sections 2,8% 5,4%

transport and storage 7,5% trade 22,6% source: same as in table

88 Diagram 7. Non-specialized SMEs export structure according to PKD sections in 2009

industrial processing 50,0%

other sections professional, 8,5% scientific and technical activity 2,7%

transport and storage 7,0% trade 31,8%

source: same as in table

In 2009, in SMEs sector, enterprises with foreign capital realised a slightly higher export than companies with the sole domestic capital (table 10). 50.1% of the total export of small and medium-sized enterprises belonged to that first group of companies. It is worth stressing that while the export of SMEs with foreign capital increased from PLN 44.6 billion in 2008 to PLN 52 billion in 2009 (16.7% growth), the export of small and medium-sized companies without this capital decreased in that period from PLN 56.2 billion to PLN 51.8 billion (7.8% decrease). It might be caused by two phenomena: firstly, the decrease of demand at the foreign market might have been more inconvenient for companies with the sole domestic capital which had worse access to those markets. It resulted in the decrease in export of those companies. Secondly, the growth of export of enterprises with foreign capital might have resulted from ownership transformations, and in particular from acquisitions of Polish companies by foreign capital.

Table 7.10. SMEs export divided into entities with foreign capital and entities without foreign capital (in billion PLN) Item Enterprises with foreign Enterprises without Total SMEs capital foreign capital 2007 43.32 53.98 97.30 2008 44.61 56.18 100.79 2009 52.04 51.77 103.81 Source: CSO data processed by Institute for Market, Consumption and Market Outlook Research and own calculations.

89 As already mentioned, in 2009 there was a 16.7% growth of the value of SMEs export in comparison to the previous year. In the main sections a situation varied. The export in transport and storage has increased (34.2% growth), in information and communication (30.5 %), in industrial processing (18.1% growth) and in trade (9.4% growth). Whereas, the export in professional, scientific and technical activity, as well as in construction, decreased (4.6% and 26% respectively). Within 23 branches of industrial processing where export activity took place, in 16 branches there was an increase of export in surveyed companies, and in 7 branches there was a decrease (table 11). The impressive growth of export took place in branch 30 covering production of other transportation equipment. The exportation of small and medium-sized companies with foreign capital increased from PLN 488.9 billion in 2008 to PLN 1163.7 billion in 2009.

Table 7.11. Value of export of SMEs with foreign capital in 2008 - 2009

Item 2008 2009 Dynamics (in million PLN) (in million PLN) (2008 = 100)

Industrial processing (C) 28459.1 33662.5 118.3 Production of groceries (branch 10) 4453.4 6202.3 139.3 Production of beverages (11) 286.2 444.2 155.2 Production of textiles (13) 551.3 651.1 118.1 Production of clothing – (14); 633.2 541.6 85.5 Production of leather and leather products (15) 241.8 299.2 123.8 Production of wooden and cork goods, excluding furniture – (16), 1155.1 1370.2 118.6 Production of paper and paper products (17) 947.3 1215.6 128.3 Printing and copying of recorded data carriers (18) 194.7 192.4 98.8 Production and processing of coke and crude oil refining products (19) 255.7 172.9 67.6 Production of chemicals and chemical products (20) 1671.2 1954.6 117.0 Production of basic pharmaceutical substances, medicines and other pharmaceutical products (21) 297.8 289.4 97.2 Production of rubber and plastic goods (22) 3548.4 3896.1 109.8 Production of goods made of other mineral, non-metallic raw materials (23) 809.0 797.9 98.6 Productions of metals (24) 544.8 676.8 124.2 Production of metal, finished goods, excluding machines and devices (25) 4098.9 4959.1 121.0 Production of computers, electronic and optical goods (26) 1076.2 850.5 79.0 Production of electrical devices (27) 885.3 952.3 107.6 Production of machines and devices which has not been classified elsewhere –(28); 2884.7 3189.4 110.6 Production of cars, trailers and semitrailers, excluding motorcycles (29); 1807.4 2182.0 120.7 Production of other transportation equipment (30) 488.9 1163.7 238.0 Productions of furniture (31) 755.5 739.8 97.9 Production of other goods (32) 400.4 431.0 107.6 Repair, maintenance and installation of machines and devices (33) 472.0 490.4 103.9 Source: CSO data processed by Institute for Market, Consumption and Market Outlook Research and own calculations.

7.3. SMEs tendency to export Companies from the SMEs sector show weaker connection with foreign markets than large entities. Two indicators presenting the level of internationalisation of enterprises show a higher tendency of larger companies to get involved in export: share of exporters in total number of companies and share of export in total income of exporters (table 12). Data for the first indicator shows that the share of companies that run export activity is increasing together with the size of enterprise. So, in 2009, the share of small enterprises amounted to 24.4%, medium-sized enterprises – 45.8% and large companies – 62.4%. Data for the second indicator shows that bigger export companies had higher share of export in income from their entire activity. In 2009, this share amounted to 18.4% as regards small exporters, 22.6% as regards medium-sized exporters and 29% for large exporters. In 2009, the share of export in income from the whole activity amounted to 21.5% for the entire group of small and medium-sized export enterprises being surveyed. The companies from transport and storage, where this rate amounted to 38% (diagram 8) showed the most pro-export attitude. It was also relatively high in the industrial processing, and relatively low in trade and construction.

Table 7.12. SMEs tendency to export in comparison to all entities in 2009 Item Total number Number of Share of Exporters' Export value Share of of companies exporters exporters in total income export in total (in million total number income (in million PLN) of companies PLN) (in %) (%) 1 2 3 4. 5 6 7. Total number of entities (over 9 persons) 50828 17079 33.6 1435.7 380.21 26.5 Small entities (10-49 persons) 31269 7615 24.4 122.51 22.56 18.4 Medium-sized entities (50-249 persons) 16512 7563 45.8 359.81 81.26 22.6 Entities from the SMEs sector (10-249 persons) 47781 15178 31.8 432.32 103.81 24.0 Large entities (over 249 persons) 3047 1901 62.4 953.38 276.4 29.0 Source: CSO data processed by Institute for Market, Consumption and Market Outlook Research and own calculations.

The share of export in income from the whole activity in industrial processing exceeded 40% in five branches (data for 2009). Production of other transportation equipment (55.3%) Production of clothing – (46.8%); Production of furniture (46.1%) Production of wooden and cork goods, excluding furniture – (44.3%), Production of cars, trailers and semitrailers, excluding motorcycles (42.5%); Small and medium-sized enterprises with foreign capitals showed a higher share of export in total income than small and medium-sized entities without this capital. In 2009, this rate amounted to 26.9% for the first ones and 17.9% for the second ones.

93 Summary In 2009, during the global crisis and considerable slowdown of economic growth in our country, the export sector of small and medium-sized enterprises achieved good results. The improvement of financial condition of those entities has taken place. Gross sales profitability of small and medium-sized exporters that employ from 10 to 249 persons amounted to 4.2%. This result was slightly better than the result in 2008 which was quite good for our economy. Particularly good results were attained by companies specialized in export due to zloty depreciation. Their gross sales profitability in the SME sector increased from 1.7% to 5.1% and sales profitability from 3.6% to 6.4%. The value of export of small and medium-sized enterprises in zlotys amounted to PLN 103.8 billion in 2009 and increased by 3% in comparison to 2008. At the same time the value of export of large companies decreased. As a result, the share of SMEs in total export of companies that employ over 9 persons increased from 26.5% in 2008 to 27.3% in 2009. Particularly high growth of export of SMEs occurred in transportation and storage management section and professional, scientific and technical activity section. Quite good results were achieved by industrial processing that prevail in SMEs export. The export of small and medium-sized companies from this section increased of 4.4%, and the highest growth o exportation was gained by producers of groceries, rubber and plastic goods and companies from the sector or printing and copying of recorded data carriers. In 2009, the export of small companies in SMEs sector was increasing faster than that of medium-sized companies; and of entities with foreign capital than of entities without such capital. As a result, the share of small companies in the whole SMEs export increased from 20.5% in 2008 to 21.7% in 2009, and the share of entities with foreign capital increased from 44.3% to 50.1% respectively. Among small enterprises, the companies that operate in transport and storage, as well as information communication, particularly dynamically increased their exports.

Part II

Role of human capital in developing entrepreneurship

Joanna Orłowska

Chapter 9. Workers' skills and professions of the future in the light of foresight research

The research conducted to date32 and the analyses available would suggest that one of the main factors which impedes innovation in and competitiveness of Polish enterprises is lack of qualified human resources. However, it is competent and skilled human resources that may become a new and most effective source of competitive advantage in the on-going process of globalisation. It would therefore seem that quick and adequate recognition as to the demand for human resources is of utmost importance, especially in those sectors where the innovation potential is greatest. It is also vital to be able to foresee trends efficiently - those that might occur in world economy and its sectors and to create possible scenarios of the development of Polish economy based on this. Structural factors such as: globalisation, technological change, ageing of societies or transition to low carbon economy contribute to fast changes that occur in the European and global labour market. Due to the pace of these changes, lack of relevant skills in some sectors and professions is already causing a high level of structural unemployment in some EU countries. In order face the current and future challenges involved in building a Knowledge-Based Economy (KBE) and also to lay the foundations for development based on the principles of competitiveness and sustainable growth, Europe needs human resources whose skills and qualifications meet the needs of the modern economy. Identifying skills and professions which are most desirable on the market is not possible in practice without determining future trends of the economy alone as well as of its specific branches. Increasingly in the last years the EU and its Member States have been making attempts at forecasting mid and long-term trends in the economy and building possible scenarios of its development (and of its branches).33 These projects are for instance carried out using the foresight method, which despite not being scientific is a good tool for analyses of this kind. At present, it is the European Commission that runs foresight projects in relation to the whole economy and its branches. Attempts at forecasting future trends and their impact on the national economy, also in relation to the required skills of its human resources were also made by the Czech Republic and Hungary.

32 Potencjał rozwojowy polskich MSP, Raport końcowy z badania przygotowany na zlecenie PAED przez PSDB i GFK Polonia [Polish SMEs development potential, A final research report commission by PAED, PSDB and GFK Polonia], Warsaw 2008 33 Projects of this kind have been undertaken internationally since 1970s. The foresight method was used for the first time in Japan in 1970 and became widely used in the world in the late 20th century and early 21st century, e.g. in the USA, New Zealand and EU countries. At present, the programmes and methods that use the foresight method are implemented by many countries and such organisations as UN, OECD and EU.

96 First foresight activities were started at national level in Poland in 2003 by launching the Pilot Foresight Project as part of the "Health and Life" research area, which was the first stage of the National Foresight Programme (NFP).34 In January 2006, the second stage of the programme started and it covered activities in three research areas: Sustainable Development of Poland, Information and Communication Technology, Security. In parallel to the national programme, several foresight projects were implemented in Poland, both of regional and industrial character. These projects were carried out not only by public institutions but also by universities and private institutions. In 2009, the Polish Agency for Enterprise Development was the first to have a foresight project implemented. The project: Foresight of human resources in modern economy was the first project of this kind in Poland, in which the foresight methodology was used for labour market analysis and forecasting trends in human resources demand in developing economy and in relation to particular sectors. This research was inspired by numerous statistical data and findings of earlier research carried out in the world and in Poland, including by PAED, and these related to human capital development and the economy‘s demand for human resources which suggested that the current skills of human resources do not meet the market needs. It is worth emphasising that the above research did not allow us to have a full picture of trends in and the demand for human resources in the Polish economy in selected sectors.

9.1 Current and future labour market conditions The data published by for instance the European Commission would suggest that the current and future labour market is and will be mainly shaped by globalisation which means that knowledge will grow in importance as a factor generating and ensuring a competitive advantage and stimulating social and economic growth. According to the European Commission, it is owing to globalisation and the opening of new markets that the retail industry developed so fast and this in turn has a considerable impact on the European labour market 35. A similar impact can be noted with respect to the states' aspirations to build a knowledge-based economy (KBE). In the economy of this kind, of paramount importance are such factors as: R&D, researchers‘ mobility, Information and Communication Technology (ICT) and services, but what first and foremost matters is education and the quality of human capital. This causes changes on the labour market, which is increasingly characterised by a wider access to education, including to higher education. The European Commission also feels that a transition to a knowledge-based economy on the one hand creates unlimited possibilities in terms of job creation and on the other make life-long learning necessary, in line with the requirements of the economy36. The Commission has drawn these conclusions based on CeDefop‘s37 data which would suggest that between 2006-2020, about 100 million jobs will be created in EU-25, of which 19.6 million will be new jobs and 80.4 million will be ―cover‖ jobs which will become available due to the fact that the worker will leave the labour

34 For more information on NFP, please see: http://www.ippt.gov.pl/foresight/foresight-narodowy.html 35 New Skills for New Jobs. Anticipating and matching labour market and skills needs, European Commission, 2009. 36 ibidem 37 CeDefop - European Centre for the Development of Vocational Training

97 market38. According to the European Commission, we will see a change in proportions between jobs for degree holders and people with secondary school education. A degree will be necessary in the case of 31.3% of jobs (an increase from 25.1% in 2006). However, a secondary school education will be a minimum requirement for 50.1% of jobs (an increase from 48.3% in 2006)39. These statistics are extremely important as even today the structure of employee education would suggest that the quality of human resources is not sufficient for the developing economy. There is a large and ever-increasing gap between the type and quality of education gained and the skills required in professional life. Lack of planned and adequate reaction of public institutions and also in part of employers and employees themselves in the field of education may have serious consequences on the global labour market and on the local markets. At the same time, due to permanent technological progress and ever increasing work efficiency, many jobs requiring routine skills are already disappearing. This phenomenon will constantly increase in importance, especially in the services sector in which more non-routine tasks and skills will be required at all levels of employment. 40 As a result of this, the number of unemployed and unnecessary people is permanently on the increase, especially in traditional sectors. This phenomenon is so obvious in the EU countries that the European Commission launched the so-called European Employment Support Initiative41 under the European Economic Recovery Plan, whose main aim is to encourage employment and allow the individuals with skills and qualifications that are no longer needed from the point of view of the economy to return to the labour market. An instrument for implementing this initiative will be trainings, improving one‘s qualifications or retraining in line with the economy‘s requirements. The paradox of the current labour market situation resides in the fact that although job-seekers are on the increase, there are deficiencies in terms of specific skills required by the economy. In its report, the European Commission predicts that in the years to come there will be an increasing demand for workers with a wide range of such key skills as: problem-solving skills, analytical skills, communication and interpersonal skills, language skills, which are, broadly speaking non-routine skills. On the one hand, the main reason for this increase in demand is, according to the authors of the report, technological progress (ICT in particular) and our ability to use these Technologies relies on having or not of the above skills. On the other hand, the current and expected deficiencies in terms of competencies are due to demographic changes, which are particularly evident in highly-developed countries42. The societies in these countries are ageing and the number of people entering the labour market is constantly decreasing. Birth rates in developed economies are falling below the replacement level and life expectancy is increasing owing to better healthcare and living conditions. In addition, the baby boom generation is beginning to retire. According to OECD, in 2025-2030

38 CeDefop data [in:] New Skills for New Jobs…., op. cit. 39 ibidem 40 ibidem 41 European Employment Support Initiative - European Employment Support Initiative 42 New Skills for New Jobs…., op. cit.

98 the global workforce will decrease by 12 million annually43. This has already resulted in a situation in which employed individuals are not able to satisfy economic needs of the unemployed, which is particularly evident in European countries. What could also be considered a paradox is the fact that working age employable human resources are not used. The results of a survey published by International Labour Organization44 showed that 61.7% of global working age population (aged 15 or more) was employed.45 It can therefore be concluded that a solution to insufficient human resources would not really be to increase the number of potential workers but the availability of individuals having the required skills. Unavailability of human resources is also increasingly caused by migration of both the employers and employees. Employers relocate their plants to places where operating costs are lowest. This can be evidenced by the data of the European Commission service: European Restructuring Monitor which would suggest that 51.5% of EU production processes have been exported outside its borders46. The workers, however, tend to migrate towards the best work and pay conditions. As a result of this, the number of qualified workers in places where the plants are located is insufficient. On the other hand there are many workers in other parts of the country or the world. The ever-increasing migration is not bad in itself. However, its scale (in the recent years, globally the number of people working abroad has been highest in the history47) has had a considerable impact on the current labour market situation. International migrations are usually from developing countries to the developed countries and they are aimed at finding better working conditions and a higher living standard. This has an impact on local labour markets and results in shortages of qualified human resources in developing countries. As a result they have no human resources necessary to maintain the current level of development or take advantage of growth opportunities in the future. In addition to international mobility which sometimes takes the form of talent drainage, an increasing migration within the countries can be noted as well. Workers usually migrate from villages to towns, from smaller towns to larger towns, from less industrialised areas to more industrialised ones. Sectoral, professional and geographical mobility will increase in importance which is why removing barriers, including the administrative ones and also clearer and more reliable information on labour market will be an important challenge for states and governments. The labour market is currently marked by a transition from traditional and rural sectors towards high skills services and sectors. This tendency will become increasingly more evident in the next decades. The economists from International Labour Organisation expect that by

43 Live longer, work longer, OECD 2006, Employment Outlook, OECD 2007. 44 International Labour Organisation - International Labour Organisation, ILO 45 Global Employment Trends 2008, International Labour Organisation, Geneva, www.ilo.org 46 [in:] New Skills for New Jobs…., op. cit. 47 ―About 190 million people live abroad, which is about three percent of the world's population. Approximately one in 35 people in the world is a migrant and their number increases by three percent annually", the data of the International Organisation for Migration, http://www.iom.int, [in:] A. Gryzik, Tendencje zatrudnienia I rozwój rynku pracy w Polsce i na świecie, w Foresight kadr nowoczesnej gospodarki, [Employment trends and labour market development in Poland and in the world [in:] Foresight of human resources in modern economy ] [eds.] K. B. Matusiaka, J. Kucińskiego, A. Gryzik, PAED, Warsaw, 2009

99 2015, the number of vacancies in services worldwide will increase by at least 500 million. The majority of those jobs will be created in Asia but also tens of thousands in Europe, both Americas and the Middle East.48 It is expected that the largest number of jobs will be created in business services industry (in particular in the ICT sector, as well as in insurance and consulting), healthcare, social work, distribution, personal services, hospitality and catering and to a lower extent in education. We will see dynamic growth of the energy sector based on alternative sources of energy, environmental protection, waste disposal, construction, transport, agriculture and forestry. Similar tendencies concerning factors which influence the world labour markets were also noted on Polish labour markets. The statistical data and research carried out to date would suggest that one of the factors impeding innovativeness and competitiveness of Polish enterprises is lack of suitably qualified human resources.49 However, the data from earlier years 50 show that each year entrepreneurs are increasingly more aware of the importance of human capital in enterprises. In 2006 human capital quality was not considered a factor that has an impact on enterprises‘ competitiveness although companies had already been affected by shortages of human resources. It was not until 2007 that employees‘ motivations and skills were mentioned as factors which enhance competitiveness 51. The findings of the above research confirm the statement that the Polish education system is weak, as many enterprises are not able to find workers with relevant qualifications. This is due to the fact that the changes in schools‘ and universities‘ curricula are too slow to satisfy the economy's needs. On the other hand, more qualified workers emigrate after Poland's accession to the UE. The Central Statistical Office's data concerning the structure of education at Polish universities would suggest that out of 1.9 million students in 2007/2008, the majority were economics and administration students (23%), students of social studies (13.9%) and pedagogy (12%), the technical and engineering students being in minority (6.8%). These proportions concerned more than 410 thousand graduates from 2006/200752. As a result, there are too many graduates in humanities when compared to the market demand and too few technical universities. There is also a mismatch between workers' skills and employers' needs, especially in high-innovation sectors and the services sector. Consequently, more than 60% of enterprises are affected by shortages of experts-engineers, and 36% of companies complain about shortages of experts with technical education. Almost 60% of entrepreneurs say that every year, it is increasingly more difficult to find the right candidate for the job, as candidates' practical skills and their knowledge are deteriorating compared to previous years.53 As a result of this incompatibility of human resources‘ skills with the Polish

48 Imputation, Estimation and Prediction Using the Key Indicators of the Labour Market (KILM) Data Set, International Labour Markets, 2004 49 Potencjał rozwojowy polskich MSP, Raport końcowy z badania przygotowany na zlecenie PAED przez PSDB i GFK Polonia, [Development potential of Polish SMEs, Final report commissioned by PAED and prepared by PSDB and GFK Polonia], Warsaw 2008. 50 Starczewska-Krzysztoszek M., Badanie Monitoring kondycji sektora MŚP 2007 [A study: Monitoring of the condition of the SME sector], PKPP Lewiatan 51 ibidem 52 Szkoły wyższe i ich finanse w 2007 r.[Schools of higher education and their finance in 2007], GUS (Central Statistical Office), Warsaw, 2008 53 Zapotrzebowanie przedsiębiorstw na wykwalifikowaną kadrę inżynierską oraz ocena przygotowania do pracy absolwentów studio technicznych, TNS OBOP dla MNISW, 2007. [Enterprises’ demand for qualified engineers and evaluation of preparation of technical universities graduates to work, TNS OBOP for MNISW (Ministry of Science and Higher Education], 2007.

100 economy, many unemployed individuals, even those with a degree, have difficulty finding a job. Simultaneously there is a constant human resources shortage in some sectors of the economy. It is worrying that the Polish society is ageing and people with the highest qualifications are emigrating. This may limit the speed and scale of increase in competitiveness of Polish enterprises, which may have a considerable impact on the condition of the whole economy. In this context, adequate recognition of demand for human resources is particularly important, especially in those sectors which have the largest growth and innovation potential, that is those that will have the main impact on the economy's competitiveness and the pace of changes. It is also important to anticipate trends that will occur in world economy and its sectors and design possible scenarios of their development based on these trends. The forecasts concerning the human resources of modern economy do not, obviously, paint a full picture of the future, but they do allow us to grasp certain trends and stress the need for appropriate reaction in the form of specific actions. Forecasting the future of human resources is particularly difficult at a time of economic crisis which makes the future of the world's economy even more difficult to predict and it also increases the pace of changes in terms of the demand for some professions and skills. As has been emphasised by the European Commission54 it is important to draw everyone‘s attention to human capital and its development in accordance with the requirements of the economy, as this might be a key factor in improving its condition. It is therefore essential to diagnose the needs in terms of human capital development in a more precise manner, improve skills, but first and foremost to better adapt them to the needs of the dynamically changing labour market. This challenge has become a strategic goal of the activity of the European Commission itself as well as of Member States, which have understood that improving human resources‘ skills is an opportunity for developing competitiveness and productivity of the European economy and its ability to adapt to fast changes and social cohesion. The aim of the study: Foresight of human resources of modern economy was to identify the skills of managing human resources and enterprises' employees for which there would be a long-term demand (10-20 years). In addition to the above trends of development of Polish and world economy, PAED focussed on four industries which, in the opinion of the experts have the greatest innovation potential and will play the key role in the economy and these are: the ICT sector, the energy sector, the chemical sector and the machinery sector. In addition, the study also covered the issue of human resources and professions of the future in a horizontal manner. The research undertaken by the experts as part of the study allowed them to develop scenarios of the development of Polish economy and the above industries and to identify the occupations of the future along with the skills that, depending on the scenario, will be most desirable in the industries investigated.

9.2 Scenarios of the development of the Polish economy

54 New Skills for New Jobs…., op. cit.

101 In order to be able to face the above challenges of the modern economy, the state needs appropriately qualified human resources, whose competencies will meet the enterprises' requirements. Due to the necessity of reforming the whole education system, which may only happen through comprehensive education and higher education reform, developing a long- term strategy seems essential. What could be the basis of such a strategy, and this is already happening in the Western European countries, are long-term projections/scenarios of the economy‘s development and of its sectors as these may support the process of making strategic decisions for policymakers. The occurrence of given scenarios, both of the ones that illustrate the desired directions of changes and the ones whose direction is unfavourable depends on the values of specific key indicators. In a study by PAED, which based on the National Foresight Programme Poland 2020, these factors were deemed by experts to be: globalisation, whose impact on the Polish economy was referred to above, as well as economic reform, knowledge based economy and social approval. The possibilities of Polish governing elites of introducing fundamental reforms to public institutions, healthcare, the public finance sector, etc and their willingness to do so have been felt by the experts to be a key factor, as adequately implemented reforms are a prerequisite for the emergence of appropriate trends in the private sector. In particular, these reforms should allow us to strike the right balance between the regulatory function of the state and the market and to obtain high efficiency of public institutions and market mechanisms. Deep reforms cannot, however, be implemented without another key factor, which is the social approval for their introduction. Initially those reforms might be difficult for some social groups. However, in the long run, they will contribute to improving the living conditions of the whole society, so it is important that there is a certain level of social approval for these changes. Another key factor is the efficiency of transfer of technology and knowledge into the economy and the development of new forms of production and intellectual capital covered by the general term: Knowledge-Based Economy. The level of this efficiency will influence the future position of Polish economy in relation to the economies of other countries. According to the experts, the values of the above mentioned key factors will have a key impact on the possibility of implementing specific scenarios. Under the National Foresight Programme Poland 2020, 5 general scenarios were built on this basis. Out of all of these, three were adopted in the PAED Project, i.e.: "civilisation leap", hard adjustments", "weakening development" as a microeconomic basis for analysis of four sectors which are key for the economy, selected by the experts (machinery, chemical industry, energy and ICT) and as a result of establishing three alternative visions of the development of the country‘s economy and the demand for human resources in the sectors analysed by the end of 2020. The diagram below presents a distribution of those three selected scenarios based on key factor values:

102 Diagram 1. Distribution of scenarios based on key factors’ values

Source: National Foresight Programme Poland 2020, March 2008

The scenarios present the logical and chronological sequence of events, with an assumed starting point, described by the above set of key factors with values assigned to them. Each scenario refers to six selected trends: legal and political, economic, social and demographic, structural and technological, educational and environmental (ecological). According to the NFP and the study by PAED, the most desirable direction of the development of Polish economy is the ―civilisational leap― scenario, in line with which the world‘s economy will have recovered from the world financial crisis of 2008-2010 by 2012 and this will allow it to return on the path of development. As a result, cooperation between developed and developing countries will become closer and its aim will be, for instance, to establish mechanisms stabilising world finance, environmental protection, migration control and intellectual property protection. The situation on the raw materials‘ market will become stable, as the increase in prices will become moderate. Trade exchange will intensify, there will be an influx of foreign investment, increase in export dynamics and the export‘s structure will improve in favour of hi-tech products 55. At national level, the ―civilisational leap‘ scenario assumes that Poland will experience fast economic growth, there will be an influx of foreign investments related to state-of-the-art technologies and clear and simple legal norms and computerized administration will enhance entrepreneurship and business development. According to the scenario, there will be an increase in state investment into research and development amounting to about 3% of the GDP. It is also expected that the results of R&D work will be implemented into economic practice. Companies will develop their own research and development centres and universities will cooperate with the economy, commercialising inventions and transferring knowledge. Students will learn based on new programmes, participate in internships and companies will

55 Based on: National Foresight Programme POLAND 2020, Integrated scenarios of development of Poland until 2020, Warsaw, December 2008, part I.

103 be actively involved in the teaching process. Academic staff, especially those working at technical universities, will have experience working in the industry and scientific exchange will increasingly be practiced. Owing to this, researchers will be eager to come to Poland and they will originate from top universities from countries which are technologically advanced and have experience cooperating with the economy. The reformed education system promotes technical and scientific faculties, which will result in a substantial increase in the level of teaching mathematics, physics and chemistry, both in lower secondary and secondary education56. The ―civilisational leap‖ scenario also assumes that a dynamic system for monitoring the labour market will come into place. Owing to this and close cooperation of universities and industry as well as flexible employment, it will be possible to ensure the right quantity and quality of human resources for a knowledge-based economy. As a result of this, we will witness dynamic economic growth which will in turn bring social, economic, technological and environmental advantages and these will be easily noticeable by the public.57 The dominant role in the economy will be played by the growth of the so-called hi-tech, based on transfer of knowledge and the results of national scientific and research work. Environmental techniques and technologies will develop, which will create new jobs, increase life comfort and satisfaction level in the society in general. This will also have an impact on the development of specific sectors of the economy forcing us to introduce innovation, especially clean technologies 58. A much more realistic scenario in line with the current situation is, in the opinion of NFP experts, and experts of the PAED‘s research project that of “Hard adjustments”. At the level of world economy this scenario assumes the emergence of trends that are similar to those of the "civilisational leap" one. However, at European level, it is expected that European Economic Area will be progressively marginalised. In most countries of the European Union, there will be an increase in state interventionism, usually of a defensive character and the inefficient social model will become an aim in itself. This will have a negative impact on the pace of integration processes and will give rise to lack of trust and willingness to defend external markets in a non-tariff manner and will as a result bring low dynamics in the labour market and absence of modernisation impulses59. According to the "hard adjustments" scenario, Poland will not be actively involved in the European integration processes, which will have an impact on lower efficiency of the use of EU funds. The most educated citizens will start noticing that the country‘s development potential is being wasted which will cause frustration. This will make the problem of electoral absenteeism even worse, which will, in turn, cause poor legitimisation of power. As a result, politics will be based on the one hand on implementation of arrangements due to international obligations and will be largely shaped by social and economic pressure groups on the other60. In the early stages, that is until 2015, politicians will attempt to reform public institutions, which will be impeded by lack of interest of the society or even its resistance. As a result, only some important reforms of the public sector will be made. However, these will only

56 In: J. Kuciński, A. Gryzik, K. B. Matusiak, J. Guliński, A. Kozieł, T. Kulisiewicz, J. Brzóska, Budowa scenariuszy foresightu kadr nowoczesnej gospodarki [Building foresight scenarios of modern economy human resources] [in:] Foresight of human resources of modern economy, [eds.] K. B. Matusiak, J. Kuciński, A. Gryzik, PAED, Warsaw, 2009 57 ibidem 58 ibidem 59 ibidem 60 ibidem

104 relate to issues of low political sensitivity such as: education, science, higher education and they will also at times be of a partial character. The ever-increasing emigration of highly qualified workers, especially of researchers, will be a significant problem. At the same time, the number of workers performing physical craftwork will stabilise. Another problem will be that the labour market will have low dynamics and it will not offer flexible forms of employment and because of that professional activity of Poles and Polish women and the elderly in particular will increase too slowly. This will be accompanied by progressive ageing of the society which will give rise to increased public spending on pension and health care, and in time will lead to inefficient pension schemes and healthcare and the resulting social tension will follow. By 2015, EU funds will become an important source of funding for modernisation activities of different kind in Poland, and they will also allow us to improve infrastructure. The demand for engineers, technicians, logisticians, infrastructural project managers and physical workers will be greater. However due to, for instance, legal, social and organisational barriers61 , these funds will not be fully used in an efficient manner. In line with the "hard adjustments‖, the first effects of reforms will be seen in 2016-2025 and will concern a considerable improvement of the quality of human capital and research potential. This will enable the development of selected key industries (including the chemical industry, machinery, ICT and the energy industry) based on own technologies. The effects of the funds invested will also be reflected in the infrastructure of science and higher education and the so-called modern economy - we will see the development of technological parks and incubators as well as seed funds, etc. Economic growth will, however, still be highly impeded by the high level of emigration of highly qualified workers and women‘s emigration will make the already difficult demographic situation in Poland even more complex62. The experts behind the PAED‘s project also expect that in the early 2030s, another global economic crisis will occur and internal EU tensions will increase, which will have an effect on Poland's pace of economic growth63. After 2025, despite considerable wastage of development potential and intellectual capital in particular, Poland will develop slowly, waiting for a better time. We will see mitigation of political and social tensions due to, e.g. arguments about the past (the majority of the society will be people born and bred in free Poland). Projects of students‘ and researchers' mobility will also bring beneficial results. The emigrants will slowly start returning to their country, bringing in new models of organisation of local communities. Poland‘s position on the political and economical arena of the European Union will be more important and that despite weakening global competitiveness64. A scenario which would not be beneficial for the Polish economy is the "weakening development" scenario, according to which65, by 2013 the world will return on the integration path and political elites will attempt to reform public institutions. Unfortunately, lack of public's interest or even reluctance to radical change will result in an inefficient system of public finance - one that will not be able to meet all social needs. This situation will, to some extent, be mitigated by an influx of foreign investment and efficient implementation of EU funds as well as cuts in spending on R&D and education.66 Currently observed brain drain will increase in scale. This will discourage the society from financing the system of educating very highly skilled specialists, and the general level of education will continue to decrease. In

61 ibidem 62 ibidem 63 ibidem 64 ibidem 65 Based on NFP, [in:]: ibidem 66 ibidem

105 addition, according to this scenario, young people will become less mobile, innovative and creative. In the years to come, this will lead to Polish economy losing its competitiveness, which used to be based on such factors as: inexpensive labour and low cost. In 2014-2019, Poland will stop receiving EU funds, foreign capital will start retreating and this will result in impeding the already slow economic growth. The ―weakening development‖ scenario assumes that after 2019, Poland will be consumed by a permanent crisis 67.

9.3. Skills of future economy's human resources Implementing the above mentioned scenarios entails adequate preparation of human resources. However, the most challenging one is that of the "civilisational leap". This one requires integrated, complex changes to occur in each domain - the society, economy, technology and education. The scenario assumes that intensive development of knowledge- based economy will occur and as a result there will be an increase in the demand for creative and highly qualified human resources, of a horizontal character (relating to human resources of all sectors of the economy) or sector specific. With respect to horizontal skills, the so-called hard skills (a term used by experts), i.e. skills resulting from traditional qualifications and education, will continue to play an important role in the "civilisational leap" scenario, but also in modern economy in general. However, the key skills (social skills), i.e. general skills that one develops regardless of the job, profession or position, will be even more desirable.68 The following have been classified as key skills: ability to learn and solve problems, logical thinking, i.e. ability to notice cause and effect as well as functional relations, complexity of phenomena, but also ability to search, segregate and use information from different sources. Such skills also include: ability to improve oneself, i.e. flexible reaction to changes and seeking new solutions, ability to communicate using modern technologies and several languages, ability to provide arguments and defend one's point of view, cooperation and agreement in a group of people and taking actions, i.e. organising work, learning working tools and techniques, designing actions and assuming responsibility for them 69. In addition, in the course of implementing the project, it was noticed that knowledge based economy will require improvement of skills of managers as well as those of regular workers. What is important is that in both groups, the same skills and competencies are expected to be mastered but their hierarchy will be different. Workers in the modern economy will be expected to develop the skill referred to as ―employability and mobility" as well as the knowledge of IT. The need for learning foreign languages, ability to work in an international environment and use mobile technologies were highly rated. The following were also considered important: social skills and self-presentation, teamwork, ability to manage teams, creativity and enterprise and sound knowledge of basic mathematics. What was considered of

67 ibidem 68 J.Skrzypczak, Tak zwane kompetencje kluczowe, ich charakter i potrzeba kształtowania w toku edukacji ustawicznej [The so-called key skills, their character and the need for life-long learning], Edukacja ustawiczna dorosłych [Life-long learning of adults], No 3/1998, p. 20, [in:] K. B. Matusiak, Ł. Arendt, E. Bendyk, Human resources of the future [in:] Foresight of human resources….., op. cit. 69 ibidem

106 least importance were skills such as: knowledge management, infobrokerage and industrial property protection70. In the case of managers, it appears that the most important skill that they should develop in the modern economy is the ability to work in an international environment and also: teamwork and managing teams, creativity, enterprise knowledge management and infobrokerage, social skills and self-presentation. What was considered of slightly lesser importance were the following skills: knowledge of foreign languages and IT technologies, use of mobile technologies, employability and mobility, intellectual property protection and sound knowledge of basic mathematics71. In the case of managers, it was also said that if the "civilisational leap" scenario was to be implemented, regardless of the sector of the economy, they should also have additional skills and qualifications that would allow their companies to operate in global knowledge based economy and these skills include72: building awareness of the role of knowledge and innovation transfer in the organisation for the purpose of the development of the business run and also creating an innovation culture of the enterprise. For human resources, it will also be important to be able to examine and analyse the market and develop technologies, prepare business plans, tax reporting, normalisations and product compliance assessment. The experts also mentioned numerous skills related to internal and external communication of companies, including with stakeholders and own human resources and also skills related to managing: projects, project risks, crises and also innovative investments and intellectual property rights.73 It is also important that managers develop skills which related to cooperation and partnership with, e.g. cooperation networks, R&D employees, universities and experts from other fields of science. It will also be extremely important that managers are able to recruit the right personnel and motivate employees74. The above mentioned set of skills that both regular employees and managers in the modern knowledge based economy of the ―civilisational leap" scenario, should have are ―soft skills‖, without which retaining a job will be very difficult. This will be particularly difficult in four sectors of the economy analysed by project experts, namely the machinery sector, the chemical sector, energy and ICT, which in the "civilisational leap" scenario will undergo extensive modernisation processes related with the reconstruction of labour market. The experts felt 75 that in relation to the machinery sector, the ―civilisational leap‖ scenario would result in an increase in employment in this sector by about 30 thousand people and there would be a larger proportion of people with a degree. In production jobs, about a dozen thousand people less will be employed, in particular those related to performing simple and

70 In: K.B.Matusiak, Ł. Arendt, E. Bendyk, Human resources of the future, op. cit. 71 ibidem 72 A. Gryzik, J.Kuciński, K.B. Matusiak, T. Kulisiewicz, J. Guliński, J. Brzóska, A. Kozieł, R. Sławeta, R, Szewczyk, Kadry dla wybranych sektorów gospodarki w kontekście zaproponowanych scenariuszy rozwoju,[Human resources for selected sectors of the economy in the contex of proposed development scenarios] [in:] Foresight of human resources…, op. cit. 73 ibidem 74 ibidem 75 ibidem

107 time-consuming activities. The demand for human resources will mainly concern specialists, engineers, managers, having skills which are specific to this sector, related to designing and developing new products, the use of computer technologies in the designing process, virtual modelling, investigating and simulating maximum use of a prototype, as well as modelling and investigating producibility. In the machinery industry, the following will be of utmost importance: the ability to use digital machining centres, introduce non-waste and energy- efficient technologies and the use of new generation materials, as well as the ability to control the quality of the production process by means of permanent monitoring of production and the use of tools and equipment.76 The experts have also drawn attention to such skills as using ICT systems, producing components in specialist SMEs, monitoring and evaluation of technological condition of machinery, maintenance based on signals from operation systems and managing the machinery operation process in the network structure. Such skills as: dissemination of mechatronic solutions in order to ensure secure use of machinery, preparing virtual user's guides, installation, technical maintenance, machinery and equipment protection during transport and using materials engineering and nanotechnology in the designing and production processes. 77 The experts also considered the following skills as important: skills related to post-production waste disposal and developing environmentally-friendly renovation documentation. They also mentioned interdisciplinarity (mechanics, mechatronics and IT) as well as the technical level command of foreign languages as key skills necessary for workers employed in the machinery industry78. In relation to the chemical industry, which in the "civilisational leap" scenario is expected to play the role of the driving force of Polish economy, the experts claim that the current mode of teaching places too much of an emphasis on specialisations within given industries, which might not necessarily be used later when working in the industry and this is so because the curricula cannot keep up with technological change. Also, many technologies are kept secret by enterprises.79 However, the chemical industry will need adequately prepared human resources, which will have managing skills, legal expertise (intellectual property rights, environmental and safety requirements) as well as IT knowledge and elementary chemical knowledge that will allow them to retrain easily, which might be necessary due to changing technologies and conditions in which companies operate. In addition, experts have mentioned such skills as: sound knowledge of economic issues, ability to perceive processes technologically and work within the framework of the ever-increasing environmental requirements 80. For the energy sector, in which considerable changes will occur in the structure of energy production, there will be an increase in the demand for specialists in new technologies, logistics and energy farming as well as designing, research, development and application81. Specialists in this industry should have skills related to logistics of energy-producing raw

76 ibidem 77 ibidem 78 ibidem 79 ibidem 80 ibidem 81 ibidem

108 materials, dispersed generation of energy (including renewable energy) and the use of such energy installations. They should also have skills and competencies in designing and implementation of clean coal technologies projects, and also in shaping the activity of energy recipients, the so-called "prosumers" (consumers who actively manage energy). The experts also draw attention to workers‘ interdisciplinary skills (energy, mechatronics, IT) in relation to energy-saving and also the ability to produce biosources and nuclear energy82 . In the ―civilisational leap" scenario, an important role will be played by the ICT sector whose human resources should be able to take advantage of new international solutions in IT technologies and create complementary and niche solutions by using them, so that these solutions can become a Polish speciality. In the case of this sector, the experts implementing the PAED project categorised human resources‘ skills and competencies into those related to solutions‘ creators and those that might be useful for services providers. 83 Such categorisation is justified by the fact that such categorisation already exists in hi-tech economies, in which, on the one hand there is a demand for creators of innovative solutions and on the other for workers of lower qualifications (suppliers), who comply closely with defined procedures and ensure that the quality of work matches that determined by norms and standards. 84 With regards to requirements for solution creators, experts mention the ability to freelance (self-employment, contracts, etc.), high creativity, the necessity of having economic/financial knowledge by technical specialists, complying with professional code of ethics and interpersonal communication skills in projects and teamwork. They also mention the ability to teach others about solutions, the ability to design psychoergonomic solutions and the ability/profession of ―general constructor‖ of solutions, a business developer who can set up a team made up of different specialists.85 The ―civilisational leap" scenario will require service providers to comply with requirements similar to those relating to solution creators and also the ability to implement innovative solutions and teaching and learning of adults, transferring the knowledge to users, creating needs and mass individualisation of solutions and resigning from highly-specialised teaching.86 Our ability to implement the above requirements related to competencies and skills of human resources of the future economy will definitely depend on comprehensive reforms of training and education systems, in primary, secondary and higher education schools, as well as in workplaces. Without these reforms, it will be impossible to provide the economy with human resources whose skills are as varied and interdisciplinary as mentioned above. The labour market and the requirements of knowledge-based economy evolve so quickly that without life-long learning and developing skills, human resources will not be able to adapt quickly enough to new challenges encountered in professional life. For workers, it is therefore key to participate in different kinds of courses and trainings and acquiring and developing skills

82 ibidem 83 ibidem 84 ibidem 85 ibidem 86 ibidem

109 which meet those skills which best suit the needs of the economy. Among these competencies one of the important ones is the ability to retrain, change profession and mobility as these are a guarantee that one can adapt to the market needs, which will cause many new occupations to emerge.

9.4 Occupations of the future The largest number of new professions may appear in the sectors which develop fast as they generate new workplaces, which are usually innovative and require precisely defined skills of a ―niche‖ character. These sectors include all areas related to human communication, i.e. IT and telecommunications. Even today the development of these industries is incredibly dynamic and despite many different faculties available and the large number of students, specialists are becoming increasingly scarce. The ICT industry is special in the sense that it is a horizontal industry, which affects all areas of private, public, economic life and influences other industries and sectors. This is thanks to almost complete computerization and informatization of all spheres of life. Undoubtedly, we should see the emergence of a number of new professions in this industry in the near future. The experts of the project forecast there will be an extraordinary demand for ICT specialists and mechatronicians as well as network specialists, whose job will be to design, implement, preserve and administer computer networks. These will be programmers of different sorts: database administrators and computer network administrators, website designers and makers, multimedia project coordinators 87. Another category of occupations of the future are ―internet‖ professions, those related with advertising in general (copywriter), designing, creating and maintenance of websites (webmaster), observing traffic on websites (traffic manager) and numerical, detailed observation of such traffic (new metrics analyst) 88 This category of occupations also includes those related with organisation and presentation of website content (content manager), developing company strategy in relation to e-mail communication (e-mail channel specialist), ergonomic and psychological design of user interface and looking for the weakest links in the networks and their protection (ethical hacker)89. There is also a future for all sorts of ―traditional‖ services related to such domains as finance or education, which will increasingly be available online. According to British experts 90, such professions as virtual lawyer, time broker/time bank trader or virtual teacher will become increasingly popular. The experts of the PAED91 project also agree with these forecasts and claim that we will see a dynamic increase in development of professions related to finance (business specialists, analysts, finance specialists, insurers) and education (trainers and instructors). These professions exist already but will "go online" and will become virtual services to a larger extent than before. According to these experts, those occupations which will be related to searching and processing information will also become occupations of the future. Already today, people who are information managers, information brokers and

87 K.B.Matusiak, Ł. Arendt, E. Bendyk, Human resources of the future, op. cit. Matusiak, Ł. Arendt, E. Bendyk, Human resources of the future, op. cit. 88 ibidem 89 ibidem 90 R. Talwar, T. Hancock, The shape of jobs to came. Possible New Careers Emerging from Advances in Science and Technology (2010 – 2030). Final raport, Fast Future Research, 2010. 91 more in: K.B.Matusiak, Ł. Arendt, E. Bendyk, Human resources of the future, op. cit. Matusiak, Ł. Arendt, E. Bendyk, Human resources of the future, op. cit. Arendt, E. Bendyk, Human resources of the future, op.cit.

110 selectors (researchers) are also intensively sought on the market. In the future there will be an increase in demand for specialists in: classifying and indexing information, managing information flow or optimisation of positioning information in searching services. Another profession of the future is that of the auditor of information credibility and industrial property rights broker, 92 People's online activity has been increasing in scale and it entails many dangers, one of the most important of which is uncontrollable publishing of all sorts of personal data and making these available. Jobs related to protecting and removing these data will definitely be very useful in the future. The British experts that have been quoted have drawn attention to this and expect that this profession (waste data handler) may become highly desirable still before 203093. Polish and foreign experts also expect that the growth of jobs of the future in the ICT sector will occur in such sectors as: biotechnology, which might be considered to be horizontal due to the fact that it can be used in different sectors of the economy and everyday life as well as nanotechnology, environmental protection and the energy production industry. In the future, biotechnology will be increasingly used to help advance medicine, which will entail an increased demand for new jobs related to cloning and extending life expectancy. The British experts also expect growth of such professions as body part maker related to creating living body parts that can be used in transplants. Specialists dealing with infrastructure and storage of thus created body parts will be sought as well. 94 The same experts also mention the development of nano-medicine, which will allow us to create sub-atomic devices that will contribute to the development of healthcare. They also forecast, on the one hand, that the demand for ―modern farmers" will increase as well as that for specialists in producing genetically modified organisms (farmer of genetically engineered crops and livestock).On the other hand, they mention the tendency for the healthy food industry to develop, especially that produced in an environmentally-friendly manner 95. The development of the energy production sector will also be related with environmental protection. What will follow is that there will be an increased demand for environmental protection specialists and those dealing with climate change (climate change reversal specialist, weather modification police), producing energy from renewable sources and waste disposal. Professions related to production and trade of environmentally-friendly vehicles also have a future (alternative vehicle developers)96. A large group of new occupations will also emerge in the medical and healthcare industries. Changes in these areas will go in the direction of operating in networks (e.g. medical counselling, ‖domestic" health assistance and in the direction of professionalization of management of institutions. There will be an increased demand for such professions as hospital managers and healthcare institutions managers97. Increased demand for professions related to personal care and healthcare will be due to the increasing ageing of the societies and as a result of this, it should be expected that there will be an increased demand for such occupations as carers, nurses and rehabilitators. Companies specialising in minor services for the elderly will grow as well as those that implement and manage technologies enabling the elderly to be independent.98 A similar trend is expected in professions dealing with beauty care as well as physical and emotional well being, and these include: plastic surgeons, cosmeticians, fitness instructors, dieticians, physiotherapists 99. According to the PAED‘s experts‘ opinion there will be an increased demand for psychologists and therapists, due to an

92 ibidem 93 R.Talwar, T. Hancock, The shape of jobs to come….., op. cit. 94 ibidem 95 ibidem 96 ibidem

111 increasing group of workaholics and people who cannot handle peer pressure. Experts also expect to see an increase in the dynamics of employment in such professions as: domestic health service, health insurance specialists, health educators, clinical and biomedical engineers, cardiac surgical technologists and clinical studies coordinators 100 . The education and entertainment industries also have a considerable job creation potential. The development of the first one will be due to the necessity of lifelong professional development and learning. The development of the first one will be due to ageing of the societies and progressive globalisation. In terms of education, such professions as media teachers will increase in importance due to the use of ICT (e-learning) and Internet (webeducation) as well as coaches, a profession which is a combination of a personal trainer, mentor and psychologist, whose task is to manage the learning process and solve the problems of the person subject to coaching so that they can achieve previously defined goals. 101 Another category of future professions are labour advisers and professional consultants, whose job will be to assist in coping with the changing labour market and indicating areas of this market, which remain "vacant".102 An increase in the dynamics of employment will also affect: training programme directors and instructors, computer-assisted education specialists, education brokers, teaching technologies experts, tele-tutors (tele-instructors). 103 The PAED experts feel that in the entertainment industry, an increase in the demand for gambling related professions will be noted as well as these that relate to erotic industry, as well as for occupations which combine entertainment and looking after one's appearance and those that relate to travelling and organising travelling. The professions of the hotelier and tour-operator will therefore increase in importance.104 It can also be assumed that there will be an increase in the dynamics of employment of multimedia software managers, intercultural managers, social marketing specialists and theme park activity organisers 105. In addition, PAED project experts claim that an increase in demand for occupations related to ensuring security of persons and property will be noted, including the demand for negotiators, property carers, body guards etc. The more significant the terrorist threats and the greater the increase in criminality rate due to economic gaps between societies106, the more important the role that these occupations will play. The above mentioned analysis shows that Polish and foreign experts are not much different in terms of current and future situation of EU and world economies. They all agree that the world‘s economy will evolve in the direction of knowledge-based economy and mention key factors that underlie the possibility of local economies for taking the same direction. This

97 K.B.Matusiak, Ł. Arendt, E. Bendyk, Human resources of the future, op. cit. Matusiak, Ł. Arendt, E. Bendyk, Human resources of the future, op. cit. Arendt, E. Bendyk, Human resources of the future, op.cit. 98 ibidem 99 ibidem 100 ibidem 101 ibidem 102 ibidem 103 ibidem 104 In: R.Talwar, T. Hancock, The shape of jobs to come….., op. cit. R. Talwar, T. Hancock, The shape of jobs to came. Possible New Careers Emerging from Advances in Science and Technology (2010 – 2030). Final raport, Fast Future Research, 2010. Hancock, The shape of jobs to come….., op. cit. and: K.B.Matusiak, Ł. Arendt, E. Bendyk, Human resources of the future, op. cit. Matusiak, Ł. Arendt, E. Bendyk, Human resources of the future, op. cit. Arendt, E. Bendyk, Human resources of the future, op.cit.

105 ibidem 106 ibidem

112 path requires numerous reforms which are frequently difficult that should perhaps be introduced according to a very precise plan. Such a plan/strategy may be built based on scenarios of the development of economies, which can be prepared using the foresight methodology. Polish experts working as part of NFP developed five scenarios of the development of Polish economy, three of which became the basis for the PAED project analysis of the demand for human resources in modern economy. Without any doubt, the most challenging scenario is that of the "civilisational leap", which requires comprehensive social, economic and political reform. It is for this reason that the "hard adjustments‖ scenario is much more likely to occur. Even though it is much less "spectacular", it gives the Polish economy an opportunity to modernize. No matter which scenario will become reality, for it to be a success it is essential that Polish human resources need to be rediverted into the direction which is in line with the trends which are present in knowledge-based economy. It is essential to learn and develop both the ―hard" skills, due to education, and the "soft" skills also referred to as social skills, which are currently key for the workers in retaining their position on the labour market. This is definitely a challenge for the Polish system of education, which should to a larger extent have an impact on the attitudes of young people and people benefitting from life-long learning, so as to better prepare human resources for challenges on the labour market. The system of education as well as that of labour market monitoring should provide the right number of specialists to Polish economy in the most predictable occupations, including those that do not exist in the labour market just yet. Therefore it is very important to build the culture of education, training, life-long learning, which should be supported by state policy.

References New Skills for New Jobs…., op. cit. Anticipating and matching labour market and skills needs, European Commission, 2009. Live longer, work longer, OECD 2006, Employment Outlook, OECD 2007. Global Employment Trends 2008, International Labour Organisation, Geneva, www.ilo.org Imputation, Estimation and Prediction Using the Key Indicators of the Labour Market (KILM) Data Set, International Labour Markets, 2004 R. Talwar, T. Hancock, The shape of jobs to came. Possible New Careers Emerging from Advances in Science and Technology (2010 – 2030). Final report, Fast Future Research, 2010. Potencjał rozwojowy polskich MSP, Raport końcowy z badania przygotowany na zlecenie PARP przez PSDB i GFK Polonia, [Development potential of Polish SMEs, Final report commissioned by PAED and prepared by PSDB and GFK Polonia], Warsaw 2008. Starczewska-Krzysztoszek M., Badanie Monitoring kondycji sektora MŚP 2007 [A study: Monitoring of the condition of the SME sector], PKPP Lewiatan Szkoły wyższe i ich finanse w 2007 r.[Schools of higher education and their finance in 2007], GUS (Central Statistical Office), Warsaw, 2008

113 Zapotrzebowanie przedsiębiorstw na wykwalifikowaną kadrę inżynierską oraz ocena przygotowania do pracy absolwentów studio technicznych, TNS OBOP dla MNISW, 2007. [Enterprises’ demand for qualified engineers and evaluation of preparation of technical universities graduates to work, TNS OBOP for MNISW (Ministry of Science and Higher Education], 2007. National Foresight Programme Poland 2020, March 2008 National Foresight Programme POLAND 2020, Integrated scenarios of development of Poland until 2020, Warsaw, December 2008, part I. Foresight of human resources of modern economy, [eds.] K. B. Matusiak, J. Kuciński, A. Gryzik, PAED, Warsaw, 2009, http://www.parp.gov.pl/Publikacje/badania i analizy/Wykaz zrealizowanych badań i analiz/2009 roku/.

114

Beata Michorowska, Maja Dobrzyńska

Chapter 10. Monitoring the labour market in Poland as a tool for supporting the social policy.

The reconstruction of Polish human resources is a way to match the direction of trends in knowledge-based economy, which was proposed in the previous chapter, requires the establishment of such a system of monitoring the labour market that will enable identification of skill gaps that emerge and the resulting training needs of enterprises and employees. Due to absence of such a system in our country, Polish Agency for Enterprise Development undertook the implementation of a comprehensive, long-term research project: Human Capital Study (Polish: Bilans Kapitału Ludzkiego, BKL), during which regular investigations into skills and qualifications of current and prospective workers will be carried out as well as into those that are desired by employers. The main aim of the project is to provide knowledge that will allow designing adequate measures in order to enhance the quality of human capital, resulting in a better match between workers' skills and employers' needs. 10.1 Introduction Implementing the Human Capital Operational Programme and increasing awareness of the necessity of introducing changes to the national education system gives rise to a very high demand for information on the labour market in Poland, on its structure, its strong and weak points. On the one hand, the key element of labour market is the quality of human capital which translates itself into people's skills and qualifications and the quality of jobs offered by enterprises, which contributes to the society's well being. In order to take efficient action in terms of human capital management in the enterprise and in the labour market, it is important to be in possession of reliable information on the demand for labour (demand for workers with relevant qualifications), labour supply (the quantity and quality of workers available), as well as information on education and training possibilities of the education system107. Investigating the behaviour of entities operating in the labour market is a source of valuable information on adaptive changes that can be introduced to the human capital in order to ensure that the supply and demand match as closely as possible. The quality of human capital is also an important factor that ensures competitiveness of Polish enterprises at the international level. According to the resource (competence) theory of

107 Human Capital Development Foundation, Summative report; practical and research recommendations and proposed research tools, 2008, p. 6.

115 enterprise, the intellectual capital is considered to be the most important resource of a company and it is vital for the creation of its competitive potential108. The situation in the labour market in Poland has improved radically in the recent years. Poland has managed to limit the unemployment rate to the level of the EU average (diagram 10.1). A positive feature of the Polish society is its relatively high level of education compared to other countries of the Community. On the other hand, one of the lowest employment rates in the EU still remains an important issue (59.3% in 2009109), which is exacerbated by the fact that a relatively small group of adult Poles participates in trainings aimed at enhancing skills (diagram 10.2)110. The above data mean that a part of the society lives off benefits, which testifies to the imperfection of the labour market in Poland111 Moreover, the low level of labour productivity confirms that Poland faces important challenges for the development of human capital112. In order to enhance it on a permanent basis, it will be necessary to invest in people, e.g. by means of additional training and promoting personal development of workers.

Diagram 10.1 Unemployment rate and long-term unemployment rate in Poland compared to the European Union

20% 17.8%

EU - long-term unemployment 16% 13.9% Poland - long-term unemployment 12% 10.3% 9.6% European Union (27 8.2% 8.9% countries) 7.8% 7.1% 8% 7.1% 8.9% 8.2% Poland 4.9% 3.7% 7.0% 3.1% 2.6% 3.0% 4% 2.4% 2.5%

0% 2005 2006 2007 2008 2009

Source: Eurostat

108 T. Gołębiowski, M. Lewandowska, Zasoby ludzkie a konkurencyjność polskich przedsiębiorstw, w: Weresa M.A. (red.), Polska Raport o konkurencyjności 2009, Zasoby ludzkie a przewagi konkurencyjne, SGH Oficyna Wydawnicza, Warszawa 2009, s. 308-309. 109 Eurostat Data 110 M. Mokrogulski, Zasoby ludzkie, in: Weresa M.A. (red.), op. cit. p. 136. 111 Ibidem. 112 Ibidem, p. 138.

116 Diagram 10.2 Participation of adults in education and training (life-long learning) – as a percentage of population aged 25-64: Poland compared to EU

12% 9.8% 9.7% 9.5% 10% 9.5%

6% 4.9% 4.7% 5.1% 4.7% European Union (27 countries)

4% Poland 2%

0% 2005 2006 2007 2008

Source: Eurostat Aware of the current problems on the Polish labour market, Polish Agency for Enterprise Development in partnership with Centre for Evaluations and Analyses of Public Policies of Jagiellonian University undertook the implementation of the project: Human Capital Study (BKL), under submeasure 2.1.3 of the Human Capital Operational Programme. The most important task in the project is to develop solutions that would enable a regular monitoring of changes in the labour market and cyclical surveys on the quality of human capital in Poland and skill gaps in the labour market and the resulting training needs of enterprises and workers. The results of the surveys will be useful to enterprises, professionally active individuals, as well as institutions supporting the development of the labour market in Poland which seek information on the demand for qualifications in the labour market. It is expected that the project will last 5 years and the investigations are to be repeated every year with the first edition starting already in 2010. The project will produce a database that will be available to the general public and it will contain the most important information on the quality of human capital in Poland. This report presents the findings of the research carried out as part of the BKL project, as well as methodological assumptions adopted for the country-wide labour market research in Poland.

10.2 Polish labour market supply and demand research – assumptions behind the BKL methodology The main aim of the BKL project is to provide knowledge on the possibilities of directing state intervention, implemented by PAED and other institutions at central and regional level, aimed at enhancing the quality of human capital and ensuring a better match between workers‘ skills and employees' needs in the labour market. The project‘s aim will be achieved by:

117 developing a research strategy and optimum research methods and tools to be used in cyclical surveys on skills gaps (related to skills and qualifications) in the Polish labour market. five editions of the study, carried out every year (starting from 2010), developing research findings and publishing reports. One of the most important assumptions behind the project is the usefulness of its findings, which is why the project is expected to provide a comprehensive tool which will subsequently be used in the process of state intervention programming. The final outcome of each research cycle will be the analysis of the collected data and preparation of reports which will contain conclusions and recommendations for ministries, self-governments of voivodeships and PAED in relation to giving an orientation to intervention areas. The reports will also help to support decision making in enterprises itself, general and higher education institutions, labour offices and other labour market institutions. The adopted approach assumes that the research will cover different categories of participants of the demand and supply end of the labour market. For it is not only the individuals who have an effect on shaping human capital but the education system as a whole (state and private education at different levels, training organisations and institutions) and labour market institutions. It is the employers who determine the demand for human resources of specific kinds. As part of this research area, publicly available job offers will be analysed, as well as skills-related needs of enterprises (increasing/reducing employment and development of the quality of human capital). This will allow determining recruitment needs of enterprises and their development needs. Whereas the supply end of the labour market will be analysed in relation to three groups: workers, students, university students and the unemployed and their qualifications, professional plans and possible migration plans. This will also allow determining both the needs and expectations of individuals currently in employment and provide information on competences to be available in the labour market in near future, as well as plans of how they will be used by those who have those skills. As part of this research field, school-based education (upper secondary and higher education) and non-school based education (offered by state and private labour market institutions) will be analysed. This part of the study will provide information on the potential of organisations that have an impact on the quality of human capital in Poland. As assumed, establishing a relevant classification of skills will be the starting point for determining the structure and quality of human capital in Poland. Such a classification will enable the evaluation of employers' needs as to specific features of employees and learning about the current and future workers' skills resources. As a basis for comparisons and evaluations related to the structure and quality of human capital in Poland a skills‘ classification will be used which will reflect the structure of occupations. In investigating individual labour market participants (at the demand and supply ends), the occupations structure from the most recent International Standard Classification of Occupations from 2008 (ISCO-08) will be used. Owing to this it will be possible to ask employers about skills required in specific occupations and also to ask the individuals willing

118 to work in these occupations about the skills they possess. On the one hand, the proposed classification of skills is as broad as possible – covering all sorts of skills and at the same time is general enough to lend itself easily to collecting appropriate data.

Figure 10.1 Competences comparison in BKL project Employers Employees

ISCO ISCO

Competences Competences (assessment) (self-assessment) (samoocena) (

Source: based on the BKL project methodology. (ocena) Classification of occupations will be supplemented with competences for each occupation analysed (figure 10.2). Figure 10.2 ISCO -08 Classification and its extension by competences

ISCO-08

Yrs of Education experience, Certificates, diplomas Additional Competences experience resources

Yrs of Entitlements to Education experience at practice a Computer, 11 types of level current position profession Internet, competences telephone

Education Yrs of Certificates, profile experience at diplomas A car previous position

Source: based on the BKL project methodology. The most important competences that will be included in the BKL research are the following ones: cognitive, numerical, technical, computer related, cultural, physical, individual (psychological), interpersonal, conventional (office skills), managerial and flexibility. The project will produce annual reports showing problem areas in terms of competences. Skills deficiencies and redundancies on the labour market will be discussed as precisely as possible, as well as estimates of the tendencies in 1-2 years, which will allow the education

119 sector institutions (especially the ones that operate based on the Human Capital Operational Programme) to prepare the right education offer. The prognostic value of the project will increase during its implementation when the data collected annually will allow a more reliable verification of the tendencies observed.

Due to the concept adopted and in line with the research aims, a number of tasks are considered necessary (table 10.1). Table 10.1 Research aims, tasks and methods Research aims Operational aims Research tasks Research methods

1. Establishing how the Identifying skills sought by Survey of employers Multimode employees' competences match employers survey with o employers' needs

Analysing skills sought by Job adverts' analysis Quantitative employers based on job content adverts' analysis analysis

Identifying workers‘ skills Investigating the working Personal age population interview

2. Establishing how education Identifying skills of Survey on secondary profiles at secondary and higher secondary education school students education level match employers‘ students Random needs survey 3. Establishing how the skills Identifying higher education Survey on students gained at secondary and higher students‘ skills education level match employers‘ needs Assessing the current Assessing the current education profiles in schools education profiles in schools Quantitative content Assessing the current Analysing education analysis education options in training profiles in extra-scholar institutions training institutions

4. Establishing how skills that Identifying skills of the Survey of the unemployed Personal unemployed individuals have unemployed interview match employers‘ needs Source: a report based on the BKL project methodology.

It is assumed that different research methods will be used. Both primary data (gathered with the personal contact technique and using new telecommunications technologies), as well as secondary data will be used. In the research module which includes a survey of employers, the Multimode Survey method will be used, due to the fact that maximum response rate needed to be ensured while trying to maintain efficiency of data collection. This means that based on the respondent‘s individual

120 situation an appropriate survey method will be applied: CAWI113, CATI114, CAPI115, PAPI116 or postal survey. For instance, if the respondent prefers to fill in an online CAWI questionnaire instead of a telephone interview, it will be possible for him to do so. 16,000 enterprises will be analysed as part of the survey (1000 enterprises per each voivodeship). Analysis of job adverts in different media is planned as another research module. This is to ensure that the picture of competence needs reported by entrepreneurs during interviews will be completed. The aim of the research will be to gather and analyse job offers available in selected sources during a specific period of a given survey edition. The following job offer sources will be taken account of: — the country-wide online job brokerage agency — Poviat Labour Offices (PLOs) in Poland. Analysis of data obtained from Poviat Labour Offices will cover at least 10 PLO branches in each voivodeship. As a result 20,000 job offers will be coded. In order to obtain valid and precise information on the skills of working Poles, the research will include personal interviews on a sample of working age Poles, randomly selected from the PESEL register, which will allow the research to cover: — the employed — professionally inactive individuals in a working age, — unemployed individuals (both registered and unregistered in Labour Offices). The population survey will include at least 1100 personal interviews in each of the 16 voivodeships (17,600 in total). This survey will be supplemented with detailed surveys of particular social groups, which are key for activation measures in the labour market. A separate research module will cover individuals which will be randomly selected from Labour Offices‘ registers. The survey fn the registered unemployed will be carried out based on a sample of at least 500 personal interviews (using the PAPI or CAPI technique) in each of 16 voivodeships (8,000 in total). At the supply end of the labour market, students and university students occupy the last position. Since those people will start work or have just started work, it is essential to look at their skills and qualifications acquired in schools. Due to the nature of education processes, students and university students about to complete final stages of education will be analysed – i.e. final year students in secondary schools and students in their last and last but one year of university. The module based on the survey among students at upper secondary school level will consist in conducting random surveys among the students in their last two years of upper secondary school in at least 100 establishments in each of the 16 voivodeships. The total number of

113 Computer Assisted Web Interview – an online questionnaire 114 Computer Assisted Telephone Interview 115 Computer Assisted Personal Interview 116 Paper and Pencil Interview

121 respondents analysed in all the establishments surveyed in a given voivodeship will be at least 2,000. This means that at least 32,000 correctly filled in questionnaires will be collected in the whole country. The university students survey module assumes in turn carrying out surveys among students in their final year of bachelor studies and in case of master studies: students in their last two years. The surveys will cover students from 1600 faculties, with faculty defined as an organisational unit for studies at universities. At each faculty, at least 20 correctly filled in questionnaires will be collected. This means that at least 32,000 correctly filled forms will be collected. If the picture of the Polish labour market is to be complete, research into training institutions and companies operating in Poland needs to be conducted. Due to the fact that we do not have precise details concerning institutions of this kind operating in Poland, one of the elements of the survey will be to verify and integrate the existing registers of these companies and institutions. Activities as part of these tasks will therefore first cover establishing a complete register of training companies and institutions and then a survey on a random stratified sample of 4500 training institutions. Field research will be supplemented by research based on secondary data, obtained from S-10 questionnaires, collected by the Central Statistical Office (for the purpose of analysing subjects studied at universities) and from the database of SIO (Education Information System) (for secondary schools and non-school training institutions). These data will paint a picture of the offer of the Polish system of education and higher education. The assumptions behind the project cover several fundamental methodological issues which make the BKL project different from other similar labour market surveys. The BKL will meet at the same time all the criteria set out below: — national scale of research — the research conducted cyclically, — uniform methodology, — controlling the data collection process, — transparency of the research process, — full availability of data, — usefulness of results. The survey will be conducted in the whole of Poland and will provide information on the situation in the Polish labour market, with a possibility of disaggregation into the voivodeship level. It will be conducted cyclically. The first five editions of the research, repeated every year starting from 2010, will be financed under submeasure 2.1.3 of HC OP (and due to varying dynamics of processes that give rise to skills gaps, not all elements of the study will be repeated in each cycle). The survey will be conducted using a uniform methodology in all editions and this methodology was developed based on the experience gained during a pilot study in the Kujawsko-Pomorskie Voivodeship and the evaluation of information needs of the

122 key recipients. Analytical and research activities as part of the BKL will be documented and disseminated so that all the stakeholders can verify the activities undertaken by researchers.

10.3. Human Capital Study – a response to identified information needs in terms of competences in the Polish labour market One of the key elements of conceptualising the research issues as part of the Human Capital Study was to diagnose the information needs of key recipients of the project. Identifying information needs was expected to enable us to better adapt the planned research as part of the project to recipients‘ expectations, increasing at the same time its usefulness. The potential recipients of the information gathered as part of the BKL projects are first and foremost the institutions that shape or influence the national and regional human capital development policy (at central and regional level) and institutions that are in charge of using the funds of the European Social Fund intended for the development of human resources of the economy. A special addressee of this project is the Polish Agency for Enterprise Development itself, which will use the research findings when planning its activities under the Human Capital Operational Programme - those that are directed at the enterprise sector. The Human Capital Study project is an answer to the demand of key stakeholders and is part of the National Employment Strategy for 2007-2013 and National Education Strategy for 2007-2013. In both documents the need is stressed for preparing forecasts regarding the long term demand for these qualifications whose current lack constitutes a significant threat to subsequent economic growth of the country and may strengthen the mismatch between the demand for work and the experience and skills that workers can offer. The survey on information needs among key recipients of the BKL project was carried out in February/April 2009 and covered the representatives of the following central or national institutions: — Confederation of Polish Employers, — the Minister – Member of the Council of Ministers, — the Ministry of National Education, — the Ministry of Science and Higher Education, — the Ministry of Labour and Social Policy, — the Ministry of Regional Development, — Polish Agency for Enterprise Development, — Polish Chamber of Training Companies, — Polish Association of HR Management and representatives of institutions in charge of measures related to human capital in the regions (Offices of the Marshal, and Voivodeship Labour Offices). The expectations towards the project that the investigated institutions voiced were extensive. Although it was impossible to incorporate all the suggestions into the project, the most

123 important ones have indeed been included. As can be expected, the most frequently raised issue was the mismatch between supply and demand on the labour market. It was confirmed that a key solution for changing this situation is efficient forecasting of the largest gaps between competences sought by employers and those possessed by employees, i.e. areas where there is a mismatch between supply and demand on the labour market. Another issue raised was the problem of validation of the skills and qualifications gained and the issue of efficiency of institutions that support the labour market. The problem of regional variation in this respect was also noted 117. As regards the education and higher education area, attention was drawn first and foremost to the necessity of adequate programming of the directions of change or even a reform of education and higher education. The respondents emphasised that from their point of view it is important to trace trends in the labour market and also to prepare forecasts that would identify shortages of occupations and surpluses of these in the next few years to come, as well as identifying the demand for specific qualifications and skills 118. As regards the market for training services, it has been emphasised that the training services market is currently being shaped by the HC OP. Aware of the dynamic nature of the training market, the investigated institutions confirmed the demand for information that might be used to improve the programming of policy and projects in the area discussed. To sum up the findings of the evaluation of information needs related to the "Human Capital Study" project, it would seem that the largest demand is for information that is necessary to119: — design an appropriate human capital development policy; — formulate relevant assumptions behind systemic projects , as well as contest projects carried out by PAED under the HC OP; — better plan and coordinate activities of particular institutions related to the labour market.

10.4.Labour market in Poland as exemplified by the Kujawsko-Pomorskie Voivodeship. Pilot study results A pilot study in the Kujawsko-Pomorskie Voivodeship was carried out as part of preparations for implementation of the project in the whole Poland. The aim of the pilot study was to verify the planned research approach that assumed covering all the areas affecting the emergence of skills gaps on the labour market and to evaluate the methodological assumptions and research tools. The Kujawsko-Pomorskie Voivodeship was chosen due to its steady economic development covering industry, as well as agriculture and services, and also

117 Raport z analizy potrzeb informacyjnych głównych odbiorców wyników badań realizowanych w ramach projektu Bilans Kapitału Ludzkiego [Report on informational needs of the target audience of survey findings as part of the Human Capital Study project], p. 8-12, CEAPP UJ, 2009 118 Ibidem, p. 12-14 119 Ibidem, p. 14-17

124 due to absence of clear focus on the development of particular sectors of the economy. The study was carried out in the last quarter of 2008. The labour market in the Kujawsko-Pomorskie Voivodeship as compared to Poland Improving competitiveness of the region is one of the primary aims of the Kujawsko- Pomorskie Voivodeship Development Strategy. Among the factors that contribute to the increase in competitiveness the following ones are mentioned: entrepreneurship of the population, ability of business entities to absorb technical, market and organisational innovation and transforming them into commercial success120, so factors that are closely related to human capital and that require its high quality. The labour market in the Kujawsko-Pomorskie Voivodeship is less developed and less absorbent than the national average, especially in relation to the level of professional activity of the population and the unemployment rate. In the Kujawsko-Pomorskie Voivodeship, the largest number of workers has been noted in the services sector (47%), the industrial sector (32%) and the agricultural sector (21%)121. As regards the enterprises, the largest number of people works in the services sector (more than 70%) and in particular in the section Wholesale and retail, repairing vehicles, motorcycles and household and personal use goods, which comprises 30% of the total number of the employed in the region. As compared to the structure observed in other regions of Poland, more people work in sections A and B (Agriculture, hunting, forestry and fishing), the section L (Public administration and national defence, compulsory social insurance and health insurance) and N (healthcare and social services). The smallest percentage was noted in sections: K (Real estate and business At the end of December 2007, 188.5 thousand national economic entities (excluding individual farmers) in the Kujawsko-Pomorskie Voivodeship remained recorded in the REGON system, of which 3.4% of all actors in the region acted in the public sector, and the remaining 96.6% in the private sector. Entities registered in the voivodeship represent about 5% of all businesses registered in the country. The majority of entities (about one third) are registered in the G section122. According to the data available during the survey, the unemployment rate in the voivodeship in 2008 was 13.3%, which is an increase by 3.8 pp compared to the Polish average in this period in Poland. Unemployed individuals with a higher education degree are least likely to register in labour offices. The percentage of people with this education level was almost 3 pp lower that the percentage of university educated unemployed in the whole of Poland. In addition, in the Kujawsko-Pomorskie voivodeship there are less unemployed with post- secondary and general secondary education (also by 3 pp). However, the share of unemployed people with basic vocational education (by 2.5 pp), lower secondary education or lower (by 4.3 pp) was larger than the national average.

120 Ibidem, p. 65-66. 121 Central Statistical Office data. 122 Ibidem, p. 37-40.

125 The indicator of the voivodeship population‘s professional activity was also poor compared to the rest of the country. In 2008, the indicator amounted to 52.4% of the total population and 67.6% of the working age population (the Polish average is 54.2% and 69.9%). At the same time, in 2007 the average gross monthly salary was lower that the Polish average by more than PLN 400.123 When we look at education institutions, there are relatively more basic vocational education schools (compared to the rest of the country) in the voivodeship, followed by technical schools and colleges. There are fewer primary, lower secondary and general secondary schools, as well as fewer universities. This means that education in the Kujawsko-Pomorskie is more focussed on teaching a given occupation than general education. Also, more attention is paid to basic vocational education, secondary and college education than higher education. In higher education, higher vocational schools (70%) prevail, as well as higher schools which are equivalent to universities (10%). In addition to schools of this kind, higher schools of technical, agricultural, economic and artistic education can be noted but they are less numerous.124 The initiatives to foster the development of labour market at voivodeship level are: the Pomeranian Special Economic Zone, industry and technology parks and a number of other institutions, including 26 Poviat Labour Offices in addition to the Voivodeship Labour Office. Furthermore, the following have been identified in the region: Voluntary Labour Corps, employer organisations and social dialogue institutions, as well as several dozen employment agencies and several hundred NGOs dealing with: — promotion of employment and professional activation (102), — activity supporting economic development, including the development of entrepreneurship (198), — activity supporting the development of communities and local communities (335), — activity encouraging European integration and developing contacts and cooperation between societies (187), — activity providing technical, training information and financial support to NGOs, as well as church units and organisations, religious associations and self-government units (88).

Supply and demand for qualifications in the Kujawsko-Pomorskie Voivodeship According to the methodological assumptions of the project, the analysis of the demand for labour was based on examination of the companies. Employers were asked about opinions on

123 Ibidem, p. 30. 124 Ibidem, p. 33-35

126 the current situation on the labour market and the needs identified by them. Results of this study showed several significant interrelations. First of all, spending on employee development in an enterprise largely depends on its financial condition and the situation on products and services market. A large part of the trainings conducted in enterprises are compulsory activities without a significant impact on business performance of an organization (e.g. health and safety training). Apart from trainings compulsory under the law, employees of companies involved in the study participated in trainings of very basic skills. Moreover, in future, only a small group of the surveyed companies planned training. Among organizations that plan such training you can see greater interest in the training of managers and directors than that of junior staff. A negative phenomenon from the perspective of the implementation of EU funds is the fact that although nearly 90% of companies are aware of the possibility of obtaining EU support for training, 83% of companies did not use this source. Interestingly enough, despite a relatively high level of unemployment in the region, over a quarter of companies participating in the study had problems with finding workers. The vast majority of these problems concerned back-office staff employed in the operational department / production. Serious problems were also encountered in obtaining employees responsible for direct sales / customer service125. The summary of the survey results of enterprises of the Kujawsko-Pomorskie Voivodeship indicates that their main constraints in the development of human capital include126: — Lack of strategic management - long-term planning activities; — Lack of basic tools of human capital management; — Lack of an individualized approach to staff development and staff management; — Focus on trainings required by the existing law; — No apparent relation between the training and the increase in the effectiveness of the organization; — Fear of a demanding attitude of employees resulting from "too high" qualifications; — Low level of interest in obtaining support for the development of employees from EU funds. The second study, and the analysis of labour market supply-side based on it, has allowed identifying staff‘s approach to vocational education and their perceptions of skills that they dispose of. The information collected shows that less than half the workers from the Kujawsko-Pomorskie Voivodeship - only 45% of the surveyed - declare the need for development. On the job training (56%), practical profession teaching (36%) and practice (24%) were regarded as the most attractive. As it turned out, only 28% of respondents participated in development activities, of which approximately 82% acquired knowledge during compulsory courses (health and safety), while 17% chose self-education, and 15% have used the studies.

125 Ibidem, p. 48-50. 126 Ibidem, p. 65.

127 Among important motivations to develop skills, the surveyed people named: better salary (68%), changing work position (31%), rapid technological changes (31%), the desire to maintain the current job (26%) and less often - willingness to change employer (15%). Those who wished to develop also wanted to achieve: new qualifications (28%), primarily obtain a document confirming their newly received qualifications or skills (25%), improve practical skills (21%). On the other hand, the lack of interest in raising their qualifications was mostly explained by: the lack of free time (42%), the possession of appropriate qualifications (26%), the lack of financial resources (24%). Unlike entrepreneurs, more than half of study participants declared that they knew about professional development funding opportunities from EU funds127. Subsequently, the study of labour supply was supplemented by opinions of the unemployed. The unemployed in the region are mainly short-term unemployed (less than 1 year), but every fourth participant in the study was unemployed for longer than 3 years. The offer of the Labour Office has been known to about 70% of the registered unemployed. Any offer of labour market institutions other than the Labour Office was not practically known to people involved in the study. Moreover, people pessimistically assessed their situation on the labour market, the realities of which they often did not know. Although two thirds of the unemployed reported a desire for professional development, only 14% participated in various forms of skills acquisition128. Significantly, almost all unemployed respondents saw their future in the voivodeship of their origin. Only 3% of the respondents planned to change jobs and places of residence to another voivodeship, and only 1% of respondents took into account the possibility of going abroad. The main conclusions from the last module of research carried out among the youngest participants in the labour market – students and pupils – demonstrate primarily an incompatible with the facts and overly pessimistic assessment of the situation on the labour market in the voivodeship. Having told that, 44% of students and 52% of post-lower secondary school students are not interested in the labour market situation at all. These people are aware, however, that the biggest obstacle for young people entering the labour market is the lack of experience. Despite this, 62% of students do not have specific career plans, and only half of them plan future work in the profession learned, but one in ten would take "any job." Greater flexibility of young people is indicated by the fact that 23% of students surveyed are planning to go abroad after completing education, and a further 13% plan to work outside the Kujawsko-Pomorskie Voivodeship. This is a major threat to the regional market, which will cause the drainage of the best-educated professionals (the unemployed are much less mobile). A positive trend, perceived in the Kujawsko-Pomorskie Voivodeship, as well as in the whole country, is a growing number of school leavers at different levels of education. In the case of post-lower secondary school education in the voivodeship, the largest number of classes and graduates are educated to the needs of a sector group:

127 Ibidem, p. 53-55. 128 Ibidem, p. 56.

128 — Production (one third of all classes and nearly one third of graduates), — Administration and business support (outsourcing) and services (more than one tenth of classes and an average of one sixth of all graduates), — Catering and hotel industry (almost one tenth of classes and about one seventh of graduates). Increments in the proportion of graduates in 2006-2008 has been in education for the following industries: Transportation and Hotel industry, whereas decreases in the percentage of graduates trained in 2006-2008 for the following industries: Printing (printing and reproduction), Waste management and water supply, Manufacture of glass, ceramics and mineral building materials and Construction - buildings. In the case of higher education – bachelor, master and postgraduate level, most graduates are educated in the following majors: — Economic and administrative (for bachelor studies nearly one fifth of all selected majors and almost half of the graduates; for master studies slightly less than one tenth of all majors and over a third of graduates; for postgraduate studies: about one tenth of all selected majors and over a third of graduates), — Pedagogy and Humanities (for bachelor studies nearly one quarter of all selected majors and about one seventh of graduates; for master studies almost a third of all majors and about one quarter of graduates; for postgraduate almost one seventh of all majors and about one third of graduates), Expanding the analysis of the learning offer in the Voivodeship with other training institutions, it should be noted that in the Kujawsko-Pomorskie Voivodeship in 2007 most training was held in the areas of basic skills129: — Vocational training (in particular Transport, operation and repairs of motor vehicles) - over one quarter of all trainings, almost 12% of all course participants, — Health and safety training - 3.46% of all training and 9.75% of participants, — Finance - 3.46% of training and 5.16% of participants. On the other hand, the least number of trainings (no more than 0.25% of the participants), during the period analysed, was conducted on more advanced topics such as: — Environmental protection - 0.53% of trainings, — Quality management - 0.27% of trainings, — Purchases / supplies - 0.80% of trainings, — Vocational training - building and related fields - 1.06% of the trainings.

In conclusion of the results of a pilot Human Capital Study (BKL) project, one should note both the positive and negative trends revealed in the Kujawsko-Pomorskie Voivodeship. The optimistic ones include at least: the awareness of the need for professional development among staff, as well as the increasing number of graduates of upper secondary level of

129 Ibidem, p. 64.

129 education. On the other hand, negative trends are mainly: the overly pessimistic views on the regional labour market, insignificant offer and low popularity of technical studies and science, as opposed to the humanities, economic and administrative majors, and a small interest of employers in specialized training for workers. In addition, the weakness of the regional labour market lies in a relatively large group of the unemployed, which are characterized by low level of education, little interest in raising their qualifications and a minimum mobility. Companies covered in the study reported difficulties in finding workers in the operational department / production or those responsible for direct sales / customer service. These are not positions that require rare kinds of competences, but rather a solid education and motivation to work. The analysis of the education system leads to the conclusion that providing this type of educational opportunities should not be a problem in the region, with appropriate incentive to undertake training or retraining in the desired fields. A more complicated problem seems to be an issue of creating „better jobs‖ that require higher qualifications, and which could keep the most talented individuals in the region. However, these issues go beyond the objectives of this project.

Conclusions The quality of human capital is one of the key determinants of the development of a modern economy. Currently available data indicate a mismatch between the competence of the employed and the need for skills as reported by employers, which is an obstacle for the best and fullest use of labour resources in the economy and an effective hindrance for its development. For this reason, many state institutions, including the Polish Agency for Enterprise Development, are engaged in the efforts to eliminate the mismatches observed through appropriate reforms in the educational system and lifelong learning, as well as the implementation of educational and training projects. The effectiveness of these institutions is dependent on proper orientation of implemented tasks. For this purpose, they should have access to current, accurate and reliable information on the national labour market. Recognizing the need for information, the Polish Agency for Enterprise Development has pledged to implement the project Human Capital Study (BKL), which collects information from many sources on the quality of human capital in Poland through a study conducted on an unprecedented scale. As presented above, the test is designed to be comprehensive and exhaustive, so the results will provide a unique source of knowledge about the labour market in Poland. The results will then provide a solid basis for designing activities for institutions supporting labour market development, towards getting a better match between the competence of prospective and current employees and the needs of employers. Long-term implementation of research based on a uniform methodology will allow the observation of trends in human capital development in Poland, which will make forecasting the future for the staff of modern economy more reliable and accurate.

130

Bibliography CEiAPP UJ, ZRZL PARP, Raport z analizy potrzeb informacyjnych głównych odbiorców wyników badań realizowanych w ramach projektu Bilans Kapitału Ludzkiego, Kraków, April 2009 Fundacja Rozwoju Kapitału Ludzkiego, Raport podsumowujący; rekomendacje merytoryczne i badawcze propozycje narzędzi badawczych, Warszawa 2008 Fundacja Rozwoju Kapitału Ludzkiego, Raport Sytuacja społeczno-ekonomiczna województwa kujawsko-pomorskiego, Warszawa 2008 Weresa M.A. (red.), Polska Raport o konkurencyjności 2009, Zasoby ludzkie a przewagi konkurencyjne, SGH Oficyna Wydawnicza, Warszawa 2009 www.stat.gov.pl ec.europa.eu/eurostat

131 Dorota Węcławska, Paulina Zadura-Lichota

Chapter 11 Effect of education on entrepreneurship and the preparation of young Poles to carry out business activity

As mentioned in the introduction to the Report, the market success of enterprises is increasingly determined by the quality of human capital. This article has been devoted to this issue from the perspective of the impact of education on attitudes and skills of potential business owners, which are fundamental human capital for their own companies.

The purpose of this article is to describe a relationship between education and entrepreneurial attitudes. The article will present first of all the link between the level of education and entrepreneurship. Secondly, it will conduct an assessment of the effectiveness of entrepreneurship education in Polish schools. In addition, we will consider whether the young people's knowledge necessary to conduct one‘s own business successfully can be supplemented by additional training and courses.

11.1 . Effect of education on the level of entrepreneurial behaviour in society The results of the studies conducted do not indicate a clear positive impact of education on the growing number of companies. The conducted meta-analysis of more than 90 studies on the relationship between education and entrepreneurship130 demonstrates that there is no significant correlation between education and the decision to launch a business. The results of this study indicate however another very important issue - namely the existence of a clear positive correlation between education (counted both in years devoted to education, and the degree of education attained) and the effects of entrepreneurs‘ activity (regardless of what indices are used - the percentage of survival, profit, income, company‘s development). On the basis of these data you can therefore assume that education allows individuals to gain knowledge that increases the efficiency of business operation. There are exceptions as exemplified by the self-employed. That is so because the results of subsequent research suggest that high qualifications (construed as formal education) do not substantially affect the survival of firms belonging to the self-employed. This may be due to the fact that a group of self-employed is very diverse; it contains both people of very high and very low skills and the impact of education is cancelled out by the other in an aggregate analysis131.

130 van der Sluis J., van Praag M., Vijverberg W., Education and Entrepreneurship in Industrialized Countries: A Meta-analysis,TI 2003-046/3, Tinbergen Institute Discussion Paper, 2003, p. 2. 131 Millan J.M., Congregado E., Roman C., Persistence of Entrepreneurship and its Implications for the European Enterepreneunial Promotion Policy, Department of General Economics and Statistics, University of Huelva, April 2009, p. 10.

132 A number of studies on this subject conducted in Europe and the U.S. reveal a subsequent phenomenon of the so-called ‗return on education‘. Return on education, measured in the size of earnings, turns out to be a variable that best illustrates the success or failure of an entrepreneur. However, the size of the earnings may conceal more variables that enhance its effect. A survey among Dutch companies132 conducted in 1995 showed that a greater number of years devoted to education is significantly and positively linked to the availability of capital - every extra year of schooling reduced the restrictions on entrepreneur‘s access to capital by 1.2 pp. In turn, reduced restrictions on access to capital by 1 pp increased the entrepreneur‘s average income by 2 pp. A capital easier to raise means, for example, that a higher educated person has a greater chance of receiving a credit for. According to the authors, the results of this study contradict common beliefs that the entrepreneur does not need education to succeed. Scientists studying American entrepreneurs reached a similar conclusion133. The researchers asked themselves the question: are higher educated people more or less likely to start their own business? In this way the researchers wanted to verify, among other things, a common belief in the American society that the person's success as an entrepreneur does not depend on (formal) education they received. The website www.youngentrepreneur.com is given by authors as an example of such beliefs being consolidated in the society. In it you can find a list of the richest people in the world who at one point stopped their education. Among them are creators of companies such as Dell Computers, Oracle and Microsoft. The researchers note for caution in assessing such examples, recalling one of the most recent lists of the world's millionaires. Of the 1,125 people making this list, only 6% (73 people) discontinued their education. In conclusion, the results of research do not allow saying that there was a significant impact of education on the decision to start your own business. On the other hand a strong positive impact of education on the method of conducting business is observed, reflected by the fact that the higher the education level is reached or more years spent on education, the greater the chances are for a good (successful) business. The already cited authors of the meta-analysis, however, emphasize that all the studies reviewed by them are in some way biased. The researchers use different ratios for measuring entrepreneurship, education and the efficiency of functioning of enterprises. These shortcomings are a response to the question why there has not yet been created a clearly quantified knowledge on the potential impact of education on entrepreneurship. The researchers do not preclude the coexistence of two different channels of impact of education on entrepreneurship. The first of these relates to the management skills that can be reinforced in the education process and positively influence the decision to undertake economic activity. The second channel relates to a greater number of occupational

132 Parker S., van Praag M., Schooling, capital constraints and entrepreneurial performance: The endogenous triangle, TI 2004-106/3, Tinbergen Institute Discussion Paper, 2004. 133 van Praag M., , van Witteloostuijn A., van der Sluis J., Returns for Entrepreneurs vs. Employees: The Effect of Education and Personal control on the Relative Performance of entrepreneurs vs. Wage Employees, Institute for the Study of Labor, December 2009, p. 4

133 choices which open up along with higher education. This channel of impact may decrease the likelihood of taking the decision to start your own business134. Another issue considered in the context of the impact of education on entrepreneurship concerns the analysis of the importance of various educational stages. Analyses from this area indicate that education can have an impact on specific professional decisions (including changes of decisions), and as a result also on the number of entrepreneurs in the economy. However, this impact may vary depending on the level of education (and thus the age of learners) and the type of knowledge transferred at each of the levels. The conclusions that scientists135 from the Erasmus University Rotterdam, and from the EIM Business and Policy Research in the Netherlands reached indicate that the educational system can play an important role through raising awareness of issues of entrepreneurship and awareness of the existence of different career paths, including those related to running your own business. This kind of entrepreneurship awareness brings greatest effects on the early stages of education (primary and secondary school), and the best way to learn is a systematic practice of certain skills. In the case of higher education institutions best results in learning entrepreneurship are reached when it is focused on developing practical skills associated with running business. This article is based on the assumption that for the youngest participants in the educational system it is more important to learn all those skills that can be learned as personal values (e.g., persistence in pursuing goals, independence, creativity), whereas more rarely the skills of a nature of explicit qualifications (e.g. marketing and company promotion). The former are difficult to master in later years, hence the role of primary education is so important. The authors have adopted a list of ten entrepreneurial characteristics, the assimilation of which in the early stages of education brings the best results. The degree of their achievement is also important when it comes to deciding on running your own business. They include: 1. Motivation for achievements seeking to establish goals and acting to achieve them through your own efforts. 2. Need for independence/autonomy the need to control and fear of/dislike of being controlled. 3. Creativity developing new methods instead of using standard procedures. 4. Initiative the motivation to act independently and take the first step. 5. Taking risks acceptance of risk in taking a specific action. 6. Finding and recognising favourable circumstances the ability to seek and find unmet needs in the market that can be met by introducing a new product or service. 7. Setting your own goals defining the goals to be achieved as a result of entrepreneurial activity. 8. Self-awareness the ability of realistic assessment of your own skills/capabilities that allow you to carry out tasks in accordance with the needs of the surrounding.

134 van der Sluis J., van Praag M., Vijverberg W., Education and Entrepreneurship.... op.cit. p. 3. 135 van der Kuip I., Verheul I., Early Development of Entrepreneurial Qualities: the role of Initial Education, SCALES-paper N200311, EIM Business and Policy Research, 2003, p. 5.

134 9. Internal locus of control – the belief of an individual that their achievements stem from their skills and activities, and not something that happened through luck or the efforts of other people. 10. Perseverance to implement the task until it is really completed136. As shown in the above list, entrepreneurship consists of characteristics that, to some extent, are present in every human being. However, assuming that we want to increase the number of entrepreneurial individuals in society, the above characteristics should be learned in the early stages of education, because they are similar to the basic skills that children are learning in the process of education (e.g. the ability to practically use the information possessed, discover your interests, responsibility, self-esteem, taking the initiative). Children are also more prone to acquire these traits than adults, and therefore action at this stage will have the greatest effect. On the other hand, as already outlined above, the learning of entrepreneurship at subsequent levels of education should focus on more specific skills, or on learning a particular "profession" of an entrepreneur. However, participation in entrepreneurship classes can both lead to the strengthening of intent in the direction of launching the company, as well as cause the participant to refrain from previous plans in that direction137. The basic explanation of this fact is associated with the acquisition of new knowledge. Some people will find it valuable and strengthening for their intentions; others, upon gaining new knowledge will prefer to withdraw, realistically assessing their potential. Knowing that, in the analysis of various test results it should be remembered that each student or pupil comes to school and university with their own load of beliefs, knowledge and experience (e.g. family, close relatives and earlier stages of education), and these beliefs together with the knowledge acquired in school, determine their final professional decisions. So, if entrepreneurship classes do not affect the number of newly founded enterprises, and on the other hand, affect the decision of whether to undertake an economic activity or not, then perhaps their greatest positive impact and ultimately the role of education should be seen in the proper selection of professional roles.

11.2.Effect of owners’ education on the results of companies in Poland

Also in Poland the level of education affects the quality of companies, but not the number of newly established companies. Analysing the data of the CSO138 it can be noted that in 2003- 2006 the greatest number of enterprises established was started by people with secondary education, then in order: by those with higher and post-secondary education (Table 11.1). In 2007 the order was reversed, and most companies were set up by people with higher education but we cannot as yet speak of a trend reversal. The situation in 2007 could be exceptional.

136 Ibidem, p. 13. 137 Weber R., von Graevnitz G. , Harhoff D., The Effects of Entrepreneurship Education, Discussion Paper no. 269, GESY, August 2009, p. 1. 138 Warunki powstawania i działania oraz perspektywy rozwojowe polskich przedsiębiorstw powstałych w latach 2003-2007,CSO (Central Statistical Office, Polish:Główny Urząd Statystyczny, GUS), Warszawa 2009 (and earlier editions).

135

Table 11.1. Structure of enterprises of individuals created in 2003-2007 by educational level of their owners (%) Owner’s education higher and post- Year of creation primary basic vocational secondary secondary 2003 4.8 20.8 47.8 26.6 2004 4.4 19.1 39.1 37.4 2005 3.7 19.5 41.9 35 2006 3.6 20.6 40.5 35.4 2007 3.8 20.8 36.5 38.9 Source: own elaboration on the basis of Warunki powstawania i działania oraz perspektywy rozwojowe polskich przedsiębiorstw powstałych w latach 2003-2007, Warszawa 2009 (and earlier editions).

However, the earlier presented van Praag's theory, which says that the owner's level of education has an impact on the survival of enterprises proves to be correct. The values of the survival rate of enterprises in Poland rise along with the owner's education level, as shown in Table 11.2. This difference is more evident in subsequent years of entrepreneurial activity. The higher the owner‘s education, the greater chance the company has to survive next years.

136

Table 11.2 Survival rates of enterprises created in 2001-2006 by level of education of the owner Survival rate of the first year Survival rate for the first two years Survival rate for the first three years

Year Owner‘s education Owner‘s education Owner‘s education

- - of -

creati

basic basic basic basic

higher higher higher higher

primary primary

on primary

and post and post and post and

secondary secondary secondary secondary secondary secondary

vocational vocational vocational

2001 56.1 46.5 46.9 50.4 2002 40.9 50.8 58.5 66.2 32.1 42.5 50.2 52.2 2003 70.5 72.9 79.4 79.4 43.9 53.7 67.4 65.7 32.7 40.2 57 57.3 2004 69.4 74 77.6 81.2 57.3 58.6 64.5 72.5 37.7 43.8 54.4 63.4 2005 66.3 75 74.1 78.3 43.9 51.7 61 66.8 2006 62.9 71.5 75 76.8 Source: own elaboration on the basis of Warunki powstawania i działania oraz perspektywy rozwojowe polskich przedsiębiorstw powstałych w latach 2003-2007, Warszawa 2009 (and earlier editions).

137 11.3. Education and entrepreneurial attitudes of young Poles The findings of many Polish and foreign surveys, carried out in the last 10-15 years would suggest that Polish young people, compared to a similar group from other countries in Europe or even in the world, are characterised by an entrepreneurial mindset which is above the average and is usually defined as willingness to start one‘s own business. The level of entrepreneurial attitudes of young people is also higher than in society at large. Among people aged 15-24 years, 59%139 would opt for self-employment if they had a choice (for the whole population the proportion is 51%). People who see business opportunities in the next 6 months constitute about 45% of the population aged 18-24 years140 (compared to the total population for whom the share is 31%). Both the Eurostat data (diagram 11.1), and the data from the Eurobarometer survey141 show that entrepreneurship of young people (defined as running your own business) in Poland is higher than the average in the European Union. The participation rate of young entrepreneurs (under 30 years of age) among all Polish enterprises amounted to 33.4%, which is a very good result in comparison with other European Union countries, because it is higher than the EU average by more than 10 pp. The Eurostat data (diagram 11.1) confirms that the level of young entrepreneurship in Poland (measured as a share of the self-employed among total employment) is higher than the EU average. However, in recent years a regular decrease in entrepreneurship of Poles aged 20-24 years can be observed (diagrams 11.1 and 11.2). This decline is particularly noticeable in relation to other EU countries where in 2001-2008 entrepreneurship of young people was slightly on the rise.

139 On the basis of research data: Entrepreneurship Survey of the EU (25 Member States), United States, Iceland and Norway, Flesh Eurobarometer 192 The Gallup Organisation, European Commission. 140 Bacławski K., Koczerga M., Zabierowski P., Studium przedsiębiorczości w Polsce w2004 roku, Raport GEM Polska, Fundacja Edukacyjna Bachalski, Poznań 2005. 141 Entrepreneurship Survey of the EU 25, Secondary analysis, Poland, Flash Eurobarometr 192, The Gallup Organization, 2007, Interactive report, p. 2

138

Diagram 11.1. Share of self-employed in the total working population aged 20-24 in 2001-2008 (%)

Source: own elaboration based on the Eurostat data. Entrepreneurship understood as running your own business, as opposed to entrepreneurial attitude, is lower among young people than the average in population. The data (diagrams 11.2) corroborates its growth in line with age. The difference is about 15 pp. on average and in the years 2001-2009 did not change significantly142. Diagram 11.2. Share of the self-employed among all the employed persons in the years 2001-2009

Source: own elaboration based on the CSO (Aktywność ekonomiczna ludności Polski, IV kwartał 2009, CSO, Warszawa 2010, and earlier editions).

142 Aktywność ekonomiczna ludności Polski, IV kwartał 2009, GUS, Warszawa 2010 and earlier editions.

139 An attempt to explain the gap between entrepreneurial attitude and the actual intention to start a business143 among young people can be found in studies of Banerski et al. 144 completed in 2009 at the request of PAED. According to the authors, on the one hand, "the attractiveness of the effects that may occur upon owning a company (the attitude), and perceived pressure from the closest surroundings to start a company most strongly affect the intention of the respondents". On the other hand, the impact of attitude on the intention to start a business can be considered as average145. In addition, the study assumed that the intention immediately precedes a specific action146, i.e. the impact of attitude on behaviour may turn out to be even smaller. As noted above, the declarations of the young are not fully reflected in the professional paths that the group actually pursues, but the enthusiasm and willingness to implement a seemingly difficult career path seem to be important and puzzling. 11.4 Unemployment among young people At least since the 1990s in the OECD countries youth unemployment has increased steadily. In Poland, the unemployment rate among young people has always been higher than among the general population (diagram 11.3). Unemployment of young people has changed similarly to rates for the society as a whole. The years until 2002 were characterized by a rise in unemployment in the age group below 25 years of age up to around 43%147. However, in recent years a systematic decline in unemployment in that group could be seen. The worsening of economic situation in the country in 2009 again strongly affected the young people. Unemployment in this group increased more rapidly than in the whole society.

143 The authors of the study referring to the theory of planned behavior take as the basis the positive or negative assessment, e.g. of having your own business, and the intention is understood as the intention to start your own business which directly precedes the behavior, i.e. which is precisely the assumption of that company. 144 Banerski G., Gryzik A., Matusiak K., Mażewska M., Stawasz E., Przedsiębiorczość akademicka, PAED, Warszawa 2009, p. 72. 145 In the study, the impact was measured using regression coefficient {standardized beta}. The coefficient can range from -1 to 1, where negative values indicate negative correlation and the positive values indicate a positive impact. The closer the indicator value is to 1 or -1, the greater the effect. It has been estimated at the level of 0.30. 146 Banerski G., op.cit, p. 60. 147 Eurostat data.

140 Diagram 11.3 The unemployment rate in Poland in 1998-2009

Source: own elaboration on the basis of the Eurostat data. High unemployment among young people has led to the extension of the education of young people, observed in all OECD countries, and, consequently, the formation of questions about the role and tasks of education in this extra time that could be better used to improve the future position of young people in the market and help them obtain jobs. In Poland the first public debate on youth unemployment and follow-up government programmes (such as: "First Job") focused on the problem of the youth‘s lack of experience and skills. The answer to that was to be the mobilization of young people for example in the direction of acquiring that experience through unpaid work (volunteering), paid internships, intervention works and subsidising jobs for young people. The "First Job" programme was launched in 2002, while in 2005 it was reinforced by an additional component of "My first business‖, which is still being implemented. Changes in the programme are, on the one hand, a broader range of opportunities offered to young people, and on the other hand, the expression of significant changes in the labour market. Young people are an interesting category in social and research terms, because in a relatively short period of life they experience and go through subsequent thresholds leading them into adulthood. The most important of these include: the transition from school to stable employment, the transition from family of origin to their own family, moving out from their parents148. Adding to it the pro-entrepreneurial attitudes of young Poles which stand out from the general society, the Polish Agency for Enterprise Development has decided to conduct its own study on the attitudes of the entrepreneurial young Poles aged 18-25 years149. In the study presented below, important areas of research included determinants shaping the entrepreneurial attitudes of young people and plans of the surveyed ones on the verge of

148 Cole B., Youth and Social Policy. Youth Citizenship and young Careers, London University College London Press, 1995, p. 8. 149 Research „ Entrepreneurial mindsets of young people in Poland‖ by P. Zadura-Lichota i D. Węcławska was conducted in November and December 2009 on a representative sample of 1400 people aged 18-25. The research was conducted by personal interviews (PAPI). Full report from research is in the works. The research was co-financed from OP IE.

141 leaving school and starting work. In the following sections the results of one of the analysed determinants of entrepreneurship will be outlined, i.e. the potential impact of education on entrepreneurial attitudes of young people in Poland.

11.5. Results of the PAED studies on the influence of education on the entrepreneurship of young Poles

11.5.1 The current stage of education and educational aspirations of the youth Among the young people aged 18-25 years in the study, over 60% undergo education currently, whereas 53% do not intend to continue their studies (diagram 11.4). Diagram 11.4 Are you currently learning? Are you going to continue your education?

Source: own calculations based on a data set from the study: Entrepreneurial mindsets of young people in Poland.

The vast majority of learners plan to continue their studies. The remaining part of this group is studying at the universities (master, doctoral or postgraduate level, which explains why they have no further educational plans). 31% of respondents of the whole population are not currently learning, and at the same time they do not plan to continue education. Nearly half of them have general secondary and vocational education, a fifth graduated from universities, and 31% completed primary education and basic vocational education. However, among people who are not currently learning there is a small group (93 people, 7% of the entire population studied) that intends to continue their education. The group comprises primarily people with secondary education (57%), and then people with higher education at the bachelor or master level 28%). In conclusion, learners are more likely to pursue education. Discontinuation of education at any stage makes it difficult to return to school again. A particularly large number of people interrupted their education after secondary school.

142 11.5.2 Education and career plans of young people On the basis of the survey "Entrepreneurial mindset of young people in Poland” it was established that the majority of people aged 18-25 years do not consider the possibility of setting up their own business. 31% of respondents are interested in running their own business. Diagram 11.6. Are you considering the idea of starting your own company in the future?

Source: own calculations based on a data set from the study: Entrepreneurial mindsets of young people in Poland. Among the current students, the proportion of those interested in their own economic activity slightly increased in comparison to the value for the entire group of respondents (over 34%). In case of people who have already completed their education, such desire is expressed by one in four of those questioned. It should also be noted that over 25% of the learning youth do not yet know if they would want to run a company in the future. And people who have completed education are more resolute almost 57% are not interested in their own company, therefore the group which answered "I do not know‖ is relatively smaller

143

Diagram 11.6. are you considering the idea of starting your own company in the future vs. are you currently a learner?

Source: own calculations based on a data set from the study: Entrepreneurial mindsets of young people in Poland.

Plans for further education differentiate young people even more. Approximately 38% of people intending to continue education are considering setting up a business, and among those not intending to continue their education, such an intention is declared only by 25% of the respondents (diagram 11.7).

144 Diagram 11.7. Are you considering the idea of starting your own company in the future? vs. are you planning to go on studying?

Source: own calculations based on a data set from the study: Entrepreneurial mindsets of young people in Poland. Relatively more interest in founding a company on the part of learners as compared to other people may stem in part from the fact that they have not yet started working or their work is temporary. However, for those no longer learning, it appears that a larger number of them have a more stable job situation. This is confirmed by data on occupational status for both groups among students one third of respondents have started their careers, and among those who completed their education almost 76% are working. Having taken as an indicator of the level of education the last completed school or the current one in case of people who are undergoing education, we can see that the tendency to establish a company increases with the increased level of education (Table 11.3). Table 11.3. Are you considering the idea of starting your own company in the future? Are you considering starting a Basic vocational Secondary Higher company / current level of education? Yes 23% 29% 36% No 62% 46% 42%

145 I don‘t know 12% 20.5% 22.9% I already own a company 3% 2.4% 2.4% Source: own calculations based on a data set from the study: Entrepreneurial mindsets of young people in Poland. The results obtained stand in apparent contradiction to the results of the van Praag study at the beginning of the article. One must keep in mind the limitations of the studies which the authors themselves mentioned, and which were presented at the beginning of the article. In addition, the study discussed here does not measure specific decisions about starting your own business, but entrepreneurial attitudes, which in the case of young people in Poland do not translate clearly into their own business (see section Education and Entrepreneurial mindsets of young Poles in this article.)

The results of Banerski et al. (2009) 150 carried out, inter alia, among Polish students show that 51% of respondents intends to start their own businesses in the future, 25% have no such plans and 2% already runs such a firm. 22% are undecided. The differences in results between both studies are probably due to differences in the sample structure and how questions were formulated. It is a noteworthy fact that both in the study of youth entrepreneurship and in the Banerski study about one-fifth of young people have no opinion if they would like to start their own business. This percentage is much lower for people who are not currently learning - 13%. This confirms the thesis that people who have already left the educational system have much more explicit view on their preferences for further careers.

11.5.3 Evaluation of entrepreneurial activities The subject "Business basics" was introduced to upper secondary education in 2002. In the subsequent two years the monitoring on the effectiveness of these actions was carried out which, inter alia, resulted in an increased pressure on the practical aspects of the knowledge base in the area of entrepreneurship. The next stage in fixing business education was the introduction of compulsory entrepreneurship courses at universities starting from the academic year 2009/2010. In the case of business classes at the secondary level, depending on the plan schools did not have to introduce this subject immediately in the first school year. Furthermore, in some schools business education was included in other subjects (e.g. civic education). For these reasons, in the youth group studied by PAED, over 22% admitted that they did not have business classes at this stage of education. This group is mostly represented by people who are either currently studying or have completed master's degree (and so could miss these classes because of the time when it entered the curricula) and who have completed or are in the process of completing basic vocational education (for analogous reasons, but also with the

150 Banerski G., op.cit, p. 69.

146 possibility of integrating business issues with other subjects, a thing that the respondent might have not remembered.) Nearly 56% of people who have participated in business classes gave a negative opinion as to the usefulness of these classes in terms of starting a new business. However, 28% felt that the knowledge gained would be helpful.

Diagram 11.8. Do you feel that the knowledge and skills gained in business classes in secondary school would help you start and run your own business?

Source: own calculations based on a data set from the study: Entrepreneurial mindsets of young people in Poland.

However, as can be evidenced by research findings, there is a relationship between a positive evaluation of business classes and willingness to start a business. The people whose opinion of business classes was positive tend to consider starting their business much more often than those whose impression of these classes was negative. Among people who considered business classes useful, nearly 47% are contemplating the prospect of starting a new business in the future. However, in the case of people whose assessment of the classes was negative, only less than 30% are interested in starting a company.

147

Table 11.4 Declarations as to starting a new business vs. opinion on business classes in secondary school Are you considering the idea of The knowledge and skills gained during business starting your own business in the classes would help me start and run a business. future? Yes No Difficult to say Yes151 47% 29% 32% No 37% 48% 45% I don‘t know 16% 23% 23% Source: own calculations based on a data set from the study: Entrepreneurial mindsets of young people in Poland.

In the first part of the article it was stressed that business education at universities should focus on developing practical skills useful for running your business. With proper arrangement of the curriculum, the university should therefore have an impact on the formation of entrepreneurial attitudes.

In the case of business classes that respondents encountered during their studies, the evaluation of their usefulness is very close to the evaluation of classes taught at the secondary level. About 58% of respondents said that they did not have courses in college which could help in setting up and running your own business, while 28% of respondents admit that they had such subjects.

151 The category Yes includes in this case also the response I already own a company due to the low number of such responses.

148 Diagram 11.9. While at university, did you have classes which seemed useful in terms of starting and running your own business?

Source: own calculations based on a data set from the study: Entrepreneurial mindsets of young people in Poland. As is the case with secondary school level business classes, there is an important relationship between the opinion on these classes at university level and willingness to start one‘s own company. The people who admitted that they attended classes which were useful in starting and running a business are more willing to start their own business than people who had no classes of this kind. The differences are substantial – every second person who admitted having such classes is considering starting a new business compared to every third person who never had such classes (Table 11.5). Table 11.5. Declarations as to starting a new business vs. opinion on business classes at university Are you considering the idea of When I was at university, I had classes which seemed starting your own business in the useful in terms of starting and running a business future? Yes No Difficult to say Yes152 53% 33% 33% No 27% 45% 38% I don‘t know 20% 22% 31% Source: own calculations based on a data set from the study: Entrepreneurial mindsets of young people in Poland.

On the basis of the presented results one cannot clearly identify a causal relationship between satisfaction with business classes and plans to start one‘s own business. Please note that

152 The category Yes includes in this case also the response I already own a company due to the low number of such responses.

149 students in assessing individual subjects may already have certain beliefs about their careers, beliefs which could affect the evaluation of these subjects. Thus, satisfaction with the undertaken classes and the desire to start their own business, can stem from the fact that these classes have been taken by people who in advance declared themselves as "future entrepreneurs." So it is worth to remember that education is only one of the determinants of entrepreneurship. The critical opinion on completed business classes in secondary schools and universities, which emerges from this study, is confirmed by the results of the Eurobarometer survey from 2007153 in which Poles negatively assessed the impact of schooling on the decision of starting their own business. Most survey respondents (about 61%) disagreed with the statement that their school education has raised their interest in running their own business. It is worth noting that on average in the European Union (EU25) 69% of the population disagreed with the statement (which is 8 pp more than in Poland), and the U.S. 59% (2 pp less). This leads to the reflection on the general effectiveness of such activities, regardless of the adopted model. On this basis one can conclude that business education at secondary or higher level is not an important factor for entrepreneurship in a given country. Numerous studies on this topic suggest that economic or social factors154 are more important. However, it is worth noting that the educational system is a factor on which public administration has a significant impact. Therefore, efforts to optimize it in terms of business education should be the goal of public authorities.

11.5.4 The need for training

As is apparent from the above, the system of formal education does not provide young people with all the necessary knowledge and skills to run their own business. In this context it is worth considering whether young people need additional training to supplement those deficiencies.

The research of Banerski et al. (2009)155 shows that approximately one quarter of students evaluate their level of knowledge on how to run their own business rather as fairly low or very low. Another approximately one third of students are not able to assess their level of knowledge on this subject which in practice can be interpreted as a lack thereof. This means that most students negatively evaluate the level of their knowledge in the subject.

The same survey156 shows that most students (79%) are interested in free-of-charge training where they can gain the knowledge and skills needed to run their own business, and about half of the students are interested in paid training in the subject. At the same time, it is surprising

153 Entrepreneurship Survey of the EU (25 Member States), United States, Iceland and Norway. Analitical Report, Flesh Eurobarometer 192 The Gallup Organisation, European Commission, 2007. 154 The issue of entrepreneurship determinants will be discussed more thoroughly in the report from research „Entrepreneurial mindsets of young people in Poland”. 155 Banerski G., op.cit, p. 106. 156 Ibidem, p. 108-109.

150 that it is people with a declared higher level of knowledge who are often interested in training (both paid and unpaid).

In the study "Entrepreneurial mindsets of young people in Poland" young people were asked, firstly, what skills they believe are key factors to running your own business, and secondly what training would be useful for them.

Young people considered the ability to obtain funding (58%) and the ability to create strategies (56%) as key skills skills should be pleasing because currently entrepreneurs from the SME sector form strategies of actions only to a small degree, which has a negative impact on their functioning in the market157. The majority of young people acknowledged the role of long-term planning, which can be very helpful if in the future they decide to start their own business. The high position of skills related to fundraising comes as no surprise. This problem is also consistently emphasised by all entrepreneurs.

157 Cf. Orłowski W. Pasternak R., Flaut K. Szubert D., Procesy inwestycyjne i strategie przedsiębiorstw w czasach kryzysu, PAED, Warszawa 2010, p. 45 and Maik R. Gołoś A. Szczerbacz K., Strategiczne źródła informacji w działalności przedsiębiorstw, PAED, Warszawa 2010, p. 62.

151 Diagram 11.12. Key skills from the entrepreneur’s viewpoint (%)

Internet use in business 8,9% 91,1%

knowledge of environmental protection law 5,9% 94,1%

knowledge of law related to conducting business 26,4% 73,6%

knowledge of a foreign language 25,7% 74,3%

knowledge of industrial property protection law (patents, 20,2% 79,8% trademarks, copyrights)

negotiating skills 35,7% 64,3%

team management skills 35,3% 64,7%

knowledge of accounting 23,3% 76,7%

knowledge of marketing techniques (customer needs 40,0% 60,0% analysis, advertising, sales)

knowledge of formal requirements needed to establish a 36,2% 63,8% company

skill of fundraising for starting a business 57,6% 42,4%

skill of creating company strategies 55,6% 44,4%

knowledge of techniques for business plan development 42,7% 57,3%

ability to identify attractive business ideas 40,4% 59,6%

0% 20% 40% 60% 80% 100%

indicated not indicated S ource: own calculations based on a data set from the study: Entrepreneurial mindsets of young people in Poland. Young people gave a quite high rate for the role of skills related to the development of business plans (43% deemed them to be key factors), the ability to identify attractive business ideas (40%) and knowledge of marketing techniques (40%). Curiously, the results showing the importance of skills related to Internet use in business are very low (9%). Respondents also underestimated the knowledge of specialised fields of law such as environmental law or the law of industrial property protection. Both areas are in fact essential for the competitiveness of enterprises in modern economy in which innovation counts, eco-innovation especially. The overall picture is emerging from the above results in which young people consider as essential skills those skills which are related to giving company the "momentum" or ―getting

152 the business going‖. In second place are mentioned skills that are necessary for conducting business, such as knowledge of the law or accounting. Training in the formal requirements for establishing the company was deemed to be the most useful training for conducting business (49% of respondents felt it was the most useful – diagram 11.13), then training in fundraising for launching a company (42%) and then in creating the company's strategy (41%). For most skills, those that were considered essential by the respondents were also more popular as subjects of training, and conversely, those found to be less important were less likely to be selected as subjects of training (diagram 11.14). The exceptions are three types of skills. In case of team management, 35% of young people believe that this ability is a key one, but only 19% want to train in the subject. This follows from the fact that the respondents doubt the effectiveness of the so-called "soft" training. The knowledge of commercial law and accounting are deemed as key skills by 26% and 23%, respectively, and respectively 36% and 35% would like to train in these areas. One can hypothesize that these areas were considered by respondents as necessary for running a company, but not the key ones for success. When comparing a group of people who already run their own businesses with the rest of young people158, one should note that for both groups key skills in running a business are similar. Persons who have their own businesses also recognise the importance of skills such as fundraising and strategy development. By contrast, people who already run their own business choose very different trainings. Most willingly they would increase their skills in marketing (54%), negotiations (45%) and accounting (40%). Since those people have already taken their first steps in running their own business, you can see that they care more for training in the areas necessary for the daily management of the company and its development. It should be emphasised that even this group does not see benefits in training in areas such as environmental law or the law of industrial property protection.

158 Also on the basis of the PAED research Entrepreneurial mindsets of young people in Poland.

153 Diagram 11.13. The subjects of trainings recognised as useful for running your own business (%)

Source: own calculations based on a data set from the study: Entrepreneurial mindsets of young people in Poland.

154 Diagram 11.14. Key competences (Y) vs. useful training (X) (%)

umiejętność identyfikacji atrakcyjnych pomysłów ability to identify attractive business ideas biznesowych jak założyć własną firmę how to establish a company (formal requirements, permits/licenses); prawo gospodarcze business law techniki opracowywania biznesplanów techniques for business plan development

tworzenie strategii firmy creating company strategies pozyskiwanie funduszy na uruchomienie firmy fundraising for starting business zarządzanie zespołem team management marketing marketing (customer needs analysis, advertising, sales)

księgowość accounting negocjacje negotiations problematyka ochrony własności przemysłowej issues of industrial property protection (patents, trademarks, copyrights) nauka obcego języka learning a foreign language wykorzystanie Internetu w biznesie internet use in business prawo ochrony środowiska environmental protection law

Source: own calculations based on a data set from the study: Entrepreneurial mindsets of young people in Poland.

155 In summary to this section it should be stressed that majority of young people do not have sufficient knowledge and skills to run their own business. Paradoxically, people with high declared knowledge in this area are more interested to lift it further. Young people are generally interested in trainings at which they could explore many aspects of running a business. Subjects they find interesting depend on their previous experience - for people who have already taken first steps in running their business, the subjects of training should be different than those for people who have so far only considered such a possibility. It is also worthwhile to make every effort to raise awareness of both groups, both as to the relevance, and the necessity of training in more advanced areas (e.g. industrial property protection and knowledge management). Human capital and business development

The results of the presented research showed that the level of education has a positive impact on the effects of entrepreneurial activity which confirms the necessity of education for potential entrepreneurs. Secondly, the age is also important at which given skills and knowledge are reported. This aspect emphasises the role of the early stages of education.

Young people constitute a reservoir of future entrepreneurs. In their case, those who plan further education, also more often consider establishing their own business in the future than those who do not have such plans. The article also refers to teaching entrepreneurship as a subject, as well as other classes in which knowledge is offered on how to run your own company. In most cases survey respondents rated such classes negatively both at secondary and higher school level. While admitting that their knowledge on starting a new business is insufficient, young people were interested in enhancing it by attending additional trainings and courses. This testifies to the fact that there is a demand for services of this kind and it could be, inter alia, funded by the state. It is, however, necessary to improve the quality of teaching business as part of formal education as well.

The market success of an enterprise is largely determined by its respective owners. The education of future entrepreneurs should start at an early stage of education and end at a higher level. Teaching skills and knowledge necessary to operate a company successfully on the market should be tailored to different stages of education. In addition, sound knowledge on running your own business allows young people to make better decisions about their future careers.

Issues for further discussion Analysing the role of education in the educational process of future entrepreneurs, we know that this is not the only factor influencing people‘s career decisions. Economic, cultural or institutional factors may prove equally important or perhaps even more important, and their impact varies depending on which country or continent is being analyzed. However, if business classes were treated as any other subject, present for a long time in the education process, or if business issues were to be included in other subjects, then it would be obvious that these classes can be run better or worse, and provide more or less valuable knowledge.

156 Here also comes the most natural function of education strengthening valuable individual interests and awakening new ones, desirable for the labour market. The data about educational needs of young Poles in the area of entrepreneurship, as cited in this article, show that needs in this respect may be diverse and thus the role and effectiveness of education may be perceived differently. In the U.S., a country famous for its friendly business climate, there appears to be no such interest in additional training. In Poland, due to the relatively complicated administrative procedures to be applied to entrepreneurs, a large proportion of potential business owners are convinced of the need for earlier preparation for this role through training. In summary, reflections on the entrepreneurship of young Poles and differences visible between declarations and actual behaviour, it should be noted that young people are relatively free to talk about their dreams which they do not have to immediately confront with their current capabilities. The people examined by PAED still had a lot of educational plans which in some way can get them closer to the goals they pursue. Young people do not also have to be aware of objective barriers the entrepreneurs face, or they may see the barriers which in fact are not particularly problematic and with the capital and knowledge these young people possess References: Aktywność ekonomiczna ludności Polski, IV kwartał 2009, CSO, Warszawa 2010 and earlier editions

Banerski G., Gryzik A., Matusiak K., Mażewska M., Stawasz E., Przedsiębiorczość akademicka, PAED, Warszawa 2009

Bacławski K., Koczerga M., Zabierowski P., Studium przedsiębiorczości w Polsce w 2004 roku, Raport GEM Polska, Fundacja Edukacyjna Bachalski, Poznań 2005

Cole B., Youth and Social Policy. Youth Citizenship and young Careers, London University College London Press, 1995 Entrepreneurship Survey of the EU (25 Member States), United States, Iceland and Norway. Analytical Report, Flesh Eurobarometer 192 The Gallup Organisation, European Commission, 2007 Entrepreneurship Survey of the EU 25, Secondary analysis, Poland, Flash Eurobarometr 192, The Gallup Organization, 2007, Interactive report

Maik R. Gołoś A. Szczerbacz K., Strategiczne źródła informacji w działalności przedsiębiorstw, PAED, Warszawa 2010 Millan J.M., Congregado E., Roman C., Persistence of Entrepreneurship and its Implications for the European Entrepreneurial Promotion Policy, Department of General Economics and Statistics, University of Huelva, 2009

157 Orłowski W. Pasternak R., Flaht K. Szubert D., Procesy inwestycyjne i strategie przedsiębiorstw w czasach kryzysu, PARP, Warszawa 2010 Parker S., van Praag M., Schooling, capital constraints and entrepreneurial performance: The endogenous triangle, TI 2004-106/3, Tinbergen Institute Discussion Paper, 2004 van der Sluis J., van Praag M., Vijverberg W., Education and Entrepreneurship in Industrialized Countries: A Meta-analysis, TI 2003-046/3, Tinbergen Institute Discussion Paper, 2004 van Praag M., van Witteloostuijn A., van der Sluis J., Returns for Entrepreneurs vs. Employees: The Effect of Education and Personal control on the Relative Performance of entrepreneurs vs. Wage Employees, Institute for the Study of Labour, December 2009 van der Kuip I., Verheul I., Early Development of Entrepreneurial Qualities: the role of Initial Education, SCALES-paper N200311, EIM Business and Policy Research, 2003 Warunki powstawania i działania oraz perspektywy rozwojowe polskich przedsiębiorstw powstałych w latach 2003-2007,GUS, Warszawa 2009 (and earlier editions). Wilson K., Entrepreneurship Education in Europe, w: Entrepreneurship and higher education, OECD 2008 Weber R., von Graevnitz G., Harhoff D., The Effects of Entrepreneurship Education, Discussion Paper no. 269, GESY, August 2009

158 Robert Zakrzewski

Chapter 12. Obtaining strategic information by small and medium-sized enterprises in Poland

Due to the globalisation of the economy and growth of information society, one of the most important factors influencing enterprises are knowledge and information. In order for the company to survive and compete efficiently on the market, skilful and effective use of the information available in business environment becomes essential in strategic management. It is particularly important for small and medium-sized enterprises, which use strategic management to a limited extent. They need to notice and be aware of the essential role of human capital in the process of obtaining information and also to ensure the development of skills and competencies necessary to obtain this information, select it and appropriately prepare strategic information based on it. Suitable preparation of human capital to do this could become the company’s strategic competence and an important competitive factor. 1. Information and its role for Polish SMEs Due to the increase in importance of technologically advanced services and industries in modern economy, ability to create, gather, process and use knowledge resources is becoming increasingly important for a contemporary enterprise. Because of the dynamics of changes in the business environment, their market position no longer depends on such traditional forms of competition as product price. What becomes increasingly important is information gathering, using knowledge, skills, experience and intuition, creativity and workers‘ innovativeness. This is true for all organisations regardless of their size and area of operations. Enterprises that use modern knowledge-based management techniques, base their activity on long-term vision and strategy and enjoy high growth indicators and have high market position are intelligent organisations. They have the ability to identify surrounding market signals and constantly develop it. They are able to analyse them, draw conclusions and make the right decisions. Intelligent enterprises build new information competencies and information is treated as the company‘s resource that should be managed skilfully. The transformation of small and medium enterprises into intelligent organisations is closely linked with the adequately designed and implemented in-company process of strategic management that must be future oriented rather than focussed on solving day-to-day problems related to running a business. Strategic management is not possible without constant obtaining, verifying and assessment of strategic information which are an important element of the process of communication of enterprises with their environment. An enterprise is an open system whose raison d‘être is constant information exchange with the environment in which it operates. Its environment not only allows the enterprise to survive and gives it opportunities for development but it is also a source of potential threats. However, each enterprise operates in its own, special environment. This is why knowing it and

159 understanding it is a fundamental task for modern enterprises, one that will allow it to formulate a strategy. Investigating the environment should be the enterprise‘s constant process. Elements of the environment form a dynamic configuration of signals which constitute an information potential, useful in shaping a strategy. The above issues were the topic of one the PAED‘s research projects: ―Strategic sources of information in enterprises' operations"159 aimed at establishing the sources of creating information used by SME sector entrepreneurs for strategic management and effective distribution channels. The project consisted of the following stages: - desk research analysis and developing research methodology, - qualitative research – in-depth interviews (IDI) with SME representatives in charge of company strategy (20), - quantitative research – computer assisted telephone interviews (CATI) with SME representatives in charge of company strategy (1018), - case studies – analysis of secondary resources and in-depth interviews (dyads, triads) with representatives of institutions that have information which are relevant for SMEs and which have been selected based on qualitative and quantitative research. The project findings allowed us to determine SME entrepreneurs preferences with respect to sources of information and to place them in the order of importance that applies in building and implementing strategy in running a business and to establishing the target audience for strategic information in SMEs and aims for which strategic information is used in the SME sector. Entities in possession of information which is relevant from the point of view of enterprises (public administration, social and business environment) have been identified and these are entities which enterprises most frequently communicate with in order to obtain information. Efficient information channels have been established that are used to transfer information. The study also allowed us to identify communication barriers and develop methods of overcoming these (in the form of recommendations). Last but not least, it allowed us to identify the entrepreneurs' knowledge on sources of business information and identification and description of good practices in communication between SMEs and public institutions, and the entities from their social and business surrounding. The research findings show us that strategic management is a weakness of Polish SMEs. Many of them are not managed strategically and making decisions is usually related to operational activity and less frequently to building a strategy. About a half of SMEs declare that they have a strategy in the oral form only. At the same time, as in-company employment increases, the extent of formalisation of strategy is on the rise as well (the larger the company, the more frequently the strategy exists as one document).

159 The study was carried out by the ARC Rynek i Opinia in September– November 2009. The project is cofinanced by the European Union under the European Social Fund.

160 Diagram 1. Defined action strategy

SMEs in total 16,7% 17,6% 49,3% 15,5% 0,9%

up to 9 employees 16,7% 16,7% 49,9% 15,9% 0,9%

10-49 employees 15,8% 31,6% 42,1% 9,3%1,2%

50-249 employees 25,0% 48,5% 22,3% 3,6%0,6%

Yes it exists as one document Yes, it is a collection of many documents

Yes it exists in an oral form It doesn't exist

I don't know/Hard to say

Source: R. Maik, A. Gołoś, K. Szczerbacz, Strategiczne źródła informacji w działalności przedsiębiorstw [Strategic sources of information in enterprise operations] PAED, Warsaw 2010. Absence of strategy or the fact that it has an oral form, and a focus on operations only, have an impact on the scope and manner of searching and using information from business environment. The majority of Polish SMEs have no separate units or job positions in charge of company development strategy. It has been noted in 9% of cases only and in most cases it is the owners themselves who are in charge of the strategy. Only 7% of SMEs in Poland have a strategy in writing and a unit responsible for its implementation. Led by the strategic perspective, these enterprises implement their goals and make decisions in line with company strategy. The remaining enterprises do not adopt a strategic perspective in management and as a result the manner and scope of searching and using information is not broad and systematic in their case. The ―ad-hoc‖, day-to-day needs mode prevails. Only 1 in 10 companies searches information in a systematic manner. It is so mainly due to the fact that the strategic awareness of entrepreneurs is low and their knowledge of management is insufficient. Because of this, entrepreneurs are even more reluctant to learn and enhance their skills and are more firmly convinced that modern management concepts are relevant to large companies and global corporations.

161 Diagram 2. Obtaining information

Total SMEs 11,1% 86,4% 2,5%

Up to 9 employees 11,0% 86,5% 2,6%

10-49 employees 12,8% 86,9% 0,3%

50-249 employees 21,4% 77,7% 0,9%

Systematic searching and updating important information

We acquire strategic information as and when needed, we don't do it systematically

I don't know/Hard to say

Source: R. Maik, A. Gołoś, K. Szczerbacz, Strategiczne źródła informacji w działalności przedsiębiorstw [Strategic sources of information in enterprise operations] PAED, Warsaw 2010. Searching strategic information in Polish SMEs is not a common practice. Nearly 17% of enterprises investigated in the last 12 months neither searched nor used any kind of strategic information. For small and medium enterprises, the most important and the most frequently used information is one that allows them to continue current operations and answers the questions of how to earn and what to earn on. The information which is sought by SMEs focuses on competitive environment (clients, distributors, competitors, etc) and not on enterprises‘ macro-environment. The companies usually search and use four types of strategic information: - Information on new technologies and products - these are mainly data on trends related to development of technology, on the feasibility of innovation projects, risks related to the emergence of new competitors, risks related to redefinition of potential demand in the sector (the emergence of new products, lower production costs, new quality, etc). - Information on economic situation – regarding economic conjuncture, consumers‘ moods and their spending power potential, dynamics of demand in the sector, investments financed from state funds, economic policy and government policy towards the SMEs. - Information on new clients – analysing business credibility of new partners, seeking new market opportunities, new distribution channels and new business partners and co-partners and other. They are of strategic importance to all enterprises as they are a basis for planning future income.

162 - Information on changes to law - which are due to efforts made to adapt the enterprise to new legal requirements, prompt reaction of enterprises to new directions of changes in law, taking advantage of opportunities and avoiding risks related to them. The main areas of interest are those that concern tax law and labour law, but also all regulations of relevance to particular industries or groups of enterprises. Diagram 3. Searching and using information

on new products, technologies 33,2% 17,4% 49,4%

on economic situation 25,4% 23,3% 51,3%

on new clients 24,4% 23,6% 52,0%

on changes in law 30,5% 16,1% 53,3%

on operations of competition 23,6% 20,6% 55,7%

on changes on the company's 26,9% 15,6% 57,5% suppliers'/subcontractors' market

on current clients 25,8% 15,8% 58,3%

about the new methods of financing 13,0% 18,8% 68,2%

about the company's international 7,5%6,8% 85,7% surrounding

Yes, the company used it Yes, the company searched for it No

Source: R. Maik, A. Gołoś, K. Szczerbacz, Strategiczne źródła informacji w działalności przedsiębiorstw [Strategic sources of information in enterprise operations] PAED, Warsaw 2010. Research findings show that nearly 70% of SMEs did not obtain information on new methods of financing, and 86% did not search information on the international business environment. The larger the size of the company, the greater the interest in strategic information and initiative in searching information. Enterprises search information in an active manner – by means of determining the type and expected content of information, identifying potential sources and undertaking activities in order to obtain information, and in a passive manner – some information reaches the organisation effortlessly (e.g. owing to information activity of the entities within the business environment of the company). Enterprises are more likely to

163 be active when searching information on the condition of the competitive environment than on more remote environment (macro-environment). The target audience of strategic information are usually the individuals who have a final say on the strategy – the owners (in companies consisting of one or several employees) or the management. Before this information reaches those who have an impact on the strategy of the enterprise, it is obtained and sometimes initially analysed by other departments and people employed in the enterprise.

2. Institutions as sources of strategic information for entrepreneurs In most cases an SMEs sector enterprise obtains information relevant from the strategic point of view from internal sources, ignoring external institutions (including public institutions). Information on new methods of financing and changes to law is usually sought in external institutions. At the same time, if the information is sought using external institutions, it is usually possible to find the relevant information. Companies are usually able to identify sources of strategic information in their environment. Below is a list of the most important institutions which are a source of information for Polish SMEs when building and implementing strategy and conducting business activity, from the most to the least important: financial institutions (banks, insurance companies, etc.), regional development agencies, gmina-level local authorities tax offices, chambers of commerce, associations of companies, Central Statistical Office (CSO), Polish Agency for Enterprise Development (PAED), labour offices, Social Insurance Company (ZUS), business intelligence, research companies, poviat-level local authorities In the case of some of these institutions, their information resources are accurately identified by entrepreneurs. Government offices (ZUS, tax offices and labour offices) are mentioned by entrepreneurs as important sources of strategic information. However, collecting, processing and distribution of such data is not part of main statutory activities. These are institutions which have been established to service and control business activity. There is at the same time an immense information potential which is unused and unrecognised by SMEs of business surrounding institutions such as: incubators (business, technology and science incubators), the European Commission, National Bank of Poland, Polish Committee for Standardization,

164 business self-governments, the Patent Office, Public Procurement Office and offices of voivodeship government administration. The usefulness of information made available by external institutions is considered to be average. Entrepreneurs draw attention to the fact that these institutions are not really competent, the information is too general and that industry-specific or tailor-made information is not provided. SMEs which search information in external institutions usually use such channels as e-mail, face-to-face meetings, telephone contact and analysis of institutions‘ online resources. However, the study has revealed that the institutions do not use e-mail to a satisfactory extent, a channel which is preferred by entrepreneurs. Internet is mainly used by SMEs to explore information resources available on the websites of institutions of information surrounding. Professional publications, trainings, seminars and conferences are not perceived to be sources of strategic information by the majority of respondents. Using these resources requires the entrepreneurs to be more active, to devote more time and financial resources as well as relevant intellectual abilities. The process of obtaining strategic information is difficult for many companies and requires time and effort. A half of Polish SMEs have difficulty finding information in external sources. This is due to the fact that the information is either incomplete or not available. At the same time, the research findings would suggest that the procedures of gaining access to the information needs are cumbersome. The larger the size of the company, the more difficult it is for it to obtain information. Contacts with external institutions are perhaps most challenging for enterprises of between 50-250 employees. The fact that they are more active in the process of searching information has an impact here as well.

Communication barriers in contacts with external institutions mentioned by entrepreneurs participating in the research: 1. The message is formulated in a manner that is difficult to understand. 2. Inadequate form of giving information – the uncertain legal status of e-mail, little usefulness of leaflets, brochures and publications. 3. Information of relevance to entrepreneurs is dispersed in many sources. 4. Little legibility of institutions‘ websites. 5. The slow speed of the process - waiting time of up to 2 weeks. 6. Difficult access to the competent person. 7. Inadequate attitude of the institutions‘ personnel – they are too formal, not involved and their communication style is inappropriate. 8. Cumbersome procedures related to accessing information. 9. The information is too general and therefore its usefulness is limited.

165 The study also allowed us to identify good practices in terms of communication of public institutions and business and social environment entities with the SMEs: . giving SMEs access to horizontal data and long-term forecasts, which is the very essence of strategic management, . undertaking information activities directed at employers organisations and in partnership with them (as well as partnerships of other kinds, e.g. : regional or thematic associations), . identifying SMEs needs in terms of efficient manners of informing and creating a model of cooperation for the employees of those institutions based on the client- consultant formula, . providing information services combined with consulting, . concentration of information with accompanying decentralisation of information exchange system and giving it a network-like character (the consultant performs the role of a channel for different kinds of information that can be found in various sources), . ―step-by-step‖ service with the consultant who manages the process, controls its schedule and the most important stages, . adapting the logics of communication to the entrepreneur's style and point of view.

3. Recommendations The research findings allowed us to formulate recommendations which will allow, on the one hand, the enterprises to transform into intelligent organisations and on the other to prepare business environment institutions to support entrepreneurs by making communication channels more efficient and making information used in strategic management more readily available. The increasing number of enterprises should contribute to faster modernisation of the economy and result in a smaller distance between Poland and developed countries in terms of science, creativity and innovation. However, in order for this to become reality, investing into human capital is necessary, both into that of small and medium-sized enterprises and public institutions which make strategic information available. Research findings would suggest that SMEs use strategic management to a limited extent. Operational management model focused on solving day-to-day problems prevails. Giving up on this model requires investment in the development of relevant skills and qualifications of employees that would allow incorporating a system of collection and processing information in the company, i.e. information that forms the basis for making the right decisions. Investment in human capital will allow us to make a better use of strategic information which is in possession of business environment institutions. The results of the project in question would suggest using information of this kind by SMEs is not common practice just yet. In order to remedy this situation, the initiators of the research recommend that two contact channels should be developed and enhanced, i.e. e-mail and face-to-face contact. E-mail should provide us with an opportunity to obtain comprehensive information (so that there is no need to use the telephone and traditional mail, etc.), obtain general information or

166 initiating contact. Progressive implementation of e-administration and the necessary legal regulations will definitely bring the desired changes in this respect. E-mail could in time become the main information channel due to the speed of entrepreneurs' work and its specificity. This is how the process of informing on enterprises‗ macro-environment can be optimised (i.e. information on changes to law, in the economic situation and new sources of financing). As can be evidenced by some institutions that have been investigated, it is recommended that the role of government official in contact with entrepreneurs evolves into an advisor- consultant role, whose task will be to ―inform efficiently‖, rather than "transfer information‖. This may reduce communication barriers and will contribute to solving the problem of dissipation of information relevance to the company. It is therefore necessary that public administration invests in human capital and development of skills facilitating contact with the entrepreneur. In addition to professional expertise, the government official needs to have skills and competencies that allow him to inform efficiently, especially communication skills, i.e. ability to use the sort of language that is adapted to the situation and the audience, facilitating mutual understanding and getting to know each other and creating the climate for mutual trust. It is important to introduce the business logics to the work of public administration. Some information functions may be outsourced to external institutions, which could be done by means of contracting these services. It would be necessary to introduce the element of competitiveness and rivalry between different institutions aimed at gaining and maintaining such contracts. Also, the work of government officials-consultants could also involve some bonuses and commissions dependent on attaining given standards of client service. This would also involve efficient monitoring of the quality of consultants' work in accordance with given indicators. What is also crucial is developing the IT skills of employees of enterprises, as well as of the personnel of business environment institutions, i.e. the use of computers and Internet to store, create, present and exchange information. The report‘s authors recommend that the public institutions' websites should be reconstructed, so that they are useful to entrepreneurs and constitute a functional and easy to use source of necessary data and information. It is a good idea to introduce a mechanism of efficient requests for opinion about a service to its users and taking account of these opinions in implementing the necessary changes. It is also necessary to make the process of giving information automatic, digitalise or develop updatable databases with strategic information that institutions are in possession of. This will facilitate access to information. The study has shown that one of the barriers in terms of entrepreneurs‘ access to strategic information that public institutions have is inadequate speed of their delivery. Dispersion of information in different institutions also remains an issue. In this case it is recommended that a channel integrating this information is created, i.e. in the form of a website containing the necessary content related to conducting business activity (consolidated acts of law, R&D issues, macroeconomic information, information on new sources of financing of one's activity and a collection of publications). Giving the portal more of a community character would also enable an efficient information flow that will not rely on

167 external institutions. Owing to this, the information would reach the actual target audience in the shortest possible time. A good solution would also be to use the moment of registering one's business activity to give entrepreneurs a package of data on important sources of information prepared in a suitable form (e.g. brochures, bulletins and CDs), i.e. telephones and addresses of the most important business environment institutions, organisations helping entrepreneurs, list of information in particular institutions, etc.). Last but not least, public institutions need to provide industry-specific contextual information. This is why it is recommended to carry out activities aimed at promoting and providing organisation and information support to business self-government institutions, which gather, analyse and also make strategic information available. The findings of the PAED‘s ―Foresight of human resources in modern economy‖ research project discussed in detail in Chapter 9 show that due to the increasing number of information almost immediately available, there will be an increase in demand for occupations related to searching and processing information. Companies will search people who will deal with determining information needs, obtaining and selecting information and appropriate preparation of information which are strategic from their point of view160. It is therefore essential to develop new competencies which will allow us to, e.g. use new IT technologies, distinguish useful and useless information, conduct data analysis. Developing such skills will have an impact on obtaining information which is necessary to make decisions and will contribute to dissemination of the model of strategic management of the SME sector enterprises. Modern enterprise management supported by reliable and competently collected information and accompanied by its skilful use enhances the company's effectiveness and innovativeness and allows it to gain a competitive advantage. This is especially relevant in the area of globalisation, which will mean that competition will become even more fierce and will force the entrepreneurs to enhance their workers' education and skills on a permanent basis. The research findings gained in the projects discussed in this chapter would suggest that we need to invest in human capital in such a way that the information that reaches the enterprise can enhance its knowledge resources, influence its ability to predict the future and think strategically, generate innovation and enable flexibility in adaptive measures, which are due to changes happening on the market. References: Ansoff H. I., Zarządzanie strategiczne [Strategic management] PWE, Warsaw 1988 Borowiecki R. (eds.), Romanowska M. (eds.), System informacji strategicznej – wywiad gospodarczy a konkurencyjność przedsiębiorstwa, [Strategic information system - business intelligence and enterprises' competitiveness] Difin, Warsaw 2001

160 In: Foresight kadr nowoczesnej gospodarki [Foresight of human resources of modern economy], (eds.) K. B. Matusiaka, J. Kucińskiego, A. Gryzik, PAED, Warsaw, 2009

168 Gierszewska G., Romanowska M., Analiza strategiczna przedsiębiorstwa [Strategic analysis of enterprises], PWE, Warsaw1994 (and later) Janiuk I., Strategia dostosowania polskich małych i średnich przedsiębiorstw do konkurencji europejskiej, [The strategy of adapting Polish SMEs to European competition] Difin, Warsaw 2004 Mazur-Łukomska K., Strategiczne zasoby informacyjne przedsiębiorstwa [Strategic information resources of the enterprises”, „Zeszyty Naukowe SCENO‖, No 2/2006 Moszkowicz M., Strategia przedsiębiorstwa okresu przemian, [Enterprise strategy in the period of change] PWE, Warsaw 2000 Obłój K., Strategia organizacji. W poszukiwaniu trwałej przewagi konkurencyjnej [Organisation’s strategy. In the search of sustainable competitive advantage], PWE, Warsaw 1998 and later Penc J., Strategie Zarządzania. Perspektywiczne myślenie. Systemowe działanie [Management strategies. Perspective thinking. System actions], Placet, Warszawa 1994 Penc J., Zarządzanie dla przyszłości [Management for the future], Wydawnictwo Profesjonalnej Szkoły Biznesu, Kraków 1998 Przech R., Public relations w działaniach komunikacyjnych administracji publicznej w Polsce [Public relations in communication activities of public administration in Poland], assignment, SGH (Warsaw School of Economics), Warszawa 2007 Stabryła A., Zarządzanie strategiczne w teorii i praktyce firmy,[Company strategic management in theory and in practice], PWN, Warsaw 2000 Woźniak K., System informacji menedżerskiej jako instrument zarządzania strategicznego w firmie [System of manager information as a tool for strategic management in the company], a doctoral dissertation, Academy of Economics in Krakow, 2005 Żołnierski A., Potencjał innowacyjny polskich małych i średniej wielkości przedsiębiorstw [Innovation potential of small and medium-sized enterprises], PAED, Warsaw 2005

169 Maciej Szałaj

Chapter 13. Improving human resources of companies as the orientation of activities funded by the European Social Fund

Supporting the development of human resources in companies through training of staff is one of the basic areas of activity of the Polish Agency for Enterprise Development. Activities in this area were undertaken by the Agency already in the pre-accession period. Under the Phare Social and Economic Cohesion programme, PAED was responsible for the implementation of one of the first training programmes financed from public funds allocated for Polish companies. After Poland’s accession to the European Union, PAED began implementing training projects on a large scale. As a result, training has covered more than 407 000 workers, who have benefited from subsidized training and postgraduate studies. Training projects implemented by PAED in the financial perspective 2004-2006, met the educational needs of enterprises of diverse specificity (size, placement activities, sectors, operating on various markets) thanks to diversification of their subject matter. The implementation of these projects helped to provide unique training services that were not previously available on the Polish market. Activities aimed at training personnel are continued by PAED also in the current financial perspective. The Agency is involved in the implementation of training projects of a supra- regional character. In order to develop a system of lifelong learning and provide adequate quality of services offered, PAED also carries out a separate project aimed at active business coaches or people interested in taking this kind of work. Ultimately, the training projects implemented by PAED in the current financial perspective will be attended by 350,000 people, which will make an important contribution to improving the quality of personnel in Polish enterprises. 13.1 Improving personnel’s skills as the direction of activities funded by the ESF European funds are used as a source of financing for various forms of business support. The most frequently mentioned activities in the Polish public debate are those related to subsidising investment in technical and logistic facilities or the development of commercial activity based on Internet solutions. These areas, however, do not exhaust the scope of public support available to Polish companies. Other initiatives relevant to the objectives of European development policy are also subject to EU financing. A special role is reserved to measures supporting the development of intangible business resources, and particularly their human capital. The adequate quality of staff is now an essential factor in market success. In a very difficult competition, and in the face of unprecedented dynamics of change, modern qualifications and

170 expertise of employees are gaining key importance. It is also necessary to have a capacity for early response to the changes and adapting your market potential and business profile to them. In response to these challenges, human resource development of companies and their adaptive capacity has been recognized by Member States and European institutions as one of the priority areas of support addressed to the companies under the structural funds. The main source of financing for such activities is the European Social Fund (ESF) which is the primary financial mechanism of the Community to stimulate the development of society and knowledge-based economy. The scope of initiatives financed by the European Social Fund is wide. It includes, in addition to projects directly aiming at the development of skills of workers and managers (training, postgraduate studies), projects aiming at promoting and disseminating flexible (so-called atypical) forms of work organization (telework, job rotation), or the professionalization of strategic business management. A particularly intensive support is targeted to groups at risk of exclusion from the labour market, including low-skilled workers and people of the age group above 45 years. In this text we will provide a description of activities aimed at human resources development of Polish enterprises. We will also discuss the profile of individuals and companies participating in subsidised training and consulting projects. We will also present the results of PAED evaluation studies on the impact of staff training on the professional situation of workers and the functioning of companies, as well as evaluation of the use of training services offered online (e-learning). 13.2. ESF projects aimed at companies in Poland European funds were first directed to Polish enterprises in the period before accession. The most important instrument of pre-accession support was the Phare Economic and Social Cohesion programme (ESC). It included, inter alia, actions related to investment support for small and medium-sized companies, advisory services in implementing quality management systems and promoting export activities. Projects related to the development of human resources have been launched in several areas. One of them was the activity of a nationwide network of non-profit organizations operating in the National Services Network. In the directory of services of the network there were training, information and advisory services focused primarily on preparing businesses to apply for co-financing from EU funds and professional support for people starting business activity. ESC Phare programme also included a component devoted to developing human resources which involved carrying out trainings as a classical form of continuing education (professional courses, training in business management). The scale, scope and diversity of activities financed from pre- accession funds, however, were relatively small161. Originally, they were to serve as a pilot. Their goal, besides achieving the expected direct results, was to prepare public institutions, social partners and enterprises to actively participate in the initiatives financed by the

161 More information on supporting personnel under projects financed from pre-accession funds can be found in: Phare Spójność Społeczno-Gospodarcza - podsumowanie programu, PAED, Warszawa 2006.

171 structural funds, under the Sectoral Operational Programme ―Human Resources‖ Development and the Operational Programme "Human Capital".

13.2.1. Supporting staff development in companies under the SOP HRD The first structural funds were awarded to Poland under the financial perspective 2004-2006. The European Social Fund has then become the source of financing for the initiatives carried out within several operational programmes - the Sectoral Operational Programme "Human Resources Development‖ (SOP HRD), the Integrated Regional Operational Programme and Community Initiative "EQUAL". The largest share of resources, amounting to EUR 1 470 million, was allocated in the first of these areas, which included in its scope actions aimed at developing human resources of the economy. Projects aimed at the companies were placed in Priority II SOP "Development of a knowledge-based society." They were placed within Measure 2.3 "Development of personnel for modern economy" with a training project for health workers involved in the implementation of Polish screening programmes.

Figure 1. Breakdown of the ESF funds under the Sectoral Operational Programme "Human Resources Development"

IROP Priority 1: Active labour market and professional and social inclusion policy

ESF SOP HRD Priority 2: Measure 2.1: Increasing Development of access to education – knowledge-based promoting lifelong

172 society learning

Measure 2.2: Improving education quality and relevance to the labour market needs

Measure 2.3: scheme a: development of Development of skills and qualifications of personnel of modern personnel economy scheme b: promotion of systemic solutions in adaptability and knowledge-based economy

scheme c: improvement of skills and qualifications of medical personnel

Measure 2.4: Strengthening administrative capacity

EQUAL Priority 3: Technical assistance Source: The Sectoral Operational Programme "Human Resources Development‖ 2004-2006 – Annex to the Ordinance of the Minister of Economy of 1 July 2004 – own elaboration

Supporting staff development in the SOP HRD was based on training and postgraduate studies for employees and managers of Polish companies. Adopting this type of initiatives was a response to the needs arising from the specifics of national barriers to development. It also corresponded well with the challenges identified in the National Strategy for Employment and Human Resource Development for 2000-2006, which at the time was the key strategic document setting out priorities for government action in the field of human resource development. This strategy also served as a coordination tool of nationally funded activities covered by the support from EU funds. This document was therefore the strategic point of reference for the SOP HRD. Its main objective was defined as the "development of an open, knowledge-based society by providing conditions for the development of human resources through education, training and work." 162 Among the pillars of the strategy, the need to improve the adaptability of workers and enterprises to changing market conditions was recognised. Promotion and dissemination of lifelong learning and training activities of companies were listed as mechanisms for improvement in this area. Diagnoses prepared for the SOP HRD programme pointed to unusually harsh conditions associated with the weakness of the domestic market for training services, a very weak activity of workers in the field of

162 The Sectoral Operational Programme "Human Resources Development 2004-2006, ibidem.

173 vocational training and development, as well as scarce outlays for training purposes, particularly in the sector of micro and small enterprises. On the one hand, these barriers resulted from the poor financial situation of Polish companies and a very difficult situation on the labour market, that being the consequence of the economic collapse of the early years of this decade. On the other hand, they also were profoundly culturally bound, as manifested by the failure to see the need for training on the part of workers and the reluctance to invest more in training staff on the part of employers. The SOP HRD projects offering trainings and postgraduate studies for company executives were implemented by two schemes - competition (scheme a.) and system (scheme b). The premises of the first scheme assumed that it will be "demand-based‖, in result the training services delivered met with large demand on the part of firms and employees. The involvement of EU funds in this case was justified by cost barriers impeding or preventing access to desired services. The implementers of such projects were training institutions which applied for co-financing for the training or postgraduate studies that were offered. Projects implemented in the former scheme (system) were of the ―supply‖ character, and so their aim was to promote competences and solutions, that at the time were not meeting a sufficiently large uptake among companies, but which were of strategic importance to the objectives of the SOP HRD and other areas of EU structural policy163. The specificity and range of activities undertaken within the system projects were varied. The implemented initiatives included: training projects aimed at improving health and safety (one of the dimensions of adaptability), trainings to prepare companies to implement an environmental management system, projects promoting flexible forms of employment and work (telework, job rotation), projects supporting business on European and non-European markets and business development in the regions of Eastern Poland, as well as projects aimed at promoting cooperative relations (clustering) and targeted at specific industries (wood, electronics, tourism). The amount from the European Social Fund earmarked for their implementation was almost EUR 190 million, representing 26% of the funds allocated to Priority II „Development of a knowledge-based society." More than three quarters of this amount was spent on ―demand- based‖ projects.

163 The concept to divide projects into ―supply‖ and ―demand‖ was taken from: Analiza kierunków wspierania kapitału ludzkiego przedsiębiorstw z wykorzystaniem środków EFS, Ministerstwo Rozwoju Regionalnego, Warszawa, 2006.

174 Diagram 1. Breakdown of the ESF allocation under Priority II SOP HRD

Source: R.Trzciński, M.Szałaj (ed.), Doskonalenie kadr polskich przedsiębiorstw, PAED, Warszawa 2009 r.

The average value of projects implemented in scheme a. was PLN 1.4 million, while in the case of system projects the analogous figure amounted to PLN 12 million. The average value (median) for "demand-based" projects amounted to PLN 630 thousand which indicates a large range of values for individual projects, as well as a relatively large number of low-budget projects with their value clearly below the average. The operators co-financing trainings and postgraduate studies in the case of 60.6% of the projects were commercial companies. Nearly one-fifth (19.2%) of projects were carried out by universities. The remaining groups of project initiators were non-profit legal persons (non- profit organizations), institutions of economic and professional self-government, public sector entities, as well as schools and other establishments operating in the educational system.

175 Diagram 2. Types of entities implementing training projects N=680 projects

Source: Monitoring Subsystem of the European Social Fund164 – own elaboration. The subject matter of training services offered varied widely. "Business management" was the subject most often discussed in the trainings. This issue was part of the program for nearly 20% of the projects. The next most common thematic categories were "vocational training" and "training in sales skills and techniques."

164 Monitoring Subsystem of the European Social Fund (PEFS) is an application developed at the request of the Ministry of Regional Development for the collection of data for reporting and evaluation studies concerning projects under the ESF co-financing.

176 Diagram 3. The subjects of the trainings offered by the SOP HRD

N=680 projects

Source: Monitoring Subsystem of the European Social Fund – own elaboration.

13.2.2. Supporting the development of human resources under the Operational Programme Human Capital The funds of the European Social Fund earmarked currently (under financial perspectives for 2007-2013) for human resources development of Polish enterprises are spent under the Operational Programme Human Capital. A new solution is to split the projects into those of nationwide and regional scope. The first category of measures included in Priority II of Operational Programme Human Capital "Supporting the development of human resources and adaptation potential of enterprises and improving the health condition of working persons." The second category is covered in Priority VII of Operational Programme Human Capital ―Regional human resources of the economy." Importantly, the division of measures into national and regional levels is not only a reflection of accepted rules of allocation, but it also responds to the different nature of the problems and the state of human capital of specific regions and to the needs generated for the entire country. Another important change in relation to the SOP HRD is a much greater variety of measures aimed at strengthening the competitiveness of the economy through the development of the adaptability of human resources and enterprises. In addition to projects aiming at providing training services, there are also: - Promotional activities (e.g. promotion of innovation, the idea of lifelong learning), - Projects combining training and advisory components, - Research projects, - Measures animating the cooperation of companies and universities,

177 - Measures to promote modern social dialogue and corporate social responsibility, - Measures to promote the development of the skills of coaching staff providing training services to Polish companies.

Training, postgraduate studies and consultancy elements offered in supra-regional projects165 involve varied subject matter, however, in their selection process the emphasis is on activities aimed at workers aged over 45 years and the development of key competencies with a view to modernisation and innovation activities of enterprises. System projects under Priority II are more diversified than it is the case of supply-side projects implemented under the SOP HRD. In addition to training projects, this formula involves also promotional, research and analytical projects. Training projects of a regional nature166 are addressed to enterprises operating within specific provinces and to their delegated employees, as well as to individuals applying on their own initiative. This area involves also training and advisory support projects for people at risk of losing their jobs in connection with the processes of adaptation and restructuring, as well as animating the cooperation between business and science. The value of the allocation of the European Social Fund for support of economic development in central priority "Development of human resources and adaptation potential of enterprises and improving the health condition of working persons‖ is more than EUR 661 million167. The largest part of this pool – EUR 428.5 million – was used to co-finance national training projects carried out under Sub-measure 2.l.1. ESF funds transferred to the implementation of initiatives supporting the development of human resources under regional priority "Regional human resources" amounted to EUR 1144.98 million168. The largest portion of this amount was allocated for regional training projects under Sub-measure 8.1.1.

165 According to SOP HC, supra-regional projects must abide by the following criteria: the companies benefiting from the projects must have an organizational structure (subsidiaries, branches) in at least two voivodeships and the employees delegated by a given company must perform work in more than one voivodeship 166 Regional projects are defined as all training projects that do not meet the criterion of being "supra-regional" 167 Total allocation earmarked for Sub-measure 2.1.1, 2.1.3 and 2.2.2 OP HC 168 Total allocation earmarked for Sub-measure 8.1.1, 8.1.2 and 8.2.1.

178 Figure 2. Breakdown of ESF funds under Operational Programme "Human Capital"

Source: Detailed Description of the Priorities of the Operational Programme Human Capital 2007-2013 - the version in force since 1 June 2009, own elaboration.

ESF

OP HC

179 Priority 2 Priority 8 Development of human resources and adaptation potential of enterprises and Regional human resources for the economy improvement in the health condition of working people

Measure 2.3 Measure 8.1 Measure 8.2 Strengthening Developing a workforce and enterprises in the region Transfer of knowledge the health potential of the working persons and quality improvement of the healthcare system functioning

Measure 2.1 Measure 2.2 Development of human resources for Support for the human modern economy resources adaptation system

Submeasure Submeasur Submeasure Submeasure Submeasure Submeasure Submeasure Submeasure Submeasu Submeasur Submeasur 2.1.1 e 2.1.2 2.1.3 2.2.1 2.2.2 8.1.1 8.1.2 8.1.3 re 8.1.4 e 8.2.1 e 8.2.2 Developmen Partnership t of human for System Improvement of Improvemen Support to Support to Strengthening Predicting Support to Regional capital in increasing support for the quality of t of the developing adaptation local economic cooperation Innovation enterprises adaptability increasing services quality of professional and partnership for change of scientific Strategies the provided by provided qualifications modernizatio adaptability environmen adaptation training and n processes t and potential of institutions services – in the supporting the counselling enterprises employees development of systemic for region and entrepreneurshi projects enterprises entrepreneur p and s innovativeness

180

181

13.3. Profile of the company and persons involved in projects to support development of human resources The Polish Agency for Enterprise Development is responsible for the training projects targeted at companies and their employees within the Sectoral Operational Programme "Human Resources Development." Currently it is the institution dedicated to supra-regional and system projects which fall within Priority II Operational Programme "Human Capital". The data presented in this chapter come mainly from the system of monitoring and evaluation studies on measures implemented by PAED169. 13.3.1. Companies participating in ESF training projects The training and postgraduate studies offered within SOP HRD were attended by 94 thousand companies170. 3 485171 and 2 426172 companies, respectively, have participated so far in supra- regional and regional human resources development projects co-financed from OP HC funds. Ultimately, training support will be provided for a total of 200 thousand companies173. In the case of projects implemented by PAED, over 80% of companies benefiting from subsidized training services are located in the cities.

Diagram 4. Location of company’s headquarters

Rural areas Urban areas

SOP OP HC HRD Source: Monitoring Subsystem of the European Social Fund; Current evaluation Measures 2.1, 2.2, OP HC – own elaboration.

Most of the companies participating in the training are located in Mazowieckie Voivodeship, and then in Śląskie, Dolnośląskie and Małopolskie Voivodeships. Companies located in Świętokrzyskie and Opolskie voivodeships were the rarest to benefit from the training.

169 Reports on PAED evaluation studies are available on the website http://www.parp.gov.pl/index/index/110 170 Doskonalenie kadr polskich przedsiębiorstw, PARP (PAED), Warszawa 2009, p.45 171 Monitoring Subsystem of the European Social Fund – as of 28.04.2010. 172 Report on the implementation of the Operational Programme Human Capital (as of 31.12.2009) 173 The estimate is based on target values set out in the Report on the implementation of the Operational Programme Human Capital.

Map 1 Companies participating in training projects SOP HRD - structure according to the location of headquarters

Map 2 Companies participating in supra-regional training projects SOP HC - structure according to the location of headquarters

The largest group of recipients of co-financed training services is created by micro-companies (employing fewer than 10 people). This is especially visible for companies involved in projects of OP HC174. In this group a slightly higher percentage of large companies (employing at least 250 people) are also observed. Among the companies that benefited from the SOP HRD projects were mostly small (10-49 employees) and medium-size enterprises (50-249 employees).

174 A larger proportion of micro enterprises probably stems in part from easier access for companies operating in the formula of one-person economic activity. The possibility of self-recruitment of these entities for postgraduate studies was introduced. In the case of SOP HRD projects, it was necessary to have intermediary institutions implementing training and fulfilling additional paperwork.

Diagram 5. The size of companies participating in ESF training projects

SOP HRD OP HC

and more

Source: Monitoring Subsystem of the European Social Fund – own elaboration. The vast majority of companies participating in training financed by the ESF have a relatively short experience of activity. Over one third of entities was formed after 2000, and a further 29% of them in 1994-2000. Companies created before 1990 represent 14% of enterprises participating in training projects. Within half a year after the participation in training projects ended, nearly half of companies (42-49%) were at the stage of stabilisation or linear development. Companies participating in the SOP HRD projects more often than users of the OP HC projects were in the phase of rapid development, but they were more rarely in crisis or stagnation. However, we can assume that these differences do not reflect the different characteristics of enterprises, but are an expression of economic downturn, which takes place during the implementation of OP HC training projects analysed.

Diagram 6. Company development stage – SOP HRD projects Basis: 18 951 enterprises

Source: Quarterly Study of Final Beneficiaries of Measure 2.3 SOP HRD

Diagram 7. Company development stage – SOP HC projects Basis: 1303 enterprises

Source: Current evaluation of Measures 2.1, 2.2, OP HC – own elaboration.

13.3.2. Employees benefiting from subsidized training and postgraduate studies Training and postgraduate studies offered by SOP HRD were used by 407 000 workers of enterprises, which represents about 3% of all working population. The range of participation was highest in the Dolnośląskie Voivodeship, where training projects covered 4.1% of working persons, while in the Lubelskie Voivodeship it was smallest, with the corresponding rate at 2.2%.

Nearly 90 thousand people participated in supra-regional OP HC training projects, while nearly 100 thousand people in regional projects. Ultimately it is planned that the offer of co- financed training will reach a total of 550 thousand employers of Polish companies. People aged 24-30 definitely predominate among the participants of the training projects implemented by PAED. The number of people aged over 30 steadily decreases with age. A slight reversal of this regularity is observed only in the group aged 45-55.

Diagram 8. Age of participants in training projects implemented by PAED

SOP HRD OP HC

Source: Monitoring Subsystem of the European Social Fund – own elaboration.

The attention is absorbed by a very high percentage of people with higher education (they comprise more than half of the participants), and a small percentage of people with basic vocational education (less than 10%) and a very number of people with primary education.

Diagram 9. Age of participants in the ESF training projects

Source: Monitoring Subsystem of the European Social Fund – own elaboration.

Most employees participating in training projects lived in the Mazowieckie Voivodeship (18.6%), followed by Voivodeships: Śląskie, Dolnośląskie and Wielkopolskie. The fewest number of people participating in training projects lived in Lubelskie, Opolskie and Świętokrzyskie Voivodeships.

Map 3 Participants of SOP HRD training projects - structure according to the place (voivodeship) of residence

Map 4 Participants of supra-regional SOP HC training projects - structure according to the place (voivodeship) of residence

13.4. Assessing the effects of subsidized training and postgraduate studies The data presented in this chapter come from evaluation research of training projects implemented by PAED, conducted periodically since 2006. Their results allow us to assess various aspects of training services received (subject matter, adjustment of the program to the needs) and assess the impact of participation in a given training project on the professional situation of an employee or business operation.175

175 The evaluation of SOP HRD training projects was conducted under the Quarterly Research of Final Beneficiaries of Measure 2.3 SOP HRD. A total of 10 editions of research were carried out. The evaluation of OP HC is conducted within the current Evaluation of Measures 2.1, 2.2 OP HC. So far one edition of the study was carried out, three more will be completed in 2010. The study will continue in subsequent years, for the period of six months after the end of last training projects. Detailed results and information concerning the methodology are available on the websites - http://www.parp.gov.pl/index/more/10558, http://www.parp.gov.pl/index/more/10556

14.4.1. Company evaluation Over 90% of enterprises participating in SOP HRD training projects evaluate their subject matter as compatible with their needs.

Diagram 10 Evaluation of the usefulness of SOP HRD projects

Basis: 19027 enterprises

Source: Quarterly Study of Final Beneficiaries of Measure 2.3 SOP HRD.

The adaptation of training services to the company‘s needs are also highly evaluated by companies involved in OP HC projects, 90% of which consider them to be useful176.

176 Entities that have opted for two highest evaluations on five-point scale were deemed as companies positively evaluating the usefulness of training.

Diagram 11 Evaluation of the usefulness of OP HC projects

Basis: 985 enterprises

very useful not useful at all

Source: Current evaluation of Measures 2.1, 2.2, OP HC – own elaboration. The vast majority of companies (89-92%) believe that the benefits associated with their participation in training projects have exceeded the related financial expenditures or other costs.

Diagram 12. Evaluation of the usefulness of training and postgraduate studies

Have the benefits associated with the Have the benefits associated with the participation in ESF co-funded participation in training projects/studies under training projects/studies proved the project proved worth the costs incurred by worth the costs incurred by your your company (financial outlays, time devoted, company? administrative burden? Source: Quarterly Study of Final Beneficiaries of Measure 2.3 SOP HRD; Current Evaluation of Measures 2.1, 2.2 OP HC.

Qualifications gained or deepened by staff in training and postgraduate studies are used by 89% of companies participating in SOP HRD projects and 88% of companies participating in OP HC projects, while in the second case, 73% of companies use them often or very often.

Diagram 13. Using the qualifications gained by workers - SOP HRD projects Does your company currently use the skills and knowledge gained by your employees during trainings/postgraduate studies co-financed from ESF?

Basis: 19027 enterprises

Source: Quarterly Study of Final Beneficiaries of Measure 2.3 SOP HRD – own elaboration.

Diagram 14. Using the qualifications gained by workers - SOP HRD projects How often do you use your knowledge and skills obtained or extended by your employees during your training within the project?

Basis: 1055 enterprises

Source: Current evaluation of Measures 2.1, 2.2, OP HC – own elaboration. Within six months after finishing participation in training or postgraduate studies, 57% of companies participating in SOP HRD projects had noticed an improvement in their

functioning. 70% of them associated this improvement with the participation of workers in these projects.

Diagram 15 Effect of co-financed training and postgraduate studies on improving the functioning of firms Is there any connection between participation of your employees in ESF-co-financed trainings/postgraduate studies and the improvement in the functioning of your company?

Basis: 10 780 enterprises

Source: Quarterly Study of Final Beneficiaries of Measure 2.3 SOP HRD – own elaboration.

In the analogous period from the end of participation, 45% of companies benefiting from the offer of OP HC projects have introduced new and significantly improved products or services. 67% of them believe that participation in the project had an average or high impact on it, while 20% assess the impact as small. The second most common change was the introduction of new methods of management and organization of work. The strength of the impact of participation in a given training project was assessed as in the first case.

Diagram 16. Changes in the enterprises after participation in training projects ended

yes no hard to say

Introduction of new and significantly improved products or services

Introduction of new methods of management and organization of work

Increased market share

Entering new markets

Introducing significant changes in the promotion of products or services

Other significant changes

Source: Current evaluation of Measures 2.1, 2.2, OP HC – own elaboration.

Over one third of companies had increased their market share within six months after participation in OP HC training projects ended. A change indicated by less than every third company was the gaining of new markets and introducing changes in the promotion of products or services.

Diagram 17 Influence of co-financed training services on changes in companies

What was the impact of co-financed training services on changes in your company? Large impact Medium Small impact No impact Hard to say impact Introduction of new and significantly improved products or services N=473

Introduction of new methods of management and organization of work N=417

Increased market share N= 326

Entering new markets N= 309

Introducing significant changes in the promotion of products or services N=293

Other significant changes N= 53

Source: Current evaluation of Measures 2.1, 2.2, OP HC – own elaboration. Changes most strongly related to the use of subsidized training services were the introduction of new management or organization of work, as well as various changes classified as "other‖. The weakest link with participation in OP HC projects was observed in the case of changes related to increased market share.

13.4.2. Evaluation of participants The vast majority of participants of subsidised training and postgraduate studies developed their qualifications thanks to that participation.

Diagram 18. The development of professional qualifications of SOP HRD training project participants

Basis: scheme a 10 891 people. Scheme b. 14 026 people

Source: Quarterly Study of Final Beneficiaries of Measure 2.3 SOP HRD – own elaboration.

According to over 90% of workers benefiting from SOP HRD projects, the participation in subsidised training or postgraduate studies translated into gaining or deepening of knowledge and skills. This opinion was particularly pronounced among those participating in the system projects (scheme b.).

Diagram 19. The development of professional qualifications of SOP HC training project participants

Basis: 750 people

Source: Current evaluation of Measures 2.1, 2.2, OP HC – own elaboration. Among the participants in OP HC projects, there was also a significant advantage of people who declare that the use of training services resulted in the expansion or revision of their qualifications. However, previously held competences clearly were developed more often than the completely new ones. Over 80% of persons participating in the SOP HRD ―demand-side‖ projects very often or often use the qualifications gained or deepened during training and postgraduate studies in their current work. This percentage, however, is significantly lower among those taking part in the systemic projects ("supply-side") and OP HC projects, which amount to 71% and 63%, respectively. In the case of supply-side projects, this difference can be explained by their specificity, involving the promotion of skills and organizational practices of an innovative nature, and so poorly established in the practice of Polish enterprises. In the case of projects funded by OP HC, it should be borne in mind that we possess only the opinions of training participants of one edition of a survey. The results of further evaluation studies will determine whether there is any regularity in this case.

Diagram 20. Using the qualifications gained or extended - SOP HRD projects How often in your current work do you use knowledge or skills acquired or extended during trainings/postgraduate studies co-financed from the EU funds?

Basis: scheme a. 10 484 people, scheme b. 13 211 people

Source: Quarterly Study of Final Beneficiaries of Measure 2.3 SOP HRD – own elaboration.

Diagram 21. Using the acquired or extended skills - SOP HC projects

Basis: 691 people

Source: Current evaluation of Measures 2.1, 2.2, OP HC – elaborated by Public Profits Sp. z.o.o.

Within half a year after the end of participation in subsidized training or postgraduate studies, 12.1% of participants in the projects of scheme a. and 8.6% of persons benefiting from the project scheme b. of Measure 2.3 SOP HRD were promoted to higher positions. In the case of OP HC projects, 5% of the participants were promoted. Lower percentage in the latter case

may stem from the fact that the implementation of OP HC training projects occurred in the period of economic slowdown, and consequently in a worse situation in the labour market and limited professional mobility of employees.

Diagram 22 Professional advancement at the end of participation in ESF training projects

Basis: 614 people

Basis: scheme a. 7992 people, scheme b. 7701 people

Source: PAED - Quarterly Study of Final Beneficiaries of Measure 2.3 SOP HRD; Current Evaluation of Measures 2.1, 2.2 OP HC – own elaboration.

In the group of people who were promoted to higher positions, the relationship between promotion and participation in training project is observed by 38.8% of project participants in scheme a., as well as 49.6% of project participants in scheme b. 177 For OP HC projects, due to the too small size of this group (31 people), the analyses of the relationship between the advancement and further training are not possible.

177 Schemes a. were competitive in their nature. Scheme b. implemented systemic projects aiming at promoting specific solutions for business management or targeted to specific industries. The specificity of different schemes of Measure 2.3 SOP HRD was discussed in chapter 14.2.1 (see p. 5)

Diagram 23. Influence of training and postgraduate studies for career advancement of SOP HRD project participants

Basis: scheme a.879 people, scheme b. 639 people

Source: PAED - Quarterly Study of Final Beneficiaries of Measure 2.3 SOP HRD – own elaboration.

Within six months after the completion of training and postgraduate studies, salaries increased for 37.2% of participants in the projects of scheme a., 28.5% of participants in SOP HRD system projects and 18.1% of people involved in OP HC projects. It must be assumed that a lower percentage of people declaring earnings growth in OP HC projects depends still much more strongly on the economic downturn than in the case of career advancement of participants.

Diagram 24. Increase in earnings among the participants of subsidised training and postgraduate studies

Basis: 172 people

Basis: scheme a. 9944 people, scheme b. 12 746 people Source: PAED - Current evaluation of Measures 2.1, 2.2 OP HC – own elaboration; Quarterly Study of Final Beneficiaries of Measure 2.1 SOP HRD – own elaboration.

Among those whose earnings have increased, the relationship between their increase and the participation in training was noticed by 33.8% of participants of projects in scheme a. and 35.4% of participants of projects in scheme b. In the case of OP HC project participants, 33.1% of the people indicated high or medium impact of funded projects.

Diagram 25. Influence of training and postgraduate studies on earnings increase of SOP HRD project participants

Basis: scheme a. 3278 people, scheme b. 3332 people

Source: Quarterly Study of Final Beneficiaries of Measure 2.3 SOP HRD – own elaboration.

Diagram 26. Influence of training and postgraduate studies on earnings increase of SOP HC project participants

Basis: 172 people

Source: Current evaluation of Measures 2.1, 2.2, OP HC – own elaboration.

13.5. E-learning courses funded from ESF - the "PAED ACADEMY" project One of the weaknesses of the Polish system of staff training is the minimal degree of application of methodological solutions using information technology to allow for widening the circle of potential recipients of training services and increasing the effectiveness of education provided. Therefore, the financing of the European Social Fund covered efforts to disseminate training services provided in the form of e-learning, i.e. distance education via the Internet and specialized portals and applications. The advantage of e-learning is the opportunity to flexibly adapt subject matter to the individual needs of participants, as well as forming a convenient schedule of the program in a given training. Because of these characteristics, e-learning is an offer addressed to groups with very limited opportunities to use conventional training. Among them, we should indicate people raising children, disabled people and residents away from the big cities in which vast majority of training institutions focus their activity. The biggest initiative to date popularising e-learning in the Polish market is the "PAED Academy‖ project178, co-funded from the ESF. Over 30 thousand people179 took part in the training based on it. Approximately 90,000 users got to know learning resources available on the site of the PAED Academy. The most common motive to participate in the PAED Academy was the desire to understand the principles of e-learning. This motivation was also often associated with the search for knowledge needed during the establishment of the company and with the intention to obtain a certificate confirming the acquisition of certain skills.

178 Detailed information on the PARP Academy is available on the project website - www.akademiaparp.gov.pl 179 PARP data, as of June 2010

Diagram 27 Motives to participate in e-learning courses Why did you decide to participate in the PAED Academy training?

Basis: 644 people

Source: Current evaluation of Measures 2.1, 2.2, OP HC – elaborated by Public Profits Sp. z.o.o. More than half of the participants benefited from training exclusively in their private time. Every fifth person performed activities related to being on the project mostly in their free time and less often during working hours. A total of 21% of the people took part in the e-learning predominantly or exclusively during working hours.

Diagram 28 Participation in the project - involving leisure and working hours When did you use the site of the PAED Academy?

Basis: 645 people

Source: Current evaluation of Measures 2.1, 2.2, OP HC – elaborated by Public Profits Sp. z.o.o.

The training offered through the "PAED Academy" is generally assessed as good or very good. This opinion is shared by virtually all participants in the training.

Diagram 29. Overall assessment of training offered at the site of the PAED Academy In general, how do you assess the training offered at the site of the PAED Academy that you used?

Basis: 637 people

Source: Current evaluation of Measures 2.1, 2.2, OP HC – elaborated by Public Profits Sp. z.o.o.

The vast majority of participants (93.2%) believe that the benefits associated with participation in the PAED Academy lived up to their expectations. Almost all (99.7%) are also of the opinion that participation in the e-learning courses was worth the time spent.

Diagram 30. Assessing the benefits associated with participation in e-learning courses Have the benefits associated with your participation in the PAED Academy so far lived up to your expectations?

Basis: 630 people

Source: Current evaluation of Measures 2.1, 2.2, OP HC – elaborated by Public Profits Sp. z.o.o.

Diagram 31. Evaluation of participation costs Do you think it was worth taking the time to participate in the PAED Academy?

Basis: 644 people

Source: Current evaluation of Measures 2.1, 2.2, OP HC – elaborated by Public Profits Sp. z.o.o.

The satisfaction from participation in the PAED Academy project is also corroborated in the willingness of participants to recommend e-learning courses; 98.3% of the participants are inclined to recommend such courses.

Diagram 32. Propensity to recommend e-learning courses Would you recommend participating in the e-learning course to your friends who want to improve their qualifications?

Basis: 645 people

Source: Current evaluation of Measures 2.1, 2.2, OP HC – elaborated by Public Profits Sp. z.o.o.

The current edition of the Academy of PAED will be implemented by 2013. According to PAED estimates, at that time at least 16 000 more people will have benefited from e-learning courses. The great popularity of this form of training allows us to assume that they will be continued also in subsequent years. PAED evaluation research will provide information needed to compare results of their evaluation and effects with results presented in the chapter above. Availability of funds from the European Social Fund provides an unprecedented opportunity not only to individual companies, but also for the whole economy. Along with increasing the level of economic development, advantages used so far by domestic companies begin to lose importance. The increase in earnings is limiting opportunities to compete more and more on the basis of low costs of production and labour force. In this context, the priority challenge is to change the model of companies in the direction of activity based on intellectual capital and high technological potential. The factors of such targeted changes must be comprehensive and properly profiled investment activities. Their scope, however, cannot be confined to the modernisation of production processes or infrastructural base. A necessary element of these activities is investments in the development and revision of the employees‘ competences. This area in the Polish context is a field of serious handicaps in relation to today‘s leading economies180. The prevailing attitude among Polish companies towards the costs associated with human resources is to treat them in terms of costs, without noticing an investment asset. Measures supporting the development of human resources and adaptive potential are an important support for companies seeking chances to modernise their market profiles. The reported test evaluation confirms that these measures have a positive impact both on the

180 According to CSO data cited in the Operational Programme Human Capital, 5.2% of active people participate in continuing education, which is one of the lowest levels reported in European countries.

functioning of companies and on the professional situation of their employees. Co-financing from the ESF eliminated cost barriers that prevented many companies from retraining workers. Along with the regionalisation of measures, the availability of training services has been further expanded. The dissemination of training and professionalization of training policy will therefore in the coming years be one of the main strategic objectives faced by Poland. The specificity of the modern economy, however, often makes human capital a determining factor of investment attractiveness of a given country and its growth potential. The ability to support staff development of the Polish economy is therefore no less important than the availability of instruments of cohesion policy for the construction of roads and highways, urban infrastructure or public transport. An appropriately high degree of its use can therefore determine the prospects for development of our country in the next few decades.