Spurred by robust economic growth, Poland’s inactivity rate has steadily declined since 2007 and reached a historic low in 2019. However, despite the positive long-term trend, Poland’s inactivity rate (the share of the working-age population not in the labour market) is still above the OECD average. That rate differed across regions by 13.3 percentage points in 2019, from 21.1% in the Warsaw capital region to 34.4% in Warmian-Masuria.
High inactivity rates put pressure on public finances. Poland currently spends more on social protection relative to its total government expenditure than the OECD average, despite its low unemployment rates. Additionally, structural barriers to labour force participation may negatively affect economic growth.
Despite some improvement in recent decades, economic inactivity rates are particularly high in some groups:
For older people of working age, early retirement is still the norm. In 2019, economically inactive people between 55 and 64 years old represented 35% of the economically inactive working-age population in Poland but the age group only accounted for 20% of the working-age population.
Women often take on family duties, preventing them from becoming economically active. Although women’s economic inactivity rate (aged 15 to 64) decreased slightly, from 40% in 2000 to 37% in 2019, the gap with men widened from 11 to 14 percentage points over the same period.
Nine out of ten high-skilled individuals were active in the labour market in 2019, compared to less than half of low-skilled individuals. The gap is partly driven by the lower education level among older people of working age (55-64), but is widening over time.
Among people with disabilities, only 27% of men and 35% of women were economically active in 2020.
Economic inactivity rates are much higher in some regions, particularly in Eastern Poland. Although there has been a trend towards convergence in economic inactivity rates across Polish regions, a number of factors have meant that some regions have lagged. In the east of Poland, for example, many SMEs have lower productivity and are not as well-integrated into international value chains as compared to firms in western regions, where proximity to EU markets has helped to attract foreign investment. The same eastern regions bore the brunt of Poland’s shift away from agricultural production towards manufacturing and the service industry, leaving them with limited and less attractive employment opportunities.
Automation of production processes and job polarisation are likely to impact economic inactivity rates in the future. In almost all Polish regions, 48% or more of jobs were at risk of high or significant change from automation. The exception is Warsaw, where that figure stood at 40%. With the share of middle and low-skill jobs declining gradually, those with low- or medium-levels of education may see shrinking job opportunities, impacting their labour force participation.
While Poland has come out of the COVID-19 pandemic with minimal changes in unemployment rates, the decline in labour demand during the downturn could have long-term impacts on the most vulnerable. While demand for labour is now rebounding, some regions and groups were hit disproportionally. The regions of Eastern Poland, in particular Podkaparcia, Podlaskie and Lublin Province experienced the sharpest absolute rise in the number of registered unemployed per job offer. There is also a risk that even the small drop in labour demand may reverse some of the favourable trends that helped disadvantaged groups increase their participation in the labour force in recent years.
Going forward, there are policy actions Poland can take to help promote an inclusive COVID-19 recovery and further reduce economic inactivity.