Public sector pay examined

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Since the early 1990s, the Polish public sector has contracted significantly and its pay and conditions have changed. While the sector continues, for the most part, to offer stability of employment, there is a trade-off in the form of earnings which lower than those in the private sector. This article examines the situation in 2003 in terms of public sector pay determination and levels, as well as looking at the development of the sector over recent years.

Until 1989, Polish law did not explicitly define the public sector; accordingly, there was no body of regulations which cohesively addressed even the basis principles governing the disbursement of public funds and of public sector assets. It was only with the passage of an Act regarding public finance in November 1998 that what is referred to in official terminology as the 'public finance sector' was defined (for statistical purposes, the 'public sector' comprises all entities, including business enterprises, owned by the State Treasury as well as by local government bodies and their associations). Through this legislation, the public sector was officially defined as encompassing:

• public authority bodies, government administration bodies, state supervision and enforcement institutions, courts and tribunals, and local government bodies and their units;

• state budget entities, auxiliary entities, and earmarked funds;

• state institutions of higher learning;

• research and development institutions;

• the National Health Fund (Narodowy Fundusz Zdrowia, NFZ) (previously the Kasy Chorych health insurance units and the independent public healthcare institutions);

• the Social Insurance Institution (Zakład Ubezpieczeń Społecznych, ZUS), the Agricultural Social Insurance Institution (Kasy Rolniczego Ubezpieczenia Społecznego), and the funds administered by each;

• cultural institutions operated by the national government or by local governments;

• the Polish Academy of Sciences (Polska Akademia Nauk, PAN) and its organisational entities; and

• entities with their own legal responsibility founded by the national government or by local governments for purposes of public duties, other than enterprises, banks, and entities incorporated under commercial law.

This definition gives the public sector a predominantly service-oriented character. Thus, below we refer to the public services sector.

Commercialisation, privatisation, and decentralisation

As Poland's economic and political reforms got under way in the late 1980s and early 1990s, the public services sector was dominated by the state at least as much as were other areas of the economy. All the public services were extensively subsidised out of the national budget. While there was a modicum of private sector presence in healthcare and in education, the effect was marginal at most.

According to a report on the public services sector in Poland prepared as part of the EFPE project, changes in the Polish public sector after 1989 progressed along the following tracks:

• reactivation of local government;

• privatisation within the public sector;

• administrative reform;

• reform of education and of healthcare; and

• reduction of the size of the public sector at the central level.

As it was so large in the days of Poland’s command economy, the public services sector initially presented ample possibilities for privatisation, in areas such as veterinary care or notaries' offices. The next phase of privatisation, running from 1992, centred on public utilities and on the large business enterprises. Furthermore, in the new economic reality, the way was open for the establishment of private educational institutions, including private colleges and private medical academies.

In the socialist-era Polish People’s Republic, all public services were financed at the central level. The state budget was subdivided into local ones, assigned to local administrative bodies. An Act regarding local government, passed into law in 1990, conferred legal personality upon the local municipalities - known as gminas - and provided for the separation of their finances out of the central budget. Thus, municipalities now finance nursery schools, pre-school centres, elementary schools, utilities providers, libraries, cultural centres, social aid centres, and their own office infrastructure out of their own budgets. However, this local government structure lacked an intervening rung separating the municipalities and the central administration, a state of affairs remedied only in 1999 with the implementation of an administrative reform.

1999 saw the reorganisation of the country into 16 regions (voivodships). These, in turn, were subdivided into districts (powiats, of which there are 373), each of which comprises a cluster of municipalities (2,489 in total). The districts and the regions are financed out of their own budgets. The local government structure was now complete. In 2000, employment offices passed under the control of local government units (PL0310104F), and in 2002 the same happened with arts schools (szkoły artystyczne).

Reforms of the pensions system, education, and healthcare proceeding parallel to those of Poland’s administrative structure and combining with them into the 'second wave of Polish reforms' have led to the emergence of new entities in the public sector.

Changes in employment

While overall employment levels in the public services have remained very similar over the last decade, there has much variation at the level of individual services, as illustrated by table 1 below.