Research published in November 2003 compares various aspects of pay in Poland and the current EU Member States. For example, Poland's minimum wage is around half that in the EU Member State with the lowest minimum, though as a proportion of average wages it is at similar levels to those found in a number of EU countries. Average earnings in Poland are around a third lower than in Greece, the lowest-paid Member State. However, Poland is narrowing the pay gap with the EU, largely due to superior economic growth.
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Research published in November 2003 compares various aspects of pay in Poland and the current EU Member States. For example, Poland's minimum wage is around half that in the EU Member State with the lowest minimum, though as a proportion of average wages it is at similar levels to those found in a number of EU countries. Average earnings in Poland are around a third lower than in Greece, the lowest-paid Member State. However, Poland is narrowing the pay gap with the EU, largely due to superior economic growth.
In November 2003, a team of researchers from the Warsaw School of Economics (Szkoła Główna Handlowa, SGH) carried out a comprehensive study of selected aspects of the overall situation of Polish employees compared with that of their counterparts in specific EU Member States as well as in the EU as a whole. Below we summarise the results of this research with respect to: the definitions, standards and level of the minimum wage; average earnings; and the characteristics of the pay structure.
The minimum wage
The SGH research on the minimum wage issue is presented in Płaca minimalna według standardów europejskich, by Dr Ewa Smyk. It cites the definition of the minimum wage current in Poland and places it in a European context (TN0208101S). The minimum wage is defined as the lowest pay which may be given to a full-time employee performing the most simple work in the country or in the group for which the minimum wage is set.
In 1970, the International Labour Organisation (ILO) adopted Convention No. 131 on minimum wage fixing, which obliges ratifying countries to establish a system of minimum wages which covers all groups of wage earners whose terms of employment are such that coverage would be appropriate. Poland has not ratified this Convention.
Article 4 of the the Council of Europe's 1961 European Social Charter provides for a right to 'the right to a fair remuneration', referring in Article 4.1 to 'the right of workers to a remuneration such as will give them and their families a decent standard of living'. On this basis, the committee of independent experts which advises on the implementation of the Charter recommended in 1977 a minimum 'decency threshold' of 68% of the average national wage, thus defining fair remuneration in relation to average remuneration.
Poland has ratified Article 4 of the European Social Charter with the exception of point 4.1 - ie that laying down the right of workers to a remuneration such as will give them and their families a decent standard of living. Polish legislation concerns itself with guaranteeing a minimum wage, which is not to say that this wage must be 'fair'. Dr Smyk argues that the institution and enforcement of a minimum wage does not contribute to the reduction of poverty, with only a fair wage capable of doing this. Also, research indicates that a large portion of minimum wage increases in Poland are not addressed properly, in that they tend to benefit households with average and higher earnings. This situation arises because the minimum wage is a point of reference for remuneration schemes in companies and for many components of compensation schemes and social benefits. Accordingly, an increase in the minimum wage occasions an increase in earnings in business enterprises; at the same time, however, the value of the minimum wage is insufficient to guarantee a decent standard of living.
The current EU Member States and the acceding and candidate countries adopt various approaches to the definition of the minimum wage (TN0208101S). The most frequent solution, according to the report, is that the minimum wage is defined by the government in consultation with the social partners; it may also be set by the government itself or by way of tripartite negotiations. In Poland, the minimum wage, and also certain pay increase indicators, are now subject to negotiations within the national Tripartite Commission for Social and Economic Affairs (Komisja Trójstronna do Spraw Społeczno-Gospodarczych) (PL0210106F). If the Tripartite Commission fails to set the minimum wage for the given period within the statutory deadline, this task passes to the government (PL0211109F). Until 1990, the minimum wage in Poland was set by way of a cabinet resolution. Between 1990 and 1998, the minimum wage was set in official orders promulgated by the Minister of Labour and Social Policy; since 1998, it has been set in ordinances by the minister responsible with labour affairs. In most European countries, Poland included, the minimum wage is expressed in monthly terms; a few countries, however, use a minimum hourly wage, sometimes as well as a monthly one.
According to the information cited in the report, the monthly minimum wage in the EU Member States and the acceding and candidate countries currently varies between EUR 56 in Bulgaria and EUR 1,369 in Luxembourg - in other words, the minimum wage in Bulgaria is 25 times lower than that in Luxembourg. Of the current Member States, Portugal, Greece and Spain have monthly minimum wages in the EUR 416-EUR 605 range, while in the remainder the minimum wage is in excess of EUR 1,000. In the acceding and candidate countries, the monthly minimum wage varies between EUR 56 in Bulgaria and EUR 535 in Malta. Malta and Slovenia have minimum wages approaching those in Greece, Portugal and Spain. Excluding these two countries, the minimum wage in the acceding and candidate countries varies between EUR 56 in Bulgaria and EUR 212 in Hungary. In Poland, the minimum wage in early 2003 was EUR 201 a month - ie 6.8 times lower than in Luxembourg.
Comparing the minimum wage with the average wage in the industrial sector, in the current EU the proportion varies between 34% in Spain and 57% in Portugal. In Poland, this proportion is 37.4%.
Polish minimum wage
In September 2003, the cabinet adopted an ordinance setting the gross minimum wage at PLN 824 a month, a level which had been duly agreed with the social partners represented on the Tripartite Commission. It was also agreed that, until the end of 2005, employers may reduce the minimum wage offered to people taking up paid employment for the first time by 20% for the first year of employment and by 10% for the second. This temporary relaxation of the minimum wage rules is aimed at easing entry to the labour market for young people born during the 'baby boom'.
In the SGH research, Dr Smyk has synthesised Ministry of the Economy, Labour, and Social Policy (Ministerstwo Gospodarki, Pracy I Polityki Społecznej, MGPiPS) data into the following table comparing the minimum wage and the average wage in Poland over 1999- 2003.
| Year | Minimum monthly wage (PLN) | Average monthly wage in national economy (PLN) | Minimum wage as % of average |
| 1999 | 653.33 | 1,698.12 | 38.5 |
| 2000 | 695.00 | 1,923.81 | 36.1 |
| 2001 | 760.00 | 2,061.85 | 36.9 |
| 2002 | 760.00 | 2,154.00 | 35.3 |
| 2003 | 800.00 | 2,141.00 | 37.4 |
Dr Smyk concludes that 'the data set out in the table indicates that the ratio of the minimum wage to the average remuneration significantly departs downwards from the recommendations of the [Council of Europe] committee of independent experts (who recommended a decent wage indicator of 68% of the average wage). On the other hand, however … it is similar to that observed in Belgium or in the UK (39% and 37% respectively), and is actually higher than in Spain (34%).'
Pay levels in the EU and in Poland
The SGH research comparing remuneration levels and structures in the EU and Poland is presented in Wynagrodzenia w Unii Europejskiej - Implikacje dla polskich firm (Remunerations in the European Union - implications for Polish companies), by Professor Marta Juchnowicz. The paper summarises the characteristics of the EU system of remuneration and adopts it as a frame of reference for an analysis of the conditions prevailing in Poland. The paper states that the EU remuneration model is based on underlying solidarity, with comparatively little disparity between the two extremes of the pay range and, accordingly, with a relatively high ratio of the minimum wage to the average wage. This basic model is said to be characterised by considerable rigidity of pay, arising from legal regulations and the fact that wages are often negotiated for many employing entities at a time. According to the report, uniform regulations of some sort concerning pay at the pan-European level refer to the issue of fair remuneration, as discussed above, and to equal pay for women and men. The remaining aspects of remuneration are left to the prerogative of individual Member States.
The paper divides the current EU Member States into three groups with respect to remuneration:
countries with average annual earnings in excess of EUR 30,000 - Luxembourg, France, Belgium, Sweden, Germany, the UK and the Netherlands;
countries with average annual earnings between EUR 20,000 and EUR 30,000 - Austria, Finland and Italy; and
countries with average annual earnings below EUR 20,000, varying from EUR 9,928 in Greece to EUR 19,307 in Spain.
Average annual earnings in Poland in 2002 stood at EUR 6,734 - almost three times less than in Spain, 37% lower than in Portugal, and 32% lower than in Greece.
Disparity in wages constitutes a natural corollary of differences in the level of social and economic development, measured by the gross domestic product (GDP) per capita, the report states. In 2001, the GDP per capita in current prices, with reference to currency exchange rates, stood at an average of USD 20,844 for the EU and USD 4,746 for Poland (ie 22.77% of the EU figure). In terms of purchasing power, this difference is somewhat smaller, with the Polish figure corresponding to 40.38% of the EU level.
Professor Juchnowicz states that, over the past few years, there has been a pronounced tendency towards narrowing the pay gap between Poland and the current EU Member States. For example, in 1989 (ie prior to the commencement of Poland's market reforms), average monthly earnings in Poland corresponded to a mere 1.5% of average monthly earnings in Germany (measured in terms of the free market exchange rate, as opposed to the official exchange rate enforced by the Polish authorities). Over the period from 1995-8, average gross monthly pay in the Polish production sector, as measured in Deutschmarks, increased by over 50%. As a result, the ratio of Polish earnings to German ones rose from 12% in 1995 to 17% in 1998 and 18% in late 2000 (17% of average earnings in the west German Länder and 23% of average earnings in the former east Germany). This narrowing of the pay gap has been possible thanks to somewhat improved GDP growth in Poland. Over 1995-2001, GDP in Poland increased by 29.7%, as compared with an average of 15.6% in the EU.
Sectoral differences in pay structure
In the EU as well as in Poland, according to the SGH research, the earnings structure has certain sectoral characteristics - for example, the extraction industries and the chemicals industry tend to pay more than light industry (such as foodstuffs and textiles). However important differences between the EU and Poland can be observed as well. In the EU, construction jobs pay better than those in the processing industry, while in Poland the opposite holds true. Comparing detailed data for specific jobs provides some instructive examples: a mining engineer working in Austria earns 290.2% more than an unskilled worker in the textiles industry; compared with 251.1% in Germany and 384.4% in Poland; while An Austrian butcher earns 135% the wage of an unskilled worker, compared with 141% in Belgium, 132% in Germany and 98% in Poland (the report draws these data from Album wynagrodzeń w krajach Unii Europejskiej i w Polsce, Z Jacukowicz, Institute of Labour and Social Policy [Instytut Pracy I Spraw Socjalnych, IPISS], Warsaw. 2002).
Professor Juchnowicz concludes that 'specialists from various fields are in agreement that, irrespective of progressing globalisation, national culture continues to be the principal factor determining human behaviour in all realms of social as well as economic life.'
Commentary
The data cited above provide clear evidence on two issues. First, Poland ranks in the middle rank, or slightly higher, among the EU acceding states in terms of average earnings. Second, on a rough estimate, Polish average earnings have attained between a third and two-fifths of the present level in Greece and Portugal. The distance to be covered by Poland in order to attain parity with the lowest EU levels thus remains substantial. On the other hand, Poland’s long-term economic development rate is somewhat higher than that now observed in the EU, and recent macroeconomic data suggest that the Polish economy is now emerging from several years of mediocre growth (increasing investment levels in Polish industry are an especially positive development). This provides for moderate optimism as regards Poland’s future place in the enlarged European Union. (Juliusz Gardawski, Warsaw School of Economics and Institute of Public Affairs [Instytut Spraw Publicznych, ISP])
Eurofound recommends citing this publication in the following way.
Eurofound (2004), Research compares Polish and EU pay, article.
