Labour unions and restructuring processes in the hard coal sector in Poland

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Hard coal mining has traditionally been a sector with a strong union presence. From the very outset of restructuring, the mining unions have taken an active part in the transformation of the industry. This article endeavours to describe the industrial relations and social dialogue situation in Polish mining, with particular emphasis on union representation. Approaching the subject from this angle is important because, as the article will demonstrate, unions are still capable of exerting an impact on the fate of entire industries (blocking privatisation).

In present-day Poland, wholesale restructuring is being pursued primarily in those sectors which, until recently, were regarded as being of key importance to the national economy and, accordingly, are referred to as 'strategic sectors'. These industries benefited from preferential treatment in the centrally planned economy prior to 1989, doted on by the authorities and pampered with special forms of support. Under the new conditions of an increasingly vibrant market economy and the waning of heavy industry, the 'leading' or 'prestige' sectors of yesteryear became 'problem' sectors and sectors 'at risk'. Hard coal mining presents a case in point, racked with radical transformations and plagued by major problems.

In the opinion of domestic as well as foreign experts (duly shared, if only at the level of half-hearted lip service, by the successive ruling cabinets in Poland and propagated by the country’s mass media), the hard coal mining sector, irrespective of changes effected over the past 15 years, continues to be a relic of times gone by. Accordingly, the established view continues, the industry is in need of further slimming down in terms of its production capacity as well as in employment levels.

This unflattering view of the coal mining industry in Poland, and likewise the consensus that change is in order, is an objective one. People on the inside, meanwhile, be they union activists or managers of the various mining companies into which the industry has been organised, tend to adopt a different perspective. While they may agree with the experts that the financial situation of Poland’s coal mines is a difficult one, they argue that the problems are not the product of some vague 'objective factors' or of 'poor performance of the mines themselves', but of deliberate policies pursued by Polish politicians seeking to physically undermine and eliminate this branch of Polish industry at the behest of foreign advisers.

Such voices from within the mining industry have been making themselves heard from the very outset of the sector’s restructuring and, while they themselves do not decide matters, the authors of every new restructuring plan to come along must take such sentiments into account, if only because coal mining is one of the traditional bastions of trade unionism.

The actors

The hard coal mining sector in Poland is at the receiving end of activities by a number of government agencies; within the industry itself, a proliferation of new entities is being observed among employees and employers alike. Public bodies charged with mining oversight and employer organisations active in the sector include the High office for mining (Wyższy Urząd Górniczy, WUG), the State Agency for hard coal mining restructuring (Państwowa Agencja Restrukturyzacji Górnictwa Węgla Kamiennego, PARG), the Central information centre for mining (Centralny Ośrodek Informatyki Górnictwa, COIG), the Mining labour agency (Górnicza Agencja Pracy, GAP), the Mining chamber of industry and commerce (Górnicza Izba Przemysłowo Handlowa, GIPH), the Central mining institute (Główny Instytut Górnictwa, GIG), and the Union of hard coal mining employers (Związek Pracodawców Górnictwa Węgla Kamiennego), to name but a few of the more important bodies which sprang up within the sector or were imposed upon it. As far as the sector’s employees are concerned, meanwhile, the number of union organisations defending their interests is even higher. At last count, there were 13 unions operating in the Polish mining industry. Research carried out by the Faculty of social economics at the Warsaw school of economics (Szkoła Główna Handlowa, SGH) indicates that there is no other industry in Poland which would be marked by such a high degree of unionisation, reaching 100% at some specific establishments. Much like many other sectors, the mining industry is dominated by the sector-specific bodies of the All-Poland Alliance of Trade Unions (Ogólnopolskiego Porozumienia Związków Zawodowych, OPZZ) and the Independent and Self-Governing Trade Union 'Solidarność' (Niezależny Samorządny Związek Zawodowy Solidarność, NSZZ Solidarność), but smaller unions of a more radical stripe also enjoy considerable clout. Unions representing all mining employees are augmented by some organisations of a narrower vocational or functional profile, such as the Labour union of Polish mine elevator machinists (Związek Zawodowy Maszynistów Wyciągowych Kopalń w Polsce) or the Kadra union (Porozumienie Związków Zawodowych KADRA, PZZ KADRA) for mid-level managerial staff.

The history of mining sector restructuring in Poland

The far-reaching economic reforms of the early 1990s left Polish mines with complete organisational and financial independence. They were free to sell their output as they saw fit, to Polish buyers and abroad. But the excess output capacity and the fall of coal prices in international markets made for cut-throat competition, and two classes of mining operations soon emerged - a small group of profitable pits managing to make ends meet and a considerably larger group of mines running high deficits. Regarded as a whole, the industry was racking up losses, perhaps inevitably, if all the factors are taken into account; it should be noted that during the first period of transition, the loss and indebtedness levels of Polish mines were comparatively moderate, but they subsequently ballooned as wage demands were pressed home with increasing persistency and as the management of mines became increasingly open to political pressures.

This first period of Polish mining adaptation to market principles can loosely be termed the 'natural stage' given the absence of administrative interference, with the individual mines largely left to fend on their own. A turning point came in February of 1993 with the passage of the legislative Act regarding property transformations of certain state-owned enterprise of special importance to the economy; this statute provided the legal foundation for the first governmental programme for restructuring of the mining industry, adopted in March of 1993. This programme put a definitive end to the situation where each mine sought to make do on its own in the new market reality, and it determined the shape of the industry for several years to come. Most of the Polish mines were grouped into seven coal companies, removing their organisational and financial autonomy. Practice would soon demonstrate that while this lumping together of the mines may have been an unfortunate idea in itself, much graver consequences arose from the division into 'profitable' and 'unprofitable' categories adopted for this purpose. The authors of the restructuring programme apparently worked on the assumption that the profitable coal pits, which had already demonstrated their efficiency under market conditions, would somehow exercise a positive effect on the remaining ones, especially if some government subsidies were included. This optimistic scenario did not stand up in practice; and after several years, all seven of the mining companies were in debt.

Execution of this first ill-fated plan for restructuring Poland’s mining sector was interrupted following a shift of the political balance. The new ruling coalition, comprised of the post-communist Democratic Left Alliance (Sojusz Lewicy Demokratycznej, SLD) and the Polish People’s Party (Polskie Stronnictwo Ludowe, PSL) devised its own restructuring plan, initially for the years 1994-1995. This new programme retained the seven-company grouping, and it also provided for the costly exercise of building-up coal reserves (in spite of a market glut). The plan was to achieve profitability of coal extraction in 1994 and to keep up this happy state of affairs in subsequent years, and also to render Polish coal a competitive proposition in international markets.

Implementation of this new government policy brought results which were nothing short of disastrous. Undaunted, the government proceeded to adopt a new programme along broadly similar lines for the years 1996-2000. In what had become a regrettable pattern, execution of the programme was cut short following the parliamentary election in 1997, and the new cabinet proceeded to build its own restructuring policy for the mining sector. This was adopted in November 1998, and took the form of a legislative Act relating adaptation of the mining industry to the market economy.

In early 1999, the Minister of the Economy announced a list of 24 mines which had been selected for liquidation; 15 of these to be shut down altogether and nine were to be partially wound down. In most cases, the process was to be concluded by 2001. For an idea of the scale of these changes, the coal mines to be liquidated had a combined employment figure of almost 76,000 people. This new government programme was brought to an end in 2002.

Following the spurts and stops of the consecutive restructuring programmes pursued since 1993, the Polish mining industry has shed some 97,000 jobs (40% of the industry workforce in percentage terms). There were 23 mines which had been wholly or partially liquidated, coal extraction had been reduced, the extraction process was streamlined and the industry’s work productivity per miner had improved to approximately 700 tonnes of coal per year.

Currently, a new restructuring programme is being executed, with measures planned for the years 2003-2006. Kompania Węglowa S.A., a holding company established in 2003, became the largest mining enterprise in Europe, with an annual extraction capacity of 55 million tonnes and a workforce of 84,000. The current plan calls for new reductions of coal production and for another round of employment downsizing, to approximately 100,000 employees industry-wide, i.e. 28,000 redundancies.

The relatively positive situation in the international coal industry of late called for some adjustments to the restructuring programme’s objectives. Extraction actually increased, and some Polish mines began recruiting new workers. As it turned out, the programme did not allow for the contingency of an upturn in the coal market; all the restructuring programmes had been planned on the premise that the industry will be going from bad to worse. Thus, the restructuring programmes have demonstrated a major weakness whose repercussions are not limited to the mining industry itself but are felt in the Polish economy as a whole.

The labour unions and restructuring

The problems plaguing the restructuring of Poland’s hard coal industry, as set out above, may be among the reasons why the reforms are meeting with relentless protests by the labour unions. The first major strikes concerning restructuring of the mining industry broke out in 1994, and the next wave of protests came in 1998. A key demand of the protesters referred to a social safety net for those affected by the restructuring processes.

For the duration of 2003, miners at various mines protested against the proposed shutting down of their workplaces. November of that year witnessed one of the larger protests against the restructuring plans which assembled some 35,000 miners. These protests can certainly rely on grassroots support even among those who don’t actually take part in them; in a referendum, 90% of mining industry workers spoke out against the restructuring plans.

The very respectable results achieved by the mining sector in 2004 have affirmed the union leaders in the strategy followed by them to date. Some representative quotes: 'The general assessment [of restructuring] is bad ... What is being referred to as restructuring in each new programme actually isn’t restructuring at all, but liquidation. The name restructuring was thought up to throw sand in people’s eyes. Every programme provided for the liquidation of a couple of mining operations, and the only differences concerned the number of pits to be shut down ... every government repeated the dogma about the waning of the mining industry...'

Another union activist has this to say: 'Fortunately, we now have a good market for coal, and we are not at risk of further mine closures or of drastic downsizing of production ... and it is a good thing that there is no need to close the mines which had been slated for liquidation, something which we fought against. For these actions, we ended up having to pay fines for damaging the facade of the Kompania Węglowa office...'

Research by the Faculty of Social Economics at the Warsaw School of Economics confirms that, until recently, collaboration with management of the mining companies was an important element of the union strategy. This was the result of a sea change occurring after the early 1990s, when the unions fought tooth and nail with the mine managers. The mining unit of NSZZ S, as strong as ever during that period, eventually replaced every last mine director with people palatable to the union. The reshuffling of the sector into seven mining companies carried out in 1993 triggered union protests at what they deemed encroachment upon the mines’ independence; NSZZ S staunchly defended the managers appointed from among union loyalists, organising 'director strikes'. In this way, a pattern of employer vs employee struggles within the mining sector was supplanted by one where the entire industry hardened into a single front against the government. It was only the organisational changes from the past two years which changed this picture.

At the present stage, an ever-increasing role extends to managerial cadres, first and foremost on account of the consolidation and privatisation processes. One mining union leader describes this situation as follows: 'After the establishment of Kompania Węglowa, it is becoming obvious that the decision-making process is shifting to the Kompania board. Management of the company is essentially independent of the national administration and of whatever policy it happens to be pursuing. The government cannot entirely withdraw from intervention in the mining sector. We can’t have a state of affairs where the government simply adopts a restructuring programme and then matters just run their course, without any government participation. But the overall tendency is that the managers have more and more to say, and the government - less...'

This growing role of the managers is also attested to by their own community. In reference to the controversy surrounding the government restructuring plan for the mining industry for the years 2003 through 2006, the chief executive of Kompania Węglowa said that 'for the first time in the history of mining, we are taking a small step towards de-politicisation of the sector. It isn’t the government changing the programme around under pressure from the unions and from politicians, but it is the company’s directors who are thinking about changes. We aren’t looking for alternative solutions because there’s a political demand or because we’re yielding to the unions, but because we want to react to changes in the market...'

Commentary

In April 2004, the Polish government adopted a programme for restructuring hard coal mining over the years 2004 through 2006, along with a strategy for 2007 through 2010. In late July, these documents were supplemented with a plan for access to hard coal deposits over the years 2004 through 2006 and by a plan of coal pit closures for 2004 through 2007. These various documents testify to the government’s determination to continue reduction of extraction capacity, although the fact that there are now two alternate reduction scenarios for the period until 2006 presents a new flexibility on the part of the planners.

This determination, however, must still be confronted with the unions, which have amply demonstrated in the past that they will fight for every job, every coal pit and every emolument included in the current social package. There have already been protests against changes to the collective agreement, and the privatisation referendum yielded a resounding no.

That said, the power of labour unions in the Polish economy as a whole is decreasing; the mining sector is actually an exception to this general trend. Here, the government and the managers of the coal companies must heed the miners if they are to have any hope of avoiding serious unrest. It is almost certain that the future holds more strikes by Polish miners. (Rafał Towalski, Institue of Public Affairs (Instytut Spraw Publicznych, ISP) and Warsaw School of Economics (Szkoła Główna Handlowa, SGH)).