New minimum wage legislation criticised by unions

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In October 2002, the Polish parliament passed a new law on the minimum wage, which should come into force in early 2003. The new legislation increases the minimum wage, amends the way in which it is set, and sets a lower rate for recent school-leavers. The trade unions have been very critical of the new provisions.

A legislative Act regarding the minimum wage was passed by the lower chamber of the Polish parliament, the Sejm, on 10 October 2002. On 30 October, it was endorsed by the Senate in its unaltered form, and is now waiting to be signed into law by the President. Once this occurs, the new regulations governing the minimum wage will come into force in early 2003. The new law marks another phase of the government's legislative activity geared at liberalisation of the labour market. The government hopes that, in this way, it can contribute to the reduction of labour costs, thus making the Polish economy more competitive and counteracting unemployment.

When the legislative draft drawn up by the government was first discussed by the Sejm in July 2002, it caused quite an uproar and was ultimately sent to the parliamentary commission for social policy and the family, for further adjustment. The commission proceeded to effect a number of changes, the most important of which increased the monthly minimum wage to PLN 800, up from the PLN 775 originally proposed by the government. The Act’s draft in its revised form was accepted by an overwhelming majority of deputies in the Sejm, with only three dissenting votes, though more than 100 deputies abstained.

New provisions

Under the new legislation, the minimum wage, previously set by the Minister of Labour and Social Policy, is now to be determined by way of negotiations within the Tripartite Commission (Komisja Trójstronna) (PL0210106F) on the basis of proposals put forth by the government. Should the Tripartite Commission fail to reach a consensus, the minimum wage is to be set by the cabinet by way of a resolution. Adjustment of the minimum wage will take place with reference to the forecast annual average prices index announced by the Polish Official Statistics (Główny Urząd Statystyczny, GUS), either once or twice a year (when the price index increases by 5%, or by 5% and above, respectively).

While the need to adopt the new minimum wage legislation and the objectives informing it did not give rise to any significant reservations, the objections raised by the political opposition in the course of the parliamentary debate referred primarily to school-leavers taking their first jobs. The new Act allows for the remuneration for first-time entrants to the labour market to be set at 80% of the statutory minimum wage in the first year of their employment and at 90% in the second; for purposes of retirement pension insurance, however, these years will be deemed to have been worked at the 'full' minimum wage. This measure was taken by the government with a view to the labour market activation of young people and reducing unemployment in the youngest group on the labour market, that comprising persons aged 15-24. The unemployment rate among this group is very high; according to GUS data published for the first six months of 2002, it amounted to 43.5%, a slight decrease compared with the first quarter but nevertheless twice the level for the working population as a whole. The First Job programme (PL0208101N) launched in June 2002 makes some positive contributions in this area, but their scope is limited. According to Ministry of Labour (Ministerstwo Pracy i Polityki Społecznej, MPiPS) data, 227,000 graduates of post-secondary schools registered as unemployed during the first five months of the First Job programme’s operation while 63,000 participated in the scheme (ie a little over a quarter of the total). The provision concerning the minimum wage for recent school-leavers is to remain in force until 2005.

The main concerns in parliament centred on whether such a reduction of the minimum wage for school-leavers is in accordance with the Constitution, with representatives of the right-wing League of Polish Families (Liga Polskich Rodzin, LPR) threatening to question the Act regarding the minimum wage before the Constitutional Tribunal (Trybunał Konstytucyjny, TK). The presumption that lower remuneration for young employees will necessarily induce employers to recruit more of them was also questioned.

Trade union reactions

Compared with the restrained objections to the new legislation raised in parliament, trade union reactions were fiercely hostile. These ill-disposed reactions were hardly a surprise, as both the major trade union organisations had already expressed their negative views of the legislative proposal tabled by the government. Maciej Manicki, speaking on behalf of the All-Poland Alliance of Trade Unions (Ogólnopolskie Porozumienie Związków Zawodowych, OPZZ) which he heads, has stated that his organisation 'absolutely rejects' the minimum wage provisions as accepted by the Sejm (quoted by the Polish Press Agency on 10 October 2002). The position formulated by the OPZZ council on 17 October unequivocally rejects the new measures which, in its view, do not guarantee an improvement in the proportion of the average remuneration for the entire economy represented by the minimum wage. However, OPZZ's call for rejection of the Act by the Senate - which is dominated by the ruling coalition of the Democratic Left Alliance (Sojusz Lewicy Demokratycznej, SLD) and the Labour Union Party (Unia Pracy, UP) - went unheeded, as did Mr Manicki’s previous suggestions that the Senate ought to effect major amendments to the draft.

This situation provides further proof of the deepening scepticism of OPZZ, an organisation with distinctly left-wing roots, towards the policies being pursued by what is, at least in name, a left-wing cabinet. The position adopted by OPZZ with regard to the government’s proposals has been a consistently negative one. The OPZZ programme for 2002-6, as formulated in the wake of its recent fifth congress, refers explicitly to striving towards reintroduction of the system for determining the minimum wage employed in the past, whereby the expenditures of working families were taken as a point of reference. Nevertheless, it appears that relations between OPZZ and the government are marked by considerable flexibility. The OPZZ leadership announced in the 30 October issue of its Trade Union Chronicle (no. 71, 423/2002) that, one day earlier, they received assurances from the Prime Minister that, if the first quarter of 2004 or 2005 sees a worsening of the minimum wage’s ratio to the average wage in the first quarter of 2003, the government will seek to counteract this negative tendency by way of legislative measures.

While the leadership of the Independent and Self-Governing Trade Union (Niezależny Samorządny Związek Zawodowy Solidarność, NSZZ Solidarność), the other major union organisation, did not voice its disapproval over the newly approved Act in as spectacular a fashion as OPZZ, it has steadfastly taken a negative position with regard to the government's proposals (as reflected in decision no. 46/02 of its national commission presidium). NSZZ Solidarność’s is unhappy about: what it sees as inadequate mechanisms for consultation on the minimum wage within the Tripartite Commission; failure to guarantee some relation of the minimum wage to the average wage; and the provisions for a reduced minimum wage in the first two years after leaving school, which are regarded as a possible violation of the Constitution. As regards the way in which the minimum wage is calculated, NSZZ Solidarność demands that the previous formula referring to the expenditures of 20% of the lowest-earning people living in working households is reverted to. The two major trade union organisations in Poland have thus taken very similar positions with regard to the changes to the minimum wage.

Commentary

In its essence, the Act regarding the minimum wage has not given rise to significant reservations on the part of the major political parties. It does, however, include the highly controversial provision regarding lower minimum wages for recent school-leavers. The faith in this measures as a way of stimulating the creation of jobs for young people is not shared by the opposition, and it is likely that this provision will be questioned before the Constitutional Tribunal. As for the trade unions, their view of the new measures is a negative one, and it can be expected that they will give vent to their displeasure in the course of Tripartite Commission talks. Needless to add, the proposed Act must still be signed into law by Poland’s President. (Jan Czarzasty, Warsaw School of Economics (Institute of Public Affairs (Instytut Spraw Publicznych, ISP and Szkoła Główna Handlowa, SGH))

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