Government drive to tackle unemployment

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This article looks at the impact of amendments to the Act regarding the promotion of employment and labour market iInstitutions. In particular it looks at how ‘activation contracts’ and state employment schemes will affect unemployment rates in Poland.

An Act regarding the promotion of employment and labour market institutions was passed by the Polish parliament in April 2004 and started to come into force on 1 May. The new legislation deals with the state’s duties with respect to fostering employment, assuaging the impact of unemployment and 'activating' unemployed people. An important role in the achieving these objectives is envisaged for the social partners. Adoption of the Act marks the latest step towards harmonisation of Polish legislation with EU law in this area.

Background to the new regulations

The past few months have witnessed a slow but consistent fall in the number of unemployed people. According to the data of the Central Statistical Office (Główny Urząd Statystyczny, GUS), the unemployment rate in September 2005 amounted to 17.6%, which equals 2,760,000 persons unemployed. This tendency may be related to the general upturn in the labour market. However, among the EU Member States, Poland still occupies a notorious leading place in the unemployment statistics.

On 6 September 2005, the government accepted the National Employment Strategy for 2007-13 (Krajowa Strategia Zatrudnienia na lata 2007 - 2013, KSZ), part of the National Development Plan, which was aimed at combatting unemployment. The KSZ proposals aim to create over 1.5 million jobs by the end of 2013, thereby reducing the unemployment rate to 10%-12%.

The KSZ objectives can only be achieved through a simultaneous rapid economic growth and further development of new ways of getting the unemployed back into the labour market. Taking these factors into account, the strategy sought new instruments to allow for at least a minimal revival of the labour market. This was the background to the amended Act on Employment Promotion and Labour Market Institutions, which came into effect on 1 November 2005.

New conditions for the unemployed

The new instruments to combat unemployment include an 'activation contract' and works done in the public interest (PL0508102N). The ‘activation contract’ is a civil law contract regulating the provision of services by babysitters and domestic help. The conclusion of this contract should be registered in the Poviat Labour Office (Powiatowy Urząd Pracy), which will make the employer eligible for tax allowances on costs incurred.

It is the local administration official, the starosta, who appoints a person ineligible for unemployment allowance to carry out ‘work in the public interest’ in a given commune. The starosta is also obliged to reimburse the commune from the Labour Fund for the remuneration of such a person. If an unemployed person rejects a Labour Office job offer, they will be deprived of unemployed status for 90 days.

Due to the new amendments to the Act, the loss of unemployed status for 90 days will apply to those who fail to agree to participate or stop participating in public works, intervention works, training, internship, or vocational training.

The unemployed may apply to the starosta, who can reimburse them from the Labour Fund for the following:

  • Up to 50% of the costs of exams that allow them to receive diplomas, certificates, or occupational entitlements;
  • Up to 75% of the costs of post-graduate studies if an unemployed person is able to ensure that the accomplishment of these studies will guarantee them an adequate job.

As regards the amendments intended to bring clarity to the act, the most significant is the one allowing people under 25 to benefit from labour schemes until the date of their 25th birthday. Prior to the amendment, a person was excluded from any of the schemes from January in the calendar year of their 25th birthday.

Certain modifications were adopted with regards to the regulations on the activities of employment, HR, temporary employment, and vocational counselling agencies. By virtue of the amendments of 1 November 2005, the registration of the above agencies (which up to then had been vested in the Minister of Economy and Labour) was vested in the marshal of the voivodeship, whereas general conditions of the registration remained unchanged - with two exceptions. First, relevant registration documents must be supplemented with a payment receipt of PLN 100 for the Labour Fund (before 1 November 2005 the registration was free). Second, a person applying for registration will receive a ‘preliminary certificate’ from the voivodeship marshal allowing them to run the activity for a period of one year only. A person intending to obtain a registration certificate has to submit an adequate application to the voivodeship marshal at least seven days before the end of this period.

The voivodeship marshal supervises employment agencies and they must now submit a report every year.

Views of experts and social partners

The new instruments to activate the unemployed were the most controversial amendments. The ‘activation contracts’, which were intended to legalise the domestic services sector, ignored the particular structure of this sector. This kind of job is often additional work for retired people and disabled pensioners; often it is family members who perform this kind of work and people providing similar services frequently have more than one employer. However, the new regulations prohibit the employment of family members or retired and disabled pensioners, as this could lead to instances of tax evasion. The contract must be drawn up with a person registered in the labour office. Moreover, unemployed people can only sign such a contract with one employer. However, according to the representatives of labour offices, the new regulations are unlikely to reduce the extent of the grey area, as in the past and at present, job offers for babysitters and domestic help are rarely displayed in labour offices. The experts from the Adam Smith Centre also criticise the fact that in order to obtain tax relief, the contract has to be in force for one year, irrespective of the competence or incompetence of domestic help or whether or not they have qualifications.

There are similar criticisms of public works. Theoretically, everyone should be satisfied with the opportunities to obtain funds for the creation of new jobs. However, certain problems have emerged. First, the Labour Fund will finance only 60% of costs; the remaining 40% have to be covered by local administrations, which means further unforeseen financial expenditure for them. Second, this offer will hardly satisfy many unemployed people who work illegally. Rejection of it will deprive them of unemployed status, which for the government will consider a success per se, as there will be a noticeable drop in the rates of registered unemployment. The representatives of trade unions expressed similar criticism. According to one of them, Jacek Smagowicz, manager of the department for the Unemployment Prevention in the Independent and Self-Governing Trade Union Solidarność (Niezależny Samorządny Związek Zawodowy Solidarność, NSZZ Solidarność), the public works programme will only benefit the government (through the 'official' drop in unemployment).

Commentary

Undoubtedly, high unemployment levels in Poland meant that the policymakers had to look for new instruments that would help reduce the number of the unemployed and prevent disastrous social outcomes from unemployment. However, it remains open to discussion whether their main goal was a purely cosmetic improvement in the statistics or a real upturn in the labour market. If the situation is to improve, instruments other than those envisaged in the amendments are required. (Piotr Sula, Instittue of Public Affairs (Instytut Spraw Publicznych, ISP) and Wrocław University (Uniwersytet Wrocławski, UWr)

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