Poland records EU’s lowest level of labour market slack

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Notes from Poland is run by a small editorial team and is published by an independent, non-profit foundation that is funded through donations from our readers. We cannot do what we do without your support.

Poland has the European Union’s lowest level of labour market slack – a measure of unmet demand for labour, showing the proportion of people willing to work but unable to find a job – new Eurostat data for 2023 show.

Poland’s figure of 4.8% was followed by Malta (5.2%) and Hungary (6%). The highest numbers were recorded by Spain (20.2%), Italy (17.7%) and Sweden (16.4%), with an EU average of 12%.

Those numbers indicate that the Polish economy almost fully utilises its available labour resources, while other countries – especially in southern Europe – struggle more with unemployment and underemployment, often as a long-lasting consequence of the 2007-2008 financial crisis.

However, the low level of labour market slack may have negative implications for Poland, as the thin “reserve” of those who could take up employment may not be enough to cover future demands, according to Paula Kukołowicz, head of sustainable development at the Polish Economic Institute (PIE).

“This reservoir is not available ‘off the shelf’ – the people in question are those who have difficulty finding suitable work due to a lack of relevant competences, the specificity of their competences, problems with territorial availability of work, or other reasons,” Kukołowicz told news website Gazeta.pl.

According to PIE’s estimates, by 2035, the Polish labour market may shrink by 12.6% due to a large cohort approaching retirement age and fewer younger people entering the labour market.

“If the number of people in employment in Poland were to actually shrink in line with our projections, our GDP would decrease by 6-8% relative to a scenario assuming unchanged access to the labour force,” Kukołowicz warns.

In Poland, 863,000 people were not working in 2023 but were ready to take up employment given the right circumstances, notes Kukołowicz. That was down from 2.5 million in 2009 and just over 1 million in 2021.

A few components make up that number, as labour market slack typically consists of the unemployed, underemployed part-time workers who wish to work more, people seeking a job but not immediately available, and people available to work but not actively seeking a job.

For Poland, the largest share of labour market slack comprises the unemployed (502,000), followed by the underemployed (143,000), people available to work but not actively seeking a job (183,000), and people seeking a job but not immediately available (35,000).

In 2021, Poland had the EU’s third-lowest labour market slack rate, at 6.2%, behind Malta (5.8%) and the Czech Republic (4.6%)

Poland and other countries that recorded low levels of labour slack last year – such as Hungary (6%), the Czech Republic (6.4%) and Slovenia (6.5%) – have low labour costs, which encourages companies to locate production facilities in central and eastern Europe, notes Gazeta.pl

In July this year, the unemployment rate in Poland dropped to the lowest level in three decades. Meanwhile, the average wage rose by 14.7% year-on-year in the second quarter of 2024 – the largest increase in at least two decades – reaching 8,038.41 zloty (€1,864.63) per month before tax.

The latest EU-wide data, from August, show that Poland’s unemployment rate was the joint second lowest in the bloc, equal with Malta and higher only than the Czech Republic. Eurostat data for 2023 also show that Poland had the EU’s joint second-lowest long-term unemployment rate.

Notes from Poland is run by a small editorial team and published by an independent, non-profit foundation that is funded through donations from our readers. We cannot do what we do without your support.

Main image credit: daha3131053 / Pixabay