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A strong labor market is a myth. Thirty-two percent of Poles are unemployed

The Eurostat data shows that only seven out of twenty-eight European Union countries have a lower unemployment level than Poland. - Theoretically, this is very positive information. Practically, however, the situation is much worse. In reality, we are definitely closer to the indebted countries of southern Europe, instead of the leading countries from the northern part of the continent – explains Marcin Lipka, Cinkciarz.pl analyst.

Marcin Lipka

Each month we receive information that the situation on the Polish labor market is improving. Recently, the unemployment rate went down to its lowest level since the beginning of the 90s. According to the Eurostat and the Polish Central Statistical Office (GUS) data it was at the 6.2% level in June. This level is positive in comparison to the EU countries as well. A lower unemployment rate is only quoted in seven countries with the average level being 8.6%.

However, the reality is much worse than it seems. The actual situation of the Polish labor market is similar to countries such as Portugal or Cyprus, with an unemployment level at more than 10%. Some data indicates that Poland's labor market statistics are worse than Spain's, where the official unemployment level is 20%.

Deceiving index – a few words on unemployment rate

It is generally assumed that the labor market condition is measured with the unemployment rate. This index is a relation between the amount of unemployed and professionally active (those who are employed, as well as those who are seeking job). According to the GUS data and the Labor Force Survey (a similar methodology is used in every EU country), for the second quarter of 2016, the amount of employed people in Poland was 16.2 million and the amount of unemployed was slightly more than 1 million people. The question is, what happened to the remaining 20 million Poles?

A portion of this amount (approximately 7 million) are people who are younger than fifteen years. It is obvious that these people do not work, or do not seek jobs, because they're too young. However, there are still 13 million people who are not included in the official unemployment statistics. According to the definition, these people are professionally passive. This means that they are older than fifteen years, don't have a job and don't search for it.

Out of this group, we should exclude seniors, as well as those who continue their education until they turn eighteen. However, even if we do this, the amount of professionally passive people within the range of 18-64 years (18-59 years for women) is 5.5 million people. As a result, when adding the amount of unemployed people, we will come to the equation that there are6.6 million people who don't have a job.

Employment rate – a more credible index

The index that contains a significantly larger amount than the unemployment rate, is the employment rate. This is a relation between people who have a job and those who are of working age (the Eurostat defines this as the range of 20-64 years). This index definitely seems more credible than the unemployment rate, because it shows the percentage of society that actually works.

According to the Eurostat data, Poland's employment rate was at the 67.8% level at the end of 2015. This was the 19th position in the European Union. The countries that were better than Poland in this ranking were Cyprus (67.9%), Portugal (69.1%), France (69.5%) and Latvia (73.3%). It is worth noting that the unemployment rate of these countries is 11.7%, 11.2%, 9.9% and 9.8%, respectively. On the other hand, Poland's unemployment rate is at the level of 6.2%.

So what is causing such significant differences? There are quite a lot of people in Poland who don't have a job and aren’t even looking. This perfectly represents the dissonance between unemployment and employment rates within the range of 55-64 years. In the first quarter, the unemployment rate was at the level of barely 4.9% against the 45.7% level of employment. This is partially a result of the fact that according to the GUS data, more than 650 thousand people that are of working age, but have already retired. Moreover, 1.33 million people are qualified as “disabled”

According to the OECD data, employment within the range of 55-64 years in Poland is the third lowest in the EU. The only two countries with a worse result in this ranking are Spain (48.7%) and Italy (49.7%). On the other hand, the percentage of this index in Sweden is at the 74.8% level, which is approximately 30% more than it is in Poland.

Thirty-two percent of Poles are unemployed

In conclusion, the real situation in the labor market is clearly worse than it's presented by the popular unemployment rate. This is a result of the fact that a significant amount of people of working age are not only unemployed, but they are also not looking for a job. This is the reason why they are not included in the most commonly discussed statistics.

As a result, in order to show the situation on the Polish labor market better, we may easily modify the employment index. If the Eurostat data indicates that 67.8% Poles within the range of 20-64 years are employed, this means more than 32% of people of working age are unemployed. Despite that this measure is not flawless, it certainly shows the actual situation in the labor market better than the information about unemployment at the 6.2% level.

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