High unemployment in Poland – not only a labour market problem

In 2005, 17.7% of the active labour force in Poland was unemployed. Despite a substantial fall from nearly 20% in 2002, the unemployment rate remains the highest in the EU. Similarly, the employment rate in Poland, at 52.8%, was the lowest in the EU. Recent developments on the Polish labour market justify some optimism, but a heavy structural unemployment component makes rapid improvement unlikely.

The picture is complex as the Polish labour market is not significantly less flexible than EU and OECD averages. Nonetheless, there are specific impediments heavily weighing on labour market performance which are related to the high tax wedge, the undiversified level of minimum wage, insufficiently flexible forms of employment, inactivity traps built into the transfer system and low regional and trans-professional job reallocation..