Japan, [1988-1989]

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OECD
Economic Surveys
Poland
2006
ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT
ORGANISATION FOR ECONOMIC CO-OPERATION
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TABLE OF CONTENTS
TTaabbllee ooff ccoonntteennttss
Executive summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Assessment and recommendations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Chapter 1. Key challenges. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Growth has strengthened again . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Faster growth requires higher rates of investment…. . . . . . . . . . . . . . . . . . . . . . . . . . 26
…and further structural change. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Labour market performance suffers from inappropriate policy settings . . . . . . . . . 31
The education system needs strengthened quality control and more focus
on the labour market. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Adult training is insufficient, especially for the unemployed. . . . . . . . . . . . . . . . . . . 33
Is entrepreneurship lacking, or is it suffering from a poor business environment?. . . 34
Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Bibliography . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Annex 1.A1. Progress in structural reform . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Chapter 2. Monetary and exchange rate policies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Monetary policy strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
The road to euro adoption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Bibliography . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Chapter 3. Achieving fiscal sustainability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Poland’s fiscal position has improved…. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
…but the upward trend in debt has not been definitely reversed. . . . . . . . . . . . . . . 68
In order to achieve fiscal sustainability, the fiscal framework should be changed. . . . 70
Expenditure needs to be controlled by setting priorities. . . . . . . . . . . . . . . . . . . . . . . 71
Social expenditure should be contained . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
Expenditure on public sector wages and state aids are high . . . . . . . . . . . . . . . . . . . 81
Simplifying the tax system. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
Absorbing EU funds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
Bibliography . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
Chapter 4. Education and training: Boosting andadapting human capital. . . . . . . . . . . 91
The returns to education . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
The structure of the education system in Poland. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
Pre-primary schooling. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
Compulsory school education . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
Tertiary education. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105
Adult learning. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109
Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117
Bibliography . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117
OECD ECONOMIC SURVEYS: POLAND – ISBN 92-64-02621-5 – © OECD 2006 3
TABLE OF CONTENTS
Chapter 5. Encouraging structural adjustment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121
Growth through sectoral reallocation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122
Entrepreneurship and innovation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125
Labour market policies to increase mobility and boost employment . . . . . . . . . . . . 135
Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 151
Bibliography . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 152
Glossary of acronyms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 153
Boxes
1.1. The flow of information: Official statistics. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
1.2. Structural adjustment and the environment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
2.1. Choosing inflation targets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
2.2. Measures of inflation expectations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
2.3. Recommendations on monetary policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
3.1. Government finance statistics definitions, data availability andrevisions . . . . 65
3.2. Impact of the classification of Polish private pension funds on debt and deficit . . 70
3.3. Measures proposed by the World Bank to increase the efficiency
ofpublic spending on health care . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
3.4. Summary of recommendations to achieve fiscal sustainability. . . . . . . . . . . . . . 88
4.1. Educational performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
4.2. The Teachers Charter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
4.3. The impact of adult learning on earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109
4.4. Recommendations on education and training . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115
5.1. Policies to improve the allocation of the labour force by sector or by region?. . . . . 137
5.2. The informal economy in Poland. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 141
5.3. Main aspects of the social security and social assistance system . . . . . . . . . . . . 143
5.4. Definition of employment in agriculture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 147
5.5. Poland and the Common Agriculture Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 149
5.6. Summary of recommendations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150
Tables
1.1. Recent trends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
1.2. Structural differences in employment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
2.1. Balance of payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
3.1. Revisions of government finance statistics. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
3.2. Savings from the implementation of the Hausner plan . . . . . . . . . . . . . . . . . . . . 73
3.3. Public expenditure on disability as a share ofGDP . . . . . . . . . . . . . . . . . . . . . . . . 75
3.4. Public expenditure on early-retirement schemes as a share of GDP . . . . . . . . . 76
3.5. Indicators of administrative costs in tax revenue collection . . . . . . . . . . . . . . . . 85
3.6. Estimated net impact of cumulated EU transfers to Poland. . . . . . . . . . . . . . . . . 87
4.1. Earnings by occupational group and education. . . . . . . . . . . . . . . . . . . . . . . . . . . 93
4.2. Changes in PISA education performance measures, 2000to2003. . . . . . . . . . . . 97
4.3. Expenditure on education by level of education, selected countries . . . . . . . . . 98
4.4. Secondary school students by school type . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
4.5. Tertiary education in Poland. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105
4.6. Participation in adult learning, selected OECD countries. . . . . . . . . . . . . . . . . . . 110
5.1. Main transfers by the social insurance system . . . . . . . . . . . . . . . . . . . . . . . . . . . 142
5.2. Average actual retirement age . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 144
5.3. Direct payments to Polish farmers financing during the transition period. . . . 149
4 OECD ECONOMIC SURVEYS: POLAND – ISBN 92-64-02621-5 – © OECD 2006
TABLE OF CONTENTS
Figures
1.1. Employment and participation rates in OECD countries. . . . . . . . . . . . . . . . . . . . 22
1.2. Inflation and inflation targets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
1.3. Capacity utilisation and unemployment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
1.4. Fixed investment as a share of GDP in selected countries. . . . . . . . . . . . . . . . . . . 28
1.5. The structure of value added . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
1.6. Employment and value added in agriculture, selected countries. . . . . . . . . . . . . 29
1.7. Educational attainment by age. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
1.8. Tertiary education by age group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
1.9. Restrictiveness of regulation having an impact on economic behaviour . . . . . . 35
2.1. Inflation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
2.2. Exchange rate developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
2.3. Composition of the consumption baskets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
2.4. Interest rate developments in selected new EU members. . . . . . . . . . . . . . . . . . . 52
2.5. Core and headline measures of consumer price inflation. . . . . . . . . . . . . . . . . . . 54
2.6. Monetary conditions index. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
3.1. Debt accumulation and the constitutional thresholds. . . . . . . . . . . . . . . . . . . . . . 66
3.2. General government deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
3.3. General government primary balance and interest payments. . . . . . . . . . . . . . . 67
3.4. Impact of the classification of Polish private pension funds (OFE) on the debt
and deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
3.5. Public expenditure in OECD countries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
3.6. Sources of public social expenditures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
3.7. Share of public employment in total employment. . . . . . . . . . . . . . . . . . . . . . . . . 81
3.8. Wage growth in the public and private sectors. . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
3.9. Structure of tax revenues by major type of taxes . . . . . . . . . . . . . . . . . . . . . . . . . . 83
3.10. The tax wedge on labour in OECD countries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
4.1. Life expectancy and educational attainment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
4.2. Comparative educational performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
4.3. Influences on education outcomes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
4.4. School-age population by age. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
4.5. Adult training, unemployment and unit costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111
4.6. Adult learning participation rate by socio-economic characteristics. . . . . . . . . . 113
5.1. Decomposition of GDP per head . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123
5.2. Decomposition of labour productivity growth in some EU countries . . . . . . . . . 124
5.3. GDP per capita and R&D expenditure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126
5.4. Competition indicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127
5.5. Venture capital investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130
5.6. Overall tax rates on distributed profits in OECD countries . . . . . . . . . . . . . . . . . . 131
5.7. Corruption perceptions index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132
5.8. Labour market developments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 134
5.9. Employment rates by age . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 136
5.10. Internal migration rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138
5.11. The minimum wage relative to the average wage . . . . . . . . . . . . . . . . . . . . . . . . . 139
5.12. Economic activity of the population aged 15 and more and reasons
for inactivity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 141
5.13. Strictness of employment protection legislation . . . . . . . . . . . . . . . . . . . . . . . . . . 145
5.14. Disability pensions: number of beneficiaries and new entrants. . . . . . . . . . . . . . 148
OECD ECONOMIC SURVEYS: POLAND – ISBN 92-64-02621-5 – © OECD 2006 5
This Survey is published on the responsibility of the Economic and Development
Review Committee of the OECD, which is charged with the examination of the
economic situation of member countries.
The economic situation and policies of Poland were reviewed by the Committee on
26April2006. The draft report was then revised in the light of the discussions and
given final approval as the agreed report of the whole Committee on 11May2006.
The Secretariat’s draft report was prepared for the Committee by PaulO’Brien and
StéphanieJamet under the supervision of PeterJarrett.
The previous Survey of Poland was issued in June2004.
BASIC STATISTICS OF THE REPUBLIC OF POLAND
(2005unless noted)
THE LAND
Area (sq. km) 312690
Arable land (in per cent of total area) 59
THE PEOPLE
Population (million, end-year) 38.2 Employment (million) 14.1
Rural population (percentage of total, 2003) 38.4 Employment by sector (percentage of total):
Life expectancy at birth (2004):Male 70.7 Agriculture (2004) 17
Female 79.2 Industry (including construction, 2004) 28
Infant mortality (per thousand, 2003) 6.8 Services (2004) 55
Registered unemployment (percentage of labour force) 18.2
Labour force survey unemployment (percentage of the labour force) 17.7
Number of pensioners (million) 9.2
PARLIAMENT
Bicameral Parliamentary system
Sejm membership (lower house) 460
Senate membership (upper house) 100
Number of political parties in Sejm 7
PRODUCTION
GDP (Zlbillion, current prices) 979.2
GDP per capita (US$, market exchange rate) 7934
Gross fixed capital formation (percentage of GDP) 18.1
PUBLIC FINANCE
General government budget balance (percentage of GDP) –2.5
General government revenues (percentage of GDP) 40.3
General government expenditures (percentage of GDP) 42.8
State treasury debt (end-year, percentage of GDP) 50.7
FOREIGN TRADE AND FINANCE
Exports of goods and services (percentage of GDP) 37.0
Imports of goods and services (percentage of GDP) 37.3
Official reserves assets (US$billion, end-2005) 42.6
Total external debt (US$billion, end-2005) 130.0
CURRENCY
Monetary unit: zloty Currency units per: US$ Euro
Average: 2005 3.2348 4.0254
April2006 3.1982 3.9194
EXECUTIVE SUMMARY
Executive summary
P
oland’s growth performance since2004 suggests that the process of catch-up with higher-income
countries has been renewed. But an improved balance of macroeconomic policies and further efforts
to improve structural policies are needed to sustain and accelerate convergence.
● Monetary policy may have temporarily been somewhat too cautious, but it would be easier for the
central bank to relax if fiscal policy were put on a sustainable footing, with consolidation focused
on social transfers, which have many adverse work incentive effects.
● Links between the education system and the labour market are still insufficient, and the financing
of tertiary education is leading to both inequity and inefficiency.
● Weak performance on adult training, reliance on passive income support and too little attention to
job-search or mobility requirements contribute to the high level of structural unemployment.
● Growth has been held back by poor framework conditions for entrepreneurship and innovation.
Seek a better balance of monetary and fiscal policies
The National Bank of Poland has acquired a reputation for inflation aversion. It may no longer
need to be quite so cautious and could afford to do more in the future to test the limits of available
capacity. Although the budget deficit improved in2005, this was partly due to one-off factors. Clear
expenditure priorities need to be defined and enforced, preferably within a multi-year planning
framework. Social transfer payments absorb too large a share of public spending and GDP and
should be better controlled.
Consolidate and extend the education reforms
Reforms of compulsory education have decentralised education management to local
governments. Further steps are needed to align financial and management responsibility with
accountability for performance and to ensure flexibility in allocating resources as needs change.
Expansion of tertiary education has increased human capital formation, but it is inefficient to
prevent public institutions charging fees; a concomitant reform of student grants and loans could
increase equity and overall resources.
Boost employment with active labour market policies and by making work pay
Poland’s very poor labour market performance is partly due to the costs of structural change,
but many social transfer payments and the large tax wedge act to reduce employment. They need to
be changed to strengthen incentives to work. The public employment service must increase its
emphasis on job-activation, making more use of adult training as well as job-search requirements for
benefit recipients.
8 OECD ECONOMIC SURVEYS: POLAND – ISBN 92-64-02621-5 – © OECD 2006