Between consolidation and crisis: divergent pressures and sectoral trends in Poland

Introduction

Poland’s economic record during the global crisis outshone not only the rest of central and eastern Europe (CEE), but also all other 26 EU Member States. Poland was the only EU country never to go into recession, with GDP continuing to rise on average by 3.4 per cent per year between 2008 and 2011 (data: National Statistical Office [GUS]). This is largely explained by the facts that Poland is much less export-dependent than other central and eastern European countries, that its underdeveloped financial system with its relatively low level of household debt did not produce any credit-fuelled bubble, and that its currency was allowed to devalue by 20–30 per cent against the euro, rather than having to toe the restrictive line of internal devaluation as in the euro area and in the Baltic States. As a result, and in combination with increased public investment from the Polish government and the EU, aggregate demand remained unaffected by the crisis, even if, when measured in dollars rather than in the national currency, Polish GDP did contract significantly.

Though unaffected by the crisis in an overall national statistical sense, Poland did not come through the crisis unscathed. First, certain sectors, in particular finance and export-oriented sectors, were hit by recession. Secondly, the great flexibility of Poland’s labour market resulted in an increase in unemployment despite economic growth. Politically, though the crisis has tempered previous neoliberal enthusiasm, higher unemployment has also halted the revitalization of labour perceivable in the 2004–2007 period.

At national level, the crisis had the temporary effect of re-legitimizing social dialogue, as witnessed by the negotiation of an ‘anti-crisis law’ in 2009. Among the measures introduced by that law, company agreements to derogate from working time regulations were made possible. Though this led to a wave of company agreements, it did not translate into a broader shift in Polish industrial relations, with these remaining characterized by disorganized decentralization, weak unions and opportunistic labour markets featuring ‘exit strategies’ (dismissals, high labour turnover and emigration) rather than ‘voice strategies’ (organization and collective bargaining) (Meardi, 2012).

This article argues that the effects of the crisis have been felt very differently dependent on which sector is involved – sectors sheltered from the global economy have benefited from resilient internal demand and public investment, while the others have suffered job losses, restructuring and further flexibilization. After a review of the economic, political and industrial relations situation at national level, three different sectors representative of the differing trends are looked at: automotive, steel and health care. Finally, the conclusion looks at the implications for Polish industrial relations and the direction they are heading.

The effect of the crisis at national level

While Poland is the only EU country not to have gone into recession since 2008, this is not to say that the crisis has not been felt in the country. Though positive from a macroeconomic perspective, the statistics hide the deep social and sectoral inequalities regarding exposure to economic uncertainty.

Employees have felt the crisis more than employers. Whereas company profits have continued to rise between 2008 and 2011 (from PLN85bn to PLN120bn: GUS), at the same time employment levels have fallen despite growing production output. Unemployment had been declining since Poland entered the EU, thanks to both economic growth and emigration, but the trend was abruptly reversed by the crisis. The unemployment rate, after reaching a historic low of 7.1 per cent in 2008, increased to 10.1 per cent at the beginning of 2012 (data: Eurostat) and is expected to continue rising. Among the factors that contributed to the rise are the crises hitting certain labour-intensive sectors such as construction, but also the negative situation on western European labour markets which has reduced emigration opportunities – Poland’s labour market ‘safety valve’ – for hundreds of thousands of Polish workers. However, with no significant return of emigrants from western Europe being registered, the surprisingly fast rise in unemployment in a period of (albeit slow) economic growth requires a broader explanation

Poland belongs, together with the USA and Spain, to those industrialized countries with the largest proportional increase in unemployment, and in particular to those with the highest elasticity of employment to economic downturn. This is to be seen in direct relation to the high labour market flexibility of these countries, and in particular to weak employee protection. Poland has for instance the highest share of temporary employment in the EU (26.9 per cent in 2011), with self-employment also well above the EU average (18 per cent as against the 15 per cent EU average). The focus on flexibility over the last two decades has made headcount-cutting the natural response for companies in crisis, rather than reducing working hours or increasing functional flexibility as seen in countries with strong social dialogue structures such as Germany. At the same time, regardless of the crisis, Polish companies have continued with the labour intensification and labour substitution-through-technology strategies that have characterized economic transformation since the 1990s.

Polish employees have also been affected by the crisis in terms of pay, which, in nominal terms, remained constant over the three years 2009–2011 (data: GUS). Although Poland has not seen the pay cuts that hit employees in other more crisis-hit countries (e.g. in the Baltic States), with nominal pay at least rising in line with inflation, the crisis has interrupted the process of slow but continuous wage convergence with western Europe started in the 1990s. The ratio between nominal Polish and German hourly wages rose from 0.14 in 1996 to a record high of 0.27 in 2008, before falling back to 0.22 in 2009 as a consequence of wage stagnation and a worsening exchange rate (our adjustment of Eurostat data).

Looking at individual sectors, services and agriculture were largely unaffected by the crisis thanks to resilient internal demand, with the notable exception of banking. Coal mining, a traditional core industry in Poland, actually benefited from the rise in coal prices and has seen high wage rises (30 per cent in 2011 as against a national average of 5.4 per cent: GUS data) and successful negotiations on pensions and emission policy. Wages similarly increased in the energy sector. By contrast, manufacturing was hardest hit, with an 8 per cent fall in employment in 2009 and only slight growth in 2010–2011 (GUS data). Construction was also hit, though less dramatically than in western Europe thanks to growing public infrastructure investment via EU structural funds and in the run-up to the 2012 European Football Championship.

The rapidly changing conditions on the labour market were acknowledged by all stakeholders. Prior to the crisis, political and economic priority had been given to stopping workers leaving Poland. The frequent wage increases this had entailed also encompassed the public sector ahead of the 2007 elections, and the labour market was considered ‘overheated’ by high turnover rates. Despite relatively good macroeconomic conditions, the crisis shifted priority to protecting jobs, with measures including cuts in working time. One consequence of this shift was a change in the labour market flexibility rhetoric dominating Polish debates since the mid-1990s and especially during the Labour Code reforms of 1996 and 2002. Even a representative of the private employers’ confederation PKPP-Lewiatan (our interview, October 2011) had to concede that the flexibility side of the flexicurity concept being pushed by the EU was not suited to periods of economic downturn.

Nevertheless, there has been relatively little change in macroeconomic policy. With the exception of the short-lived populist governments of 2005–2007, Poland has officially remained loyal to its policy of minimum intervention in the economy, as symbolized by that famous sentence of Poland’s first non-Communist industry minister, Tadeusz Syryjczyk, in 1990: ‘the best possible industrial policy is no industrial policy’. Though Poland introduced a stimulus package in 2008–2009, equal to around 2 per cent of GDP, it was below the European average. Similarly, the government did not need to bail out or nationalize any important company, as was the case in several western countries. The main policy change caused by the crisis was the postponement of Poland’s adoption of the euro. While in 2007–2008 the government planned to take Poland into the Economic and Monetary Union by 2012 (under the slogan ‘Euro for the Euro’, referring to the European Football Championship hosted by Poland in 2012), the euro area’s unfolding instability and exchange rate volatility quickly convinced the government to postpone entry to a more stable period. As Polish National Bank president Marek Belka admitted at a European conference in October 2011, the euro crisis proved that all government assumptions on the euro’s beneficial effects on investment and stability in Poland were wrong.

A significant change in the political climate could be registered. The Liberal – Peasant Party coalition in power since 2007 has adopted more centrist, moderate policies and avoided radical reforms, in stark contrast to the alternating neoliberal and populist excesses characterizing Poland since the beginning of democratic transition. The result has been greater stability, despite increased tension between the government and the opposition in the wake of the Smolensk disaster in April 2010, in which President Lech Kaczyński and a number of leading state officials died. The 2011 elections saw the Tusk government becoming the first government since 1989 to win a second term.

At the same time, new opposition parties with new political messages have emerged. During the crisis, the term ‘junk contracts’, first used by marginal leftist parties, quickly became the common term used by the whole political spectrum to refer to all atypical and precarious employment contracts – which just a few years previously had been universally accepted as an expression not only of flexibility, but also of ‘freedom’ for both employers and employees. Campaigning against those ‘junk contracts’, ‘Palikot’s Movement’, a new opposition party named after its founder and leader and comparable to the western European ‘pirate parties’ of Germany and Scandinavia, entered parliament with 10 per cent of the vote in 2011. Also proposing that ‘the state should build factories’ to create employment, something previously considered as tantamount to communism, Palikot’s Movement is however strongly anti-union and closely linked to business circles. In its search for a new political language, it has contributed to a striking change in the terminology used in public debates on social and economic issues in Poland. The issue of the so-called ‘junk contracts’ became increasingly prominent in political debates, but in October 2012 the government surprisingly abandoned its widely expected plans to limit precarious employment, arguing that in a period of crisis the economy could not afford to place any additional burden on employers.

The 2009 anti-crisis package and its aftermath

The global financial crisis of autumn 2008 rapidly reverberated in Poland, leading to intense tripartite negotiations on how to respond to it. After several western governments had implemented rescue packages for banks and large companies and started working on large stimulus packages, similar proposals were put forward in Poland. The first demands came from the automotive sector with its tight links to western economies and especially Germany. In December, soon after the German government introduced its recovery plan and extended its short-time working scheme, the metalworking federations of Solidarność and OPZZ joined forces with the employers’ Automotive Industry Association to demand a government rescue package for endangered companies. This marked a shift from oppositional industrial relations to a new pattern of ‘political exchange’ (despite the fact that this demand was eventually not implemented by the government), especially on the part of the Automotive Industry Association which had until then rejected any proposal of coordinated industrial relations and collective bargaining, but now needed labour support for its economic demands.

This pattern quickly spread to the national level, and in February bilateral negotiations started between unions and employer associations within the framework of the Tripartite Commission on the crisis and EU subsidies. The negotiations led to the most comprehensive bilateral agreement since the early 1990s, with a 13-point ‘anti-crisis package’ proposal being signed on 13 March (Gardawski and Meardi, 2010). Employer requests featured greater working time flexibility (putting working hours on an annual basis) and state subsidies for lifelong learning, while union requests focused on an increase in the minimum wage and limits on temporary contracts. Not having participated in the negotiations, the government acknowledged the proposed package, making the implementation of the 13 points subject to financial considerations. When it finally got around to transposing the package into law on 1 July 2009, it did so selectively, postponing any increase in the minimum wage, and with changes, in particular with regard to working time flexibility. The package, introduced for a period of two years, received employers’ support but caused uproar in the unions and especially in Solidarność, which felt that the spirit of the agreement had been violated. However, union disappointment was limited to declarations and no protest against the measures was organized, although campaigns for an increase in the minimum wage continued.

The success of the anti-crisis package was mixed, with the new working time regulations being the most popular. Over 1 300 companies, employing more than one million people, took advantage of the provision allowing company-level agreements on more flexible working time (in particular, putting working hours on an annual basis). But the effect was mostly limited to the automotive sector, which accounted for half of the employees covered by the new agreements, with other examples mostly restricted to multinationals such as France Telecom. Working time regulations are deemed to have limited job losses in manufacturing, although a precise assessment of the effects is lacking. Although trade unions criticized the new law, employee representatives at company level behaved in an accommodating way, bartering changes in working time for job protection. In companies where no unions were present, the law allowed agreements on working time to be signed by ad hoc employee representatives. Although at first sight this wave of company agreements could be seen as a step towards greater company-level social dialogue and collective bargaining, it does not seem to have had any spillover effect onto negotiations on other topics, or onto other sectors of the economy. Other aspects of the package remained virtually dead-letters, in particular the promotion of lifelong learning (taken up by a mere 15 companies for a total of 55 employees), mainly because of the administrative burden involved and the limited interest of both employers and employees in retraining. Changes in the regulations governing temporary employment did not affect the extremely high level of temporary employment. Given the divergent opinions on the package’s success, it was not renewed on expiry at the end of 2011.

The crisis had an indirect effect on employment relations through its impact on social expenditure. With the Polish budget deficit increasing to over 7 per cent of GDP in 2009 and 2010 and despite accumulated debt only reaching 56.3 per cent of GDP in 2011 (well below the EU average of 82.5 per cent and within the Maastricht criteria), demands arose for public employment and welfare cuts. Particular pressure was put on teachers’ employment, fuelled by demographic decline. After winning a second term in 2011 the Tusk government put forward a proposal for pension reform featuring an increase in the retirement age from 60 (men) and 55 (women) to 67. Trade union opposition to the proposal was immense, and it became the occasion for unprecedented joint action between the long-time rival union confederations Solidarność and OPZZ. In spring 2012, Solidarność collected 1.5 million signatures under a petition calling for a referendum on the reform, but parliament rejected the petition and no referendum took place. Nonetheless, the protests forced the government to make changes to its proposals, allowing earlier retirement for women, even if with a lower pension entitlement. The lack of popularity for increasing the retirement age of women must be understood in the context of the Polish welfare state with its lowest level of childcare facilities in post-communist Europe. This sees retired women playing a crucial child-minding role and any increase in the retirement age would threaten the female employment rate, which, at 53.1 per cent (2011), is already well below the EU average of 58.5 per cent.

Divergent sectoral trends in collective bargaining

Though in all three sectors a trend exists towards increased labour flexibilization, union reactions differed in each sector dependent on exposure to the economic crisis. A distinction is made between those manufacturing sectors heavily dependent on exports and therefore closely tied to the global downturn (automotive and steel), but with very divergent labour relations legacies, and the public sector protected from the global economy (health care). In all three sectors labour organization is above average. According to the Eurofound representativeness surveys, union density in 2008–2009 was 11 per cent in the metalworking sector (only taking into account unions affiliated to the three nationally representative unions), 85 per cent in steel, and 37 per cent in the hospital sector (Traxler, 2009a, 2009b; Dörfler, 2010; no data are available for the whole of the health sector). According to the same source, collective bargaining coverage is 70 per cent in metalworking, 93 per cent in steel and 97 per cent in the hospital sector. It should be noted, however, that collective agreements in Poland have often little effect on actual employment conditions.

The automotive sector is the one most affected by the crisis. The largest source of Polish exports, it is dominated by Western multinationals. Production is largely for export, with for instance 92 per cent of car components produced in Poland being exported in 2009 (data: Eurostat). As a result, though internal demand remained stable, it was not sufficient to prevent a major fall in production. At 20 per cent, the fall was particularly marked in 2009, and recovery has been slow and fragile since then. After a period when west-to-east production relocation was the main industrial relations issue at transnational level (Meardi, 2007; Meardi et al., 2009; Bernaciak, 2010), the crisis revealed that CEE employees’ jobs were just as insecure as those of their western counterparts, and sometimes even more at risk. A number of CEE locations were treated as ‘production buffers’ more prone to the vagaries of the economy, while core workforces in the west enjoyed greater protection, also thanks to political intervention. For instance, in 2010 Fiat decided (after major union concessions in Italy) to transfer Panda production from the Polish Tychy plant to the Italian Pomigliano plant, while the General Motors Polish plant at Gliwice, previously considered the corporation’s flagship plant in Europe, found itself under the same pressure in 2011–2112 as its older western counterparts. Between 2008 and 2010, 30 000 jobs were lost (14 per cent of the total workforce). After a slight recovery in 2011, the crisis has resurged in 2012.

Hit hardest by the crisis, the automotive sector was where the anti-crisis law had the greatest impact, with hundreds of agreements swapping working time changes for job protection. Despite this increase in company-level bargaining, no progress was made at the sectoral level, except for the above-mentioned December 2008 joint union-employer position on the crisis. With car manufacturing in Poland already at the same skill level as in western Europe, employers were anxious to retain their skilled workers, explaining the short-time arrangements. However, despite its relevance, visibility and growth in the mid-2000s, the automotive sector accounts for only 6 per cent of total employment, 10 per cent of production and 21 per cent of exports in Polish manufacturing (data: GUS). This means that it does not have the critical mass needed to exert a ‘disciplining effect’ on national industrial relations. Moreover, weak information and consultation rights at the workplace mean that the multiplication of company agreements on working time remains an isolated practice, rather than a process belonging to a broader trend of co-determination and labour participation in organizational issues.

The steel sector is in a similar position to the automotive sector. Although itself not export-oriented, it is closely related to manufacturing and therefore suffered from reduced industrial production in 2009, registering a 17 per cent drop. The impact the crisis had on industrial relations is particularly interesting in this sector due to the ‘best case’ nature in its collective bargaining and social dialogue (Gilejko, 2011). At 60 per cent, union membership is high in comparison to the 15 per cent national average, and steel was one of the first sectors to have a sectoral collective agreement after 1990 (sectoral agreements formally existed under the communist regime in most sectors, but were not an expression of free collective bargaining). This contrasts greatly with the decentralized bargaining dominant in most of the economy. The sectoral collective agreement (the Supra-Enterprise Collective Agreement for Steel Industry Employees) was negotiated in 1998 by the Tripartite Team for Social Conditions in the Restructuring of Steel and still defines basic working conditions. Several important supplementary agreements were concluded on restructuring between 1998 and 2003. Sectoral social dialogue was seen as a way of speeding up the necessary restructuring of sectors with high operating costs and dependent on state budgets and as an answer to EU demands. Much of sectoral dialogue, although formally tripartite, was bipartite throughout the 1990s, with only the trade unions and the government involved.

Although the sector had a tradition of worker militancy (e.g. the 1994 two-month strike at the Warsaw Steelworks, taken over by the Lucchini Group), social dialogue achieved its aim of avoiding social tension during restructuring (Towalski, 2011). Within a few years of the Steelworkers’ Social Package being agreed in 1998, 50 per cent of steel jobs had disappeared.

On expiry of the sectoral agreements, shortly before privatization, social packages were negotiated in many steel companies at enterprise level. At the largest steel company, ArcelorMittal Poland (accounting for 70 per cent of Poland’s steel production), unions were able to negotiate an agreement in 2004 guaranteeing employment up to the end of 2009. On renewal however, the economic crisis had put an end to the years of high steel demand and companies took the decision further to cut jobs, this time without the protection of any sectoral or company-level agreement and without any compensation. Some 10 000 jobs were lost throughout the sector in 2009–2010 (HIPH, 2012). Pay was also affected. Though keeping up with inflation in most of manufacturing, steelworkers’ nominal wages did not increase in 2009.

According to the unions, the crisis served as an excuse for already planned reductions. ArcelorMittal for instance announced 1 560 redundancies in 2008 in a drive to increase efficiency (European Restructuring Monitor). In 2010, half of the workers laid-off were re-employed as agency workers. This contrasted greatly with the pre-crisis situation where, under the terms of the social package, ex-steelworkers were not allowed to re-enter the sector via agencies. ArcelorMittal had already expressed its need for a 30 per cent flexible employment buffer, whether through temporary contracts or agency work, and by 2012 the share of agency workers had peaked at 40 per cent. A similar shift from permanent to agency employment occurred in other steel plants such as Huta Batory and CMC. Unions were unable to prevent the cuts or come up with viable alternatives, and the only concession they achieved was a two-year wage parity guarantee for steelworkers re-employed through agencies. The extent of unilateral restructuring came as a shock to them and initiated a process of reorientation and reinterpretation of their mandate. After almost two decades of focusing on social partnership (Trappmann, 2013), unilateral restructuring left unions without a role.

They therefore started taking up more militant standpoints, including protests, wage demands and the organization of agency workers (including industrial action) at the Huta Batory plant in spring 2012, despite management resistance. In summer 2012, unions were up in arms against an increase in work-related accidents due to agency work and feared downward pressure on wages after 2012 when the two-year wage parity guarantees start to expire. Management has reacted to the unions’ new militancy by creating a ‘Social Dialogue Academy’ to train trade unionists in economics and engender mutual trust.

The health care sector has witnessed strong employee assertiveness in recent years. Public health care expenditure in Poland is among the lowest in the EU (4 per cent of GDP in 2007, as against the 6.7 per cent EU average; European Commission data), but there has been strong political pressure to increase it. In the years before the crisis, the strong mobilization of nurses and doctors by the trade unions, warning of the risk of massive emigration of health professionals towards western Europe, led to significant government concessions (Kaminska and Kahancová, 2012). Overall health care expenditure was not cut but kept slowly increasing, and the unions maintained their mobilization power, effectively defending jobs and employment conditions. Doctors were particularly successful in achieving wage rises, but also nurses reached a particularly important collective agreement in June 2010, improving such working conditions as the nurse-patient ratio, and benefited from the wage upward pressure that characterized all professions with high emigration in the mid-2000s (Dustmann et al., 2012). The fact that unions have achieved most in election years (2007 and 2010) can be seen as an indication that in the public sector unions have been able to wield their political power effectively, regardless of the global economic crisis. Overall, the public sector bears the main responsibility for the large increase in strikes in Poland since EU accession. In late 2009, the 1994 law on collective bargaining, which required annual pay negotiations in the public sector, was amended, as requested by the trade unions during the anti-crisis package negotiations. While this change increased trade union autonomy from the government, it also contributed to an increase in wage-related industrial disputes in the public sector, as unions now often need to use the strike threat to force employers to the bargaining table.

Crisis-related budgetary constraints have however endangered the situation of health care workers. Despite increased public investment, decentralization coincided with the worsening financial situation of many hospitals since 2007. Austerity measures introduced in 2010 have opened the door to the privatization of loss-making public hospitals, which would put an end to existing working conditions and rights. Since 2000, wages have stagnated at around PLN 2 500–PLN 3 000 gross (€600–€750, data: GUS), increasing the risk of a nurse shortage in the future, after a long period of surplus. The high incidence of ‘junk contracts’ among nurses (5 per cent are reportedly self-employed) is already jeopardizing the capacity of nurses’ unions to defend working conditions in hospitals.

Conclusion

The article has shown that beneath its exceptionally good economic performance, Poland has been affected by the crisis in many ways. Overall, labour has been hit by increasing unemployment and stagnant wages. The effects have been different dependent on the sector – while in certain protected or booming sectors employment conditions have improved (especially in mining and energy) or have been defended (parts of the public sector such as health care), there have been strongly negative repercussions in the export-oriented sectors, previously considered the driving force of national economic development.

Polish responses to the crisis have only partially been characterized by social dialogue. At national level, agreement was reached in 2009 on an anti-crisis package, though the government later implemented it in a selective and somewhat distorted way. A spate of company-level agreements on working time followed, but with no spillover effects to other areas of collective bargaining. With attempts at sectoral bargaining being abandoned, the traditionally weak multi-employer level of collective bargaining became even weaker. Even in steel, one of the few sectors where coordinated bargaining did take place, the unions were unable to prevent mass redundancies. In the face of these divergent trends in the individual sectors, at national level coordination has become even more difficult than before.

Symbolically, these developments mark the end of market euphoria in Poland, the front-runner of neoliberal transformation in the region. Restructuring through integrating a sector into global markets is no longer seen as necessarily good, given the experience of the steel sector. Employment flexibility hype has given way to the emerging social problem of precariousness. Union militancy is increasing (e.g. in Solidarność after the election of its new leader, Piotr Duda, in 2010) and previously rival confederations are cooperating in fighting ‘junk contracts’, arm in arm with the socially conservative Catholic Church. While the 1998 pension reform with its elements of privatization passed almost without resistance, the new 2012 reform has run into massive opposition, with unions notching up a certain degree of success.

From an overall perspective, the crisis in Poland did not have the disruptive effects it had on the most exposed European countries, whether in the east or in the west. Nevertheless in some sectors it helped legitimize further flexibilization or expenditure cuts. In a way, its effects have consolidated the main lines of the Polish socio-economic model, defined as ‘embedded neoliberalism’ (Bohle and Greskovits, 2007): a form of neoliberalism that includes decentralization, flexibility and a residual welfare state, but which counterbalances its inherent insecurity through strong political intervention in the economy and through a relatively high degree of self-reliance, internal demand and monetary sovereignty.