From January 1 the minimum wage will increase to PLN 4,666 gross for full time. But did you know that there are ways to circumvent this limit? The above amount includes bonuses and compensation. “As long as the final amount constitutes the minimum wage, the Polish state is satisfied and happy. For example, Jasiek has PLN 3,500 gross under the contract, PLN 500 discretionary bonus and 300 PLN equalization to the minimum wage,” writes Razem MP Marcelina Zawisza. What's worse, such a settlement model applies especially to the budget sector, which the politician calls “pathology”. The MP also ridicules the fact that in the Polish system there is such a thing as equalization to the minimum wage. .
The Ministry of Family, Labor and Social Policy has prepared a project that would eliminate the above problem. However, the ministries of finance and development did not agree to reform this issue, which, according to Zawisza, “spoiled” the amendment. For now, we remain in a system in which the Act lists specific allowances and bonuses that are not included in the minimum wage. Ministry of Finance boasted that this catalog has been expanded in recent years and will be expanded further. However, some of the allowances are to be included until the end of 2027. The system is therefore becoming more and more complicated.
Entrepreneurs have been threatening the minimum wage for years. Are they right?
Poland is one of the countries where the minimum wage has increased the fastest in recent years. Entrepreneurs They have been threatening for many years that such rapid increases would kill businesses and negatively impact the economy. The same arguments have been used for years, including that work in Poland is expensive and we cannot afford to further increase labor costs because we will no longer be an attractive investment destination and many companies will disappear from the market.
And yet, even though the minimum wage has almost tripled over the last decade, despite these bleak visions, our economy is still growing and unemployment is the lowest in 25 years. –
It is difficult to find very negative effects of increasing the minimum wage from the perspective of the entire economy. Raising lower wages results in stronger consumption growth and stronger economic growth, and we have seen this well in Poland in recent years
– tells us Dr. Jakub Rybacki, head of the macroeconomics team at the Polish Economic Institute. However, let's break down the arguments of entrepreneurs.
Let's look at labor costs first. As Dr. Rybacki says, raising the minimum wage may obviously have negative effects. But in Poland we still have a lot of room for price increases, contrary to what entrepreneurs claim. Because according to Eurostat data from 2023 an hour of work in Poland cost 14.50 euro and was still among the lowest in the Community. The average in the EU was EUR 31.80 according to the latest data. Last year in Germany an hour of work cost 41.30 euros, in France 42.20 euros, in Ireland 40.20 euros, in Italy 29.80 euros and in Spain – 24.60 euros. In the Czech Republic it was 18 euros, in Slovakia 17.20 euros, incl Greece 15.70 euros, higher labor costs are even in Lithuania – 14.7 euros.
So, despite the fact that Poland has been very dynamically and decisively raising the minimum wage in recent years, work in 2023 was “cheaper” only in five out of 27 Community countries: Hungary (EUR 12.80), Romania (EUR 11), Bulgaria (EUR 9.3), Latvia (EUR 13.5) and Croatia (14.4%).
Despite the increase in the minimum wage, there is no sign of a decline in the number of enterprises in Poland. Not at all. There are more and more of them. Of course, each company collapse is often a very personal tragedy for the owners and employees, but it is not necessarily severe for the economy from a macroeconomic perspective. Raising the minimum wage is a big problem for micro-enterprises. There are much more of them in Poland than in developed economies. To make matters worse, Polish micro-enterprises are 2.5 times less productive than the EU average. And yes, the increase in the lowest salaries drives some such companies out of the market, but as Dr. Rybacki says, the number of companies planning layoffs for this reason is relatively small. – It is also true that market consolidation would help Poland achieve faster economic growth – added our interlocutor.
Does raising the minimum wage mean that Poland is no longer an attractive destination for foreign investments? When asked about this issue, Dr. Rybacki from PIE explained that Poland attracts different capital than before, which is related to rising labor costs. Their growth does not have to be a bad thing, because we are no longer an assembly plant of simple household appliances. Dr. Rybacki notes that we have fewer factories of simple plastic tools and more investments in data clouds, lithium-ion batteries and the renewable energy sector. – Investments are turning towards more sophisticated activities – says our interlocutor. And this brings us to further opportunities offered by raising the minimum wage.
Poland has something to make up for. Minimum wage can help
Many economists, including Marcin Piątkowski, point to the need to change Poland's development model. Increasing labor costs helps to change this model (for which the minimum wage, by its nature, is an ideal tool), as shown above by Dr. Jakub Rybacki. However, higher labor costs do not only attract investors from more advanced sectors of the economy. It is also an impulse for modernization for companies already operating in Poland, as economist Jan Oleszczuk-Zygmuntowski demonstrated a year ago at the 10th edition. In his opinion, Poland also needs a new development model. “For 30 years, our economic model has been based on low labor costs of a relatively well-educated population, the cult of stupidity and foreign investments by companies that see us as a safe subcontractor, not prone to rebellion or innovation,” wrote the economist. In his opinion, we should, among other things, improve the level of automation.
Poland is lagging behind Europe in this matter. As Filip Lamański wrote in 2021 on in the Economic Observer, Robotization in Poland is at a “woefully low level”. In 2022, we had 71 robots per 10 thousand industry workers. Regional partners, Czech Republic – 189. Germany, European leader – 415. The global average in 2022 was 151 robots per 10 thousand employees. This also translates into work productivity – Poland is fourth from bottom in the EU in this respect.
But how can increasing labor costs (even by increasing the minimum wage) drive automation in Poland? Oleszczuk-Zygmuntowski argues as follows: as long as an entrepreneur makes a profit thanks to cheap labor, there is no rational financial reason to buy machines. The impetus for this can be provided by limiting his profits. And this can be done by increasing employee salaries. In the West, wages are fought for by trade unionists or determined by collective agreements. “Automation and the introduction of the latest technological achievements are therefore the effects of economic pressure exerted by employees,” wrote the economist. Poland, however, has no such traditions, so our salaries remain relatively low. Each employee must ask for a raise himself.
So how can we force employers to invest in development in a weakly unionized country like Poland? The state has a tool that can force companies to automate by increasing labor costs – namely raising the minimum wage. In this way, the employer's profit goes mostly to the people who earned it – the employees. If the employer wants to maintain its level of profits, it will have to look for alternative ways of development and buy, for example, a machine that will increase work productivity and, at the same time, its profits.
The data also shows a correlation (which does not necessarily mean that these things are related) between the minimum wage and automation. In 2018, the minimum gross salary was PLN 2.1 thousand. PLN, and we had 42 robots for every 10,000. employees. In 2022, the minimum amount increased to 3.1 thousand. PLN, and the number of robots to 71/10 thousand. employees. Dr. Jakub Rybacki points out that this coincided with the trend of growing automation throughout Europe, so it is difficult to talk about any specific relationship. He adds, however, that in Poland, raising the minimum wage is more important in this matter than in Spain or Italy.
Our interlocutor also emphasizes that merely raising the minimum wage is not enough to change Poland's development model and move towards a specialized economy. These activities must be accompanied by others, such as searching for appropriate business contacts or creating incentives for innovation. – However, raising the minimum wage certainly means that there is no longer room in the economy for repetitive, very low-quality production – says Dr. Rybacki.
It is also worth thinking about increasing the minimum wage as an investment. Many teachers, policemen, officials and health care workers work on minimum wage. If we do not raise it, more and more people will leave these professions, because unfortunately many earn the minimum wage. And now we have problems with vacancies in… police or with the rapidly increasing average age of teachers.
The minimum wage is set blindly
Of course, the minimum wage can also – like everything else – be implemented without any thought. “For years, this wage was so low that the positive effects of the increases outweighed them. But subsequent increases are a blind charge and may turn out to be overshot, especially since the economy is in a slowdown phase,” economist Piotr Lewandowski told Money.pl. There is also an idea to differentiate the minimum wage depending on the region. Germany, for example, operates in such a model. However, this would require appropriate supervision to prevent abuse. However, this system would be extremely complicated and may have many drawbacks – wrote “Rzeczpospolita”.and”.
After all, the minimum wage does not exist in a vacuum. One act does not solve anything if there is no environment that respects and controls the introduced rules. Often, one reform should lead to others, so that the law keeps up with reality – but this does not always happen.