Analysis: ruling party promises end of low wage economy

Poland's ruling party leader Jarosław Kaczyński announces that the minimum wage will almost double over a period of four years.

Speaking at a Law and Justice (PiS) rally in Lublin the party leader Jarosław Kaczyński introduced the key planks of the ruling party’s election platform for the Parliamentary elections due to take place on Sunday 13 October.

He promised that the minimum wage would rise from its current level of approx. EUR 500 to a level of approx. EUR 900 by 2023. He also committed PiS to two bonus payments for pensioners next year and to guaranteeing farmers direct payments at the level of those made to farmers in western Europe.

Kaczyński hattrick

The policy platform, daubed the “Kaczyński hattrick” has been formulated to shore up support in rural areas (direct payments for farmers) where the party is fighting off a challenge from the rural Polish People’s Party (PSL) and among the old (bonus pension payments), an age group with a high propensity to turn out in elections and a group which has not benefited as much from the social transfers policies of the present government as much as families of working age and the young, the main beneficiaries of the universal child benefit policy (500+).

But the proposal to increase the minimum wage over four years from 2250 PLN (cc EUR 500) to PLN 4000 (cc EUR 900) will have mass rather than niche appeal. It marks the completion of the shift in thinking among policy makers about how to develop the Polish economy and society.

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Major policy shift

At the beginning of the transformation in the 1990s and right up to even 2015 it is fair to say that policies focused on attracting investors to Poland on the grounds of the country having very competitively priced but well educated labour force and relatively light tax regime. Redistribution of income was never seen as a policy goal.

The present government has with its policy moves of tightening up tax collection, increasing social transfers and now radically increasing the minimum wage moved the country away from development via keeping the price of labour down. This policy shift is aided and abetted by the rapid fall in unemployment which has seen some sectors of the economy suffering from labour shortages.

The shift in policy for boosting incomes - and the opposition Civic Platform (PO) has joined in this by promising that there could be subsidies for the lower paid if they come to power - is also directed at persuading migrant Labour from Ukraine and other parts of eastern Europe to stay in Poland and at persuading some Poles who have migrated to western Europe to return home.

There will be concern among the business community at the pace they are expected to increase wages by. For many small businesses this will be difficult, and it will mean additional expense for the state budget in order to fund the additional pay in the public sector. Business will also be concerned at the proposal to remove the ceiling on social security payments and make all businesses pay social security contributions according to the level of income.

PiS dominant

These measures are part and parcel of the PiS approach to politics. They remain staunchly conservative on supporting the Catholic Church and maintaining a traditional vision of family and marriage. But on the economy and welfare they are focused on social justice via redistributive social transfers, raising low pay and intervening to promote domestic capital and business. Despite spats over judicial reform and accusations that PiS are usurping power and politicising the public administration and public media, the policy mix the ruling party is offering seems to be very popular.

With just five weeks left until polling day the party is way ahead in the opinion polls and the opposition, having failed to unite against the ruling party, is struggling for a theme. At times when the economy is doing well (growth still at almost five percent), incomes rising and social policies benefiting millions many voters will say “if it works, don’t fix it”.