“The effect of raising minimum wages on inflation and growth in the short term will be minimal,” the central bank Chairman Adam Glapiński said at the end of the Monetary Policy Council meeting at which reference interest rates were kept at 1.5 percent.
The National Bank of Poland Chairman was commenting on Poland’s ruling party Law and Justice’s plan to raise minimum wages by 15 percent per annum for the next four years, a subject which had been discussed during the September session of the Council.
Mr Glapiński said that their forecasts take into consideration the current year and the next two years and in that time the effect on growth of such a wage hike would be around 0.1 percent, while the positive and negative effects on GDP would cancel each out.
Yesterday the Entrepreneurship and Technology Minister Jadwiga Emilewicz said that she had not been consulted on the policy idea, but had said that as “per normal procedure, any legislation passed by the cabinet would be presented to the Social Dialogue Committee” for further consultation, referring to a consultative body consisting of representatives of employers, trade unions and other organisations.
On the other hand, she felt that it is “unjust” for 14 percent of the working population to be earning a wage “which is difficult to live on”.
As regards the rate decision taken during the Monetary Policy Meeting Glapiński summarised the economic situation which Poland is now facing. It was likely that “Germany would be slipping into recession,” he read from the Council meeting’s notes. Meanwhile most central banks worldwide, with the exception of Norway were lowering rates, including the US. The ECB, which is meeting on Thursday, is likely to reduce rates and recommence the use of quantitative easing.
In such an environment, the Chairman said it was not the time for Poland to raise its rates.