Changes in the external environment will be shaped first of all by globalisation and technological processes, and especially so in the field of technology concerned with IT and telecommunications. Globalisation and technological changes have one common general effect in the sense that they intensify competition and that is a challenge which Polish companies and the Polish economy will have to face. Globalisation escalates competition in the sense that goods and services produced to date at definite costs, are now delivered at much lower costs by competitors, while technological progress boosts competition by creating new manufacturing processes as well as new products and services. But the overall result is the same – increase of competition pressure which forces adjustment and restructuring.
As regards internal processes in Poland, these will go together with demographic changes. The latter will step up demand for social services, notably in the field of health care and social security in the broadest meaning of that word. Access to the single European market, which Poland shall be taking ever greater advantage of, represents another determinant. Significantly, that access will facilitate migration of labour force, and in particular of its best educated and enterprising members. And finally the third dimension of these changes entails growing domestic expectations. These are generated also by Poland’s EU membership and the growing aspiration to take advantage of the social policy instruments, and in particular of social security measures now well established first of all in the “old” EU countries.
It follows that on the domestic scene pressure can be expected for higher wages, that expectations will rise on matters of social security and of sharing EU accomplishments such as shorter working hours and greater social privileges. I see unavoidable tensions looming between these two spheres of impact, that is between what is happening outside the economy (and what calls for adjustment and demands increased efforts), and between what will be happening in the country’s economy. On the one hand, external processes will force Poland to adjust, while internal processes and involvement in European integration will boost demands and expectations, on the other.
How can such tensions be dealt with? How should such conflicts be resolved? We surely need a very innovative economic policy to this ends. To outline such a policy let me refer to a very simple equation – the GDP per capita function. I shall factorise that function into three quantities: the rate of employment (the ratio of working population to the total working-age population, work intensiveness (the average number of hours worked by one employee during a year) and work productivity (measured by added value per one hour of work). This analysis yields the following quantities:
– Poland’s employment rate of 54% places it at the EU level of 84%;
– Poland outdistances euro zone countries with respect to work intensiveness at a ratio of 1:22 (according to 2006 figures, Poles work an average of 1980 hours per year compared to about 1600 in euro zone countries);
– with regard to work productivity, the value of one working hour calculated by the OECD in USD amounts to USD 19 in Poland and USD 44 generated in the euro zone, giving Poland an index of 0.43.
After multiplying these three quantities, Poland’s per capita GDP index stands at 0.44 and that ratio to the EU average does do not come as a surprise. Using these three quantities I wished to pinpoint those areas in Poland in which changes will be taking place and consequently adjustments will have to be made.
The guideline for economic policy makers stemming from the first quantity is to increase the economic activity rate. That implies institutional changes but in the long run investments to generate jobs. The second quantity indicating a very high number of hours worked by Polish employees gives rise to public aspirations that Poland strives to achieve EU quantities with regard to working standards, labour laws and social benefits. Poland will certainly not follow the example of countries such Korea and its annual 2.500 hour working rate. The work productivity index indicating a high, 60% gap between Poland and the EU can be improved only by developing a knowledge-based economy. That calls for new rules and regulations, allocation of public funds for education, R&D and innovations as well as for a decisive growth of the investment rate. That is the policy that can help to solve the tensions I referred to earlier.
Dariusz Rosati
Professor at the Warsaw School of Economics
Member of the European Parliament
former Minister of Foreign Affairs