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Low Unemployment, High Labor Costs: Polish Companies at Crossroads

BUSINESSLow Unemployment, High Labor Costs: Polish Companies at Crossroads

A recent survey reveals that as many as 67 percent of Polish companies cite high labor costs as the biggest barrier to their current operations. Surprisingly, this doesn’t translate into decisions about layoffs – almost 80 percent of businesses plan to maintain their current levels of employment, and more than half complain about a shortage of employees. The data is sourced from the December study by the Polish Economic Institute and Bank Gospodarstwa Krajowego.

“The lack of hands-on labor will remain a major challenge in Poland in the coming years,” assesses Wojciech Ratajczyk, CEO of Trenkwalder Poland. He indicates that local companies are entering 2024 with several concerns, primarily related to the economic environment.

“The labor market in 2023 could be characterized by four main phenomena. The first is low unemployment, which currently stands at 5 percent and is slightly lower than last year. The second is a significant lack of job candidates. Currently, there are 110,000 job vacancies registered in Poland, which is an impressive number. The next issue is wage pressure related to inflation and an increase in minimum wages. Last is economic uncertainty, which is tied both to the general economic situation, notably a slight slowdown in the last two quarters, and to fiscal unpredictability,” Ratajczyk explains in an interview with Newseria Biznes.

At the end of November, Poland’s unemployment rate was 5 percent according to the Ministry of Family and Social Policy. This rate has remained stable for several months, showing a year-on-year decrease of 0.1 percentage points. Furthermore, this rate is lower by 0.5 percentage points than the level recorded at the end of February 2020.

Employers, who struggle with a lack of labor force and a shortage of qualified staff, do not rejoice at the persistently low unemployment rate. The latest “Talent Shortage” report by Manpower Group states that 72 percent of companies in Poland are currently having difficulties filling job positions with new employees who possess the desired competences. The December index of economic climate, published monthly by PIE and BGK, indicates problems associated with worker availability for 51 percent of companies.

Despite high labor costs, decisions about layoffs are not being made. In the PIE and BGK study, almost 80% of companies declared their intention to maintain current employment levels. Despite the prevailing negative mood, companies continue to express recruitment needs.

“The key factors influencing the hiring of new workers are primarily demand, efficiency, planned investments, and candidate availability. These all combine because it’s hard to plan investments when you don’t have candidates or demand,” says Wojciech Ratajczyk. “A shortage of candidates and workers will remain a major challenge in Poland in the coming years. Therefore, defining a policy of economic migration to Poland should be a priority.”

The new government should also prioritize more support for vocational education and filling the so-called skill gap. The skills of graduates currently do not meet the needs of businesses and the labor market.

Industry education, based on already existing robust legislation, needs to train such staff in cooperation with business, which will meet the labor market needs,” the expert emphasizes.

According to PIE research, entering 2024, Polish entrepreneurs are also worried about energy price increases – 80 percent of companies believe that energy carrier prices will rise next year. Slightly fewer, 57 percent, predict inflation growth in the same period, and almost 40 percent expect rising interest rates. Also, the general economic uncertainty and geopolitical situation cause concern – more than half of the companies believe that the war in Ukraine will still be ongoing in 2024.

“Before 2024, we can observe slight optimism, linked to the appointment of a new government, the chances of unlocking EU funds and the forecast of a small GDP growth. On the other hand, there is uncertainty caused by not the best news from the German economy, as Germany is our biggest economic partner,” Wojciech Ratajczyk concludes.

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