Demand- and Supply-Side Determinants of Unemployment in Poland
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Publication date: 2012-12-31
GNPJE 2012;260(11-12):25-57
The aim of the paper is to determine to what extent fluctuations in the level of unemployment in Poland in the last two decades have depended on changes in labor demand and labor supply. To this end, the contribution of labor demand and labor supply to changes in the unemployment rate is examined and then trends in labor demand and labor supply and their key determinants are analyzed. The study finds that changes in labor demand were the main determinant of unemployment fluctuations. A decrease in labor demand contributed to strong unemployment growth at the beginning of the 1990s and at the turn of the century, when the economic slowdown was associated with transformation and pre-accession restructuring respectively. An increase in labor demand caused by economic recovery after EU accession was behind the subsequent fall in unemployment. For most of the time span of the analysis, labor supply was a factor alleviating negative developments on the labor market due to the possibility of early retirement, easy access to disability pensions and labor force migration. Growing labor supply contributed to a rise in unemployment only at the end of the last decade. The fact that labor demand had a stronger impact on the level of unemployment than labor supply indicates that labor market policy should focus on job creation, not on “manipulation” of labor supply, the author concludes.
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