Labor Productivity and Its Impact on Employment in Poland’s Manufacturing Sector
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Publication date: 2010-08-31
GNPJE 2010;241(7-8):1–19
The paper analyzes the influence of labor productivity on employment in various branches of Poland’s manufacturing sector in 1993-2007. The author attempts to determine if changes in labor productivity and employment were substitutive or complementary in nature and whether the relationship between these processes was stable or liable to change. The analysis, using the Pearsoncorrelation coefficient (which measures the strength of the linear relationship between two variables), shows that the relationship between labor productivity and employment turned from substitutive to complementary and that an improvement in labor productivity had no distinct impact on employment in the short term, while in the long term it promoted an increase in employment. The relationship between labor productivity and employment varied because the ways in which labor productivity improved tended to change. In the 1990s institutional changes led to an improvement in labor productivity, including the introduction of market economy mechanisms, privatization and greater competition in the wake of opening the economy. At the time the simplest method was used: employment reductions. With time this option petered out and companies began to improve labor productivity (and competitiveness) by investing, modernizing their fixed assets, and introducing product rather than process innovations. This had a favorable influence on employment, the author says.