3 years in the EU: Emigration of Polish workers is boon and bane to economy

By bne IntelliNews May 1, 2007

Patricia Koza in Warsaw -

Poland can blame the EU for its delicious dilemma.

The EU's single market for workers has yet to be realized - only the UK, Ireland and Sweden currently permit unrestricted opening of their labour markets to Poles. But an unofficially estimated, and totally unanticipated, 600,000 to 800,000 Poles have taken advantage of the new freedom to work, or search for it, in the British Isles and Ireland.

"We think this was beneficial for both the old EU economies and for ours, because wages are being transferred back to Poland, which has boosted consumption in our economy," says Piotr Bujak, a macroeconomist at BZ WBK Bank in Warsaw.

Poland's Economy Ministry recently warned of the negative consequences of mass emigration, estimating Poland could lose PLN440bn (€37.4bn) as a result in the next 20 years. Yet many analysts and economists see the development in a positive light. Some estimates put the level of remittances from the UK at about €5.9bn per year, a stimulus that could add about 2% to the GDP of Poland, whose growth rate is already expected to top 6% in 2007.

In addition, the emigration has taken the pressure off Poland's unemployment rate, which hovered at a stubborn 17.2% the year it joined the EU. Registered unemployment is falling at an unprecedented pace and stands at 14.4% after dropping 3.4 percentage points in March, the biggest one-month fall since record-keeping began.

The two other main stimulants to the Polish economy are the influx of EU funds and the surprise decision to name Poland, with Ukraine, as co-host of the 2012 European Football Championships - one of the two most prestigious events in world football (the other is the World Cup). Altogether, these three factors could provide an annual stimulus of up to 7% of Polish GDP.

However, the mass movement of workers abroad on one side and the massive infrastructure projects on the other do not necessarily sit well together.

Problems building

The month-long football tournament - with its need for new stadiums, dozens of hotels and 1,000km of motorway to improve Poland's deplorable road network - will antagonize the already critical labour shortage in the construction industry. The shortfall already approaches 300,000 workers - and Poland has PLN150bn (€40bn) of EU money to spend on infrastructure development.

Construction companies, desperate for workers and unable to wait for the government to ease labour laws, are taking the initiative. JW Construction, one of Poland's largest housing developers, is bringing in 20 construction workers from Tajikstan and Uzbekistan. Mostostal Zabrze has searched even farther afield, announcing recently it was hiring 350 Chinese welders. Illegal hiring is widespread as well.

To be sure, the development stimulated by EU membership may run Poland afoul of several other community rules.

Builders are already issuing dire warnings about the impact of the European Commission's March 25 decision to reduce the Polish share of carbon dioxide emissions from 284m to 208.5m tonnes a year (t/y). If it stands, the ruling would hold cement producers to about 12m t/y, or force them to buy permission to emit more CO2 at the current cost of Euro19 per tonne.

In a similar vein, Polish officials feel stymied by a European Commission decision challenging plans to build a short stretch of the Via Baltica Highway, from the Baltic states to Prague, through the EU-protected Rospuda Valley in northeastern Poland.

Such EU decisions prompted Prime Minister Jaroslaw Kaczynski to go to Brussels on April 18 with an appeal: "Let us develop rapidly. Avoid decisions that will increase our development costs."

Yet economists believe Poland is benefiting immensely from EU membership, and should not complain about such bumps in the road.

"Poland, being an EU member, has to accept the rules," says Ewa Balcerowicz, president of the Center for Social and Economic Research (CASE), a Warsaw-based think-tank. In exchange, Poland benefits from a common market "where people are free to choose where they will travel and where they will work. That's something especially important, and a very substantial change."

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