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We would like to thank Mark Allen, Eduard Bos, Jerzy Kurowski, and Monika Witkowska for helping us to obtain the various data used in this study, and Ehtisham Ahmad, Biswajit Banerjee, Ajai Chopra, and Ke-young Chu for many useful comments and suggestions. All remaining errors are our own. The views expressed here do not necessarily represent those of the International Monetary Fund.
Several recent publications contain in-depth discussions on social policy reform issues that are omitted here. See for example Atkinson and Micklewright (1992), the World Bank (1993) for a review of family policies and basic income support and emergency assistance policies, and the World Bank (1992) for a review of health care policy reform issues.
For a general overview on social policy reform in economies in transition, see, for example, Ahmad (1992), Atkinson and Micklewright (1992), Barr (1992), Hambor (1992), Holzmann (1991), Kopits (1992), McAuley (1992), Simanis (1991), and Williams, et al. (1991). For specific analyses on Poland, see, for example, Ksiezopolski (1991), Naujoks and Bledowski (1991), Rutkowski (1990), Tymowska and Wisniewski (1991), Wiener Institut für Internationale Wirtschaftsvergleiche (1990), the World Bank (1993), and Żukowski (1992).
See: Glowny Urzad Statystyczny (GUS), Budzety Gospodarstw Domowvch w 1990 r., (Warsaw: GUS, 1991).
Average consumer price inflation amounted to about 250 percent in 1989 and 585 percent in 1990. Given the extent of price liberalizations in Poland during 1989–90, these high inflation rates largely reflected step-adjustments and significantly exceeded the underlying rate of inflation.
However, employers are no longer required to inform the state employment office of vacancies. Many of the small scale enterprises that have come into existence since 1990 are unlikely to list vacancies, so that the rapid rise in the ratio exaggerates the lack of employment opportunities.
The minimum wage amounts to 35 percent of the average wage in the economy.
There are several exceptions, all of which complicate administration. Individuals who are subject to a mass lay-off and are within five years of the regular retirement age (60 for women and 65 for men) receive unemployment benefits at 75 percent of their previous wage. School leavers receive benefits that are related to the minimum wage rather than the average wage. Unemployed workers in training receive a higher level of benefits but for a shorter duration, if they have previously participated in the labor market. For an overview of the current system, see the World Bank (1993). In addition, it is currently intended to revoke the duration limit for people in regions with high structural unemployment who have worked for a certain number of years and were subject to a mass lay-off. Benefits for this group is currently suggested to amount to 52 percent of average wages. The scheme, if implemented, would mean an additional burdening of social insurance with needs that may better be addressed by social assistance or more temporary arrangements.
See Atkinson and Micklewright (1992) for a review of recent research on the poverty line in Poland.
The “social minimum” is generally thought to exceed minimum subsistence (World Bank, 1993). It is calculated on the basis of a market basket of about 250 goods that includes food products, clothing, housing, hygiene and health care, education and culture, and transport. The exact weights and method are described in Goralska (1986); a general overview can be found in Kordos (1991). The estimates presented here are only indicative as they take June 1990 data presented by Ksiezopolski (1991) that was updated by using the general CPI.
The basis for this estimate will be discussed later on.
The government has yet to decide on how to comply with the Constitutional Court ruling. It is currently planned to use vouchers from the mass privatization program to compensate pensioners whose pensions were initially lowered according to the October 1991 law.
For an in-depth review of all existing rules and regulations refer to Jedrasik-Jankowska (1992) or Kalinowski (1992). Under the 1993 budget law the individual assessment base for pensions is reduced to 91 percent of the calculated base.
This will increase by one year each year; i.e., to 4 consecutive years out of the last 13 years in 1993, and so on. Beginning in 2000 it will be based on 10 consecutive calendar years out of the last 20 years. Still, in April 1993 the rule was challenged in Parliament, and its fate is currently uncertain.
In January 1993 the Polish Parliament (Sejm) voted to raise minimum pensions (and the so-called “group I and group II” disability pensions) to 40 percent of the average wage used in the most recent COLA (AW), and increase group III disability pensions from 27 percent to 30 percent of the AW. The 1993 budget law, which overrides the January vote, implicitly reversed these decisions, but, on April 28, 1993 the Sejm upheld its vote. The fate of all these changes is currently unclear.
Adding old age and disability retirees, this increases to 60.6 percent for men and 35.6 percent for women. Williams et al. (1991) report a much higher number, with about 78 percent of all retirees being in early retirement in 1990. Their data, however, also seem to include survivors pensions. This distorts the analysis because survivors pensions are provided independent of the beneficiary's labor market participation.
Chart 6 has only indicative value as the data are not strictly comparable. The 1990 age distribution for Poland is based on Social Insurance Institution (ZUS) records for male old-age and disability pensioners, as reported by the World Bank (1993). The U.S. and West German distributions are based on sample data, the 1984 Panel Study of Income Dynamics in the case of the U.S., and the 1984 Socio-Economic Panel in the case of West Germany, as reported by Börsch-Supan (1991).
As proposed, COLAs were to be carried out on the basis of the average wage in the economy that prevailed in the previous quarter.
For a detailed overview of changes in contribution rates during 1985–90, see ZUS (1990). The only major change in contribution rates during 1990–93 was the March 1992 increase from 43 percent to 45 percent. However, there were numerous small changes, generally affecting specific groups of employees or specific enterprises. Two examples of the various exceptions that exist in the Polish pension law: payroll contributions for people on temporary work contracts or subcontracts, 38 percent since January 1990, were raised to 40 percent in March 1992; at the same time, additional payroll contributions from enterprises where “working conditions have deteriorated,” 5 percent since October 1989, were increased to 7 percent.
As explained earlier, the dependency ratio refers to the number of contributors per pensioner; the number of contributors is approximated by the number of insured workers (ubezpieczeni) recognized by FUS.
See Rzeczpospolita. No. 34, February 10, 1992.
A very similar result can be obtained by a simple analysis of deterministic trends. If contributors would have increased during 1990–92 in the same way as during 1985–89, there would have been roughly 15.5 million contributors by December 1992. However, there were only 13.2 million contributors, a difference of 2.3 million. This difference reflects an increased tendency towards early retirement (including disability) and contribution evasion. If pensioners would have increased during 1990–92 in the same way as during 1985–89, there would have been roughly 5.9 million pensioners by December 1992. However, there were about of 6.6 million. These 0.7 million additional pensioners have to be subtracted from the 2.3 million. This would leave 1.6 million people for whom contributions are evaded.
See Rzeczpospolita. No. 34, February 10, 1992.
The total fertility rate (TFR) equals the average number of children that women of reproductive age will have if their reproductive behavior does not change. A rule of thumb that holds for most middle and high income economies is that with a TFR of 2.1 children per women or above, generations are renewed, i.e., the net replacement rate is at or above 1.
The reason for using this population dependency ratio instead of the standard OECD indicator is that, at the end of 1992, the average retirement age for FUS pensioners was estimated to be about 55 years.