Putting Off Polish Demographic Reckoning Just Became Harder

Poland’s economy has made it past a record stretch of deflation and the biggest institutional crisis to grip the nation since the fall of communism. Demographic problems, on the other hand, have a way of sticking around.

The arrival of unprecedented numbers of workers from neighboring Ukraine has turned back the demographic clock for one of the fastest-aging and lowest-fertility nations in Europe, effectively delaying the graying of Poland’s population by five years, according to PKO Bank Polski SA.

But this week, as the European Union throws its doors open to visa-free travel from Ukraine, officials are watching whether the boom in the labor market turns to bust if enough people choose to try their luck beyond the EU’s biggest eastern economy.

“It’s not only about higher pay in Western countries,” said Grzegorz Baczewski, deputy head of Poland’s Lewiatan Employers’ Association. “It’s even more about Poland doing nothing to make them settle down here, to offer permanent jobs, to attract them through special programs.”

Ukrainians, drawn to Poland by higher wages and relative ease of access to its jobs market, now only need a biometric passport to enter wealthier parts of the EU for up to three months, although the new legal regime doesn’t entitle them to work. Ukraine’s economy remains under strain three years after Russian President Vladimir Putin’s annexation of Crimea in 2014 was followed by a separatist conflict and a recession. 

Under a scenario of “mild outflows” from Poland, which assumes that the number of Ukrainians decreases by one-third, growth in real wages would go up by 0.8 percentage point this year, according to PKO. In 2016, the influx of workers from the nation of 42 million effectively reduced earnings adjusted for inflation by 2 percentage points, Poland’s biggest lender estimates.

Click here to watch Glapinski discuss Polish rates after June’s meeting

“We’re watching the labor market and we will be watching it even closer,” central bank Governor Adam Glapinski said last month.

The immigration wave from Ukraine helped contain a revival in inflation and relieved a labor market stretched by record-low unemployment. The number of vacancies in Poland, a country of 38 million people, is hovering near a record-high for a second year, as every third employer reports growing problems with finding qualified workers.

“The risk of wage acceleration is the highest in the last two-three years,” said Rafal Benecki, chief economist at ING Bank Slaski SA, who predicts they’ll surge 6.5 percent from a year earlier in the fourth quarter. The central bank “is overconfident when saying that Ukrainians should keep filling the gap on the labor market.”

The authorities are hopeful that Poland will remain a favored destination, helped by close cultural and linguistic ties, as well as convenient bus transit across the border. The number of Ukrainians getting new biometric identity documents reached 340,000 in May, an increase of almost 80 percent from a year earlier, compared with 216,000 in April, according to the country’s Migration Service.

Click here to read about Ukrainians leaving to work in Poland

Businesses have responded by handing out even more temporary work registrations before the new rules come into force. In the first four months of the year, Poland issued almost half the 1.3 million permits received by Ukrainians for the whole of 2016, according to the Labor Ministry.

“Changes on the labor market, including a declining unemployment rate and no visa requirement for Ukrainians, may finally impact on wage-growth acceleration,” said Jaroslaw Janecki, chief economist at Societe Generale SA in Warsaw. The latest data continue to indicate a lack of wage pressure, he said.

Adding to evidence that underlying price strains remain subdued, core inflation -- which strips out volatile components -- unexpectedly slowed last month to 0.8 percent from a year earlier, according to data released on Tuesday. 

Opinions among Ukrainians are split, with younger people prepared to go farther in search of better lives.

“I can’t wait,” said Andrej Sereda, 24, now a graduate student in Warsaw. And many people my age can’t wait either. We learn English. We save money. We’re like envoys -- we go west and make a new home there, and then we pull the others along, either from Poland, or directly from Ukraine.”

While saying it couldn’t estimate the size of possible outflows, the Polish Labor Ministry is upbeat, predicting that geography and culture will shape people’s motivations. That’s certainly the case with Maria Gnatiuk, 46, who until recently was employed as a cleaner before starting to work legally this year at a supermarket in the northern Polish town of Gdynia. 

“It’s not that easy to leave Poland,” she said. “Language would be the main hindrance. Distance to our homeland matters.

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