ZPP Newsletter
14.12.2017
Union of Entrepreneurs and Employers Report: The increase in wages in Poland must be accompanied by tax relief on wages
Wages in Poland over the past years have been steadily growing. An average employee could easily see that changes in this respect have taken place. For this to happen, it is necessary to undertake reforms aimed at tax relief of wages – reducing the amount of the tax wedge and spending on the social security system – as it is stated in the publication of the Union of Entrepreneurs and Employers under the title “Salary Report. Poland and the World”.
Recently, due to demographic problems and a shortage of workforce, the increase in average wages has gained exceptional dynamics. In October 2017, the average monthly remuneration in Poland amounted to PLN 4,574, which is more than PLN 500 more than in 2016. In most sectors, however, the average wages are raised by wages in public economic entities. It also differs depending on the size of the company (the bigger, the higher the median wages) or which voivodship the company is located in. Moreover, in accordance with the adopted methodology, only companies employing more than 9 people are taken into account in calculating the average remuneration.
Wage growth in Poland could be more noticeable by employees, but the biggest barriers in this respect are taxes and tax deductions.
“From 2001 until October 2017, the average salary has more than doubled. Therefore, one cannot deny that in the last dozen or so years, Poles have realistically become wealthier, which in turn affected their quality of life. An important problem remains the tax wedge in Poland, approximately 35.78% and close to the OECD average, but definitely too high for our stage of economic development. In terms of spending on the social security system, we are one of the Organization’s leaders,” said Jakub Bińkowski, secretary of the Law and Legislation Department of the Union of Entrepreneurs and Employers, author of the report.
The expert added that a real change in the reduction of these deductions will be possible due to the complete remodeling of the tax system. The finished project was presented by the coalition Płaca Plus Podatki Minus (http://podatkiminus.pl/projekt,m,mg.2).
According to the data for the first half of 2017, out of all the industries making up the economy, employees of information and communication companies earned the highest salaries (average remuneration PLN 7,871.60), followed by financial and insurance companies (average remuneration PLN 7,648.64). From the National Salary Report 2016, it appears that wage growth is influenced by every completed stage of education.
In terms of regional division, in the first half of 2017, employees in the Masovia earned the most money – the average gross salary reached PLN 5,530.32. Lower Silesia came second (PLN 4,652.90), and Pomerania came third with an average salary of PLN 4,999.41. Voivodships with the lowest wages were as follows: Warmia-Masuria (PLN 3,876.63), Subcarpathia (PLN 3,895.38) and Świętokrzyskie voivodship (PLN 3,963.43).
Among the factors shaping wages, there are, among others: level of unemployment benefits, intensity of job search, costs of job search or provisions of the law protecting employees.
In this respect, from the economic point of view, the amount of the minimum monthly remuneration determined by law is important.
In 2017, the minimum wage in Poland amounted to PLN 2000 gross. Within a dozen or so years, its amount has increased almost threefold.
“Generally speaking, we are not proponents of a minimal wage. Such a regulation distorts the labor market and as a result worsens the situation of the weakest players. First and foremost, this concerns young and inexperienced people,” said Marcin Nowacki, vice-president of the Union of Entrepreneurs and Employers, adding “If regulations defining minimal wage must be in force in Poland, I would rather be in favor of determining the minimum wage on a regional level, as this way it would potentially cause much less damage than a minimum wage set for the country as a whole.”
Analyzing the data on wages on a global scale, one will notice the fact that in the period from 2013 to 2015, the growth in real annual wages slowed significantly all over the world – in the last year analyzed, i.e. 2015, the increase reached the lowest level since 2011 and amounted to 1.7%.
Data on wages in individual countries is provided by the OECD. According to their statistics, earn the highest wages in Luxembourg, the United States, Switzerland, Iceland, Norway, the Netherlands, Denmark, Australia, Ireland and Belgium.
In 2016, Poland qualified to the group of countries where the average annual wage is the lowest (totaling PLN 25,921). Poles, therefore, earn half as much as the Irish, but more than twice than Mexicans.
“It is noteworthy that the amount of wages translates in some way into the share of wages in GDP. Analyzing the data of the International Labor Organization, we can observe a trend in which countries with the highest wages have at the same time their highest share in the gross domestic product and vice versa, however, this rule is not an axiom. Nonetheless, the share of wages in GDP is in principle higher among countries with high wages than in low-wage countries,” added Jakub Bińkowski.
The share of wages in Poland’s GDP in 2016 amounted to 47.5% (below the average for the five countries with the lowest wages) and decreased by 1 pp over the decade. According to forecasts of the European Commission, however, it is expected to grow in the coming years.
All of the values provided above and presented in the report by the Union of Entrepreneurs and Employers are gross values. Therefore, they do not equal the remuneration transferred to the employees’ account each month – they are increased by social security premiums, paid in part by the employees themselves and advance payments for personal income tax. Moreover, one should also mention the contributions of the employers to employees’ social security and the actual costs of employment. According to data of the Polish Central Statistical Office, the monthly labor cost per 1 employee in 2016 amounted in Poland on average to PLN 5,489.14. One should keep in mind that the average gross remuneration was approximately PLN 4,047 and the employee received even less.
“Being the Union of Entrepreneur and Employers, we have been repeating for many years now that the highest burden for the sector of small and medium-sized enterprises are the non-wage labor costs that are too high. Work in Poland is taxed like hard liquor. Furthermore, for the mere fact of hiring an employee, one has to pay the government almost the equivalent of this employee’s remuneration. For business in Poland, this is a very big barrier,” commented Cezary Kaźmierczak, president of the Union.
The available data show that in recent months, the increase in wages has been quite dynamic, but it is related to, among others, to a very pessimistic demographic situation and problems resulting from insufficient workforce that have affected many companies. According to the experts of the Union of Entrepreneurs and Employers, the largest part of employment costs should go to the employees’ pockets. The increase in wages must be linked to the increase in productivity, which is why it is necessary to shape an economic policy that will support specific sectors of the economy, characterized by innovation and generation of high added value.
