How big are labour productivity disparities in Poland

Abstract

The ongoing discussion on inequalities in Poland focuses on household income. It ignores the scale of differences in labour productivity. In order to fill this gap, having combined national accounts and employment data we show that a narrow group of 7.2 million people working in non-financial and financial enterprises account for almost 60% of Polish GDP and 75% of income tax revenues and social security contributions from the private sector. This structure of the economy represents both an opportunity and a threat to growth prospects. Flows of new employees to the enterprise sector from micro-businesses of low productivity or agriculture can considerably increase their productivity. At the same time, however, large differences in productivity, leading to income disparities, create the temptation to tax productive entities more heavily in order to finance transfers to less productive ones, which in turn perpetuates the current structure of the economy.

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“…In contrast, in small (10-49 employees) and medium (50-249 employees) enterprises, this amounts to three-thirds of the Western level, while in large firms it reaches 90% of that level (cf. Ciżkowicz, Łaszek and Rzońca, 2020). 18 That stays in stark contrast with the pace of labour reallocation directly after the GFC.…”