The spiral of wages and prices in Poland almost does not stop

When Przemysław Gacek started his recruiting business, he watched the huge queues in front of the main office in Warsaw for unemployment benefits. Two decades later, unemployment has fallen from 20% to just 3%, and Polish workers are queuing up at his office demanding higher wages.

“We see more Poles coming to their bosses asking for a pay rise, and if they don’t get it, they start looking around,” said Gacek, chief executive of Grupa Pracuj, which runs Poland’s largest online job posting platform. . Ads.

Poland is one of the most striking examples of the post-pandemic growth in the bargaining power of workers. IN THE USA, employees quit in record numbers take advantage of better deals elsewhere. In the UK, employers provide a living wage bonuses. In the eurozone burning slower negotiations with trade unions may result in delayed payment of wages.

For monetary policy makers, however, this labor market strength makes it difficult to control inflation, which has risen amid soaring global food and energy prices. They are concerned that price pressures, now at their highest levels in decades, will take root if workers demand higher wages to match higher living costs, prompting employers to raise prices to reflect rising wages.

In Warsaw, fears of such a wage-price spiral have already become a reality. As companies across all sectors struggle to hire, median wages rose 13.5% year-on-year through May, nearly matching a galloping 15.6% year-on-year inflation through June, the highest level in a quarter of a century. In response, the central bank quickly raised rates, and on Thursday raised its benchmark base rate by 50 basis points to 6.5%, from near zero in the fall. The central bank expects inflation to remain in double digits until 2023.

Rafal Beneki, an economist at ING, noted “the risk of permanent and self-reinforcing price increases that could be difficult to stop.”

Liam Peach, an economist at the consulting firm Capital Economics, said the countries of Central and Eastern Europe are acutely exposed to the risk of a wage-price spiral. Even before the pandemic, strong economic growth and a continued decline in the working-age population had driven unemployment to ultra-low levels. Hungary and the Czech Republic face similar pressures, but Poland’s job market is now “in a league of its own,” Pietsch said.

As consumer spending remains high, companies have the opportunity to burden their customers with higher costs.

Softylabs, a Polish software company, recently raised wages by 20% – twice as much as in previous years – and is passing on more than half the cost of its growing payroll to clients. “I see salary expectations going up very, very fast,” said Rafal Kijonka, chief executive of Softylabs. “If we don’t accept the demand for higher wages, unfortunately the software developer will just go to another company.”

The twin shocks of Russia’s invasion of Ukraine and monetary tightening are likely to wipe out economic growth in the coming quarters. The central bank on Thursday predicted that the economy would soon fall into recession.

However, economists expect the labor market to remain buoyant.

“The figures are not declining, even though energy prices affect production and interest rates affect the housing market,” said Agnieszka Zielińska, director of the Polish HR Forum. Economic uncertainty also hampered companies invest in automationshe added.

Morgan Stanley also predicts “minimal impact on the labor market and unemployment” if the Polish economy slides into a technical recession.

Competition for staff has been fiercest in tech, where demand has skyrocketed during the pandemic. While Brexit initially helped companies by pushing Poles leave BritainThe pandemic has allowed IT professionals not only to stay at home, but also to work directly for companies in countries like Germany and Sweden that pay more than their Eastern European neighbors.

According to Manuel Segador Arrebol, who heads the Polish department of the recruitment agency GI Group, the salaries of some IT professionals have jumped by more than 40%. Lack of staff can mean that sometimes “we had to approach 800 people” to fill one vacancy.

A chart showing the number of vacancies and the level of vacancies in various sectors in Poland, to show that there are especially many vacancies in the IT sector.

He added that in the working sectors, employers are not only increasing wages, but also offering overtime and moving from temporary contracts to permanent ones. Some are also asking workers to stay past retirement age.

Since Russia’s full-scale attack in February caused a mass exodus of Ukrainians, Polish employers have sought to hire Ukrainian refugees. Andrzej Kubisiak, deputy director of the Polish Institute of Economics, estimates 1.1 million registered refugees, about 600,000 people of working age and 200,000 people found work.

Recruitment agencies are partnering with companies to help Ukrainian women by matching job offers with on-site housing and childcare, and training some women to operate forklifts. But many prefer informal jobs in cleaning, childcare or hospitality in the hope that they will soon be able to return home, Kubisiak said.

Meanwhile, employers in manufacturing, transportation and construction who are accustomed to hiring Ukrainian men say they find it difficult to offer the same job to women because of labor protection regulations and the physical demands of their production lines. “Historically, the Poles went west and got people from the east,” Gachek said. “But now there are no deliveries (of men) from Ukraine, as well as from Belarus and Russia.”