Poland's early parliamentary election of 2007

By Manuel Alvarez-Rivera, Puerto Rico

Voters in Poland head to the polls on Sunday, October 21, 2007 for a parliamentary election held two years ahead of schedule, following the collapse of Prime Minister Jaroslaw Kaczynski's right-wing coalition government last August.

Poland's bicameral Parliament is composed of an upper house, the 100-member Senate, and a lower house, the 460-seat Sejm. Bills must be passed by both houses before they can become law. However, in case of disagreement between the two houses, the Sejm has the final word. Members of the Sejm are elected by the largest average method of proportional representation - the D'Hondt rule - in multi-member constituencies, where political parties and electoral alliances submit lists of candidates. The lists are open, and voters indicate a preference for one candidate within a list. In order to take part in the distribution of Sejm seats, political parties must obtain at least five percent of the nationwide vote; for electoral alliances, the threshold is set at eight percent.

Meanwhile, members of the Senate are elected in multi-member constituencies - the voivodeships (provinces) of Poland, or subdivisions of these - by plurality voting. Each voter may choose as many candidates as there are seats to be filled, and the candidates obtaining the largest number of votes are elected to office.

Since the transition to democracy in 1989 after forty-two years of Communist rule, Poland has developed a highly fractious party system that has undergone frequent changes over the course of the years. Nonetheless, the main political parties can be broadly grouped in two categories: the right-of-center heirs to the tradition of Solidarity - which emerged in 1980 as the first independent trade union in Communist-dominated Eastern Europe - and the center-left, post-Communist parties which replaced the Polish United Workers' (Communist) Party and its political satellites.

Solidarity, which had been legalized in 1980, suppressed in 1981 and then restored in 1989 after round-table negotiations between the government and the opposition, swept the parliamentary elections held that year under a special arrangement that reserved the Communist Party and its allies a majority of seats in the Sejm. However, the United Peasants Party and the Democratic Party, which up to that point had been satellites of the Communists, broke with the party to join forces with Solidarity, and Tadeusz Mazowiecki, a prominent member of Solidarity, became Poland's (and Eastern Europe's) first non-communist head of government in more than four decades. His government pursued a policy of "shock therapy" reforms that rapidly established a booming market economy, but also brought about a drastic rise in unemployment.

Following the transition to democracy, Solidarity disintegrated into numerous factions that became separate parties. This turn of events was probably inevitable, inasmuch as the movement brought together diverse groups that were united in their opposition to the Communist government, but otherwise had little in common. In the 1990 presidential election, Prime Minister Mazowiecki ran against Solidarity leader Lech Walesa but finished in a surprisingly weak third place; Walesa was elected president in the runoff election, easily defeating Stanislaw Tyminski, a hitherto unknown émigré businessman who had unexpectedly arrived second in the first round of voting. In parliamentary elections held the following year under a system of unfettered proportional representation, no single party won more than one-eight of the vote, and a total of twenty-nine parties secured representation in the Sejm. During the next couple of years, Poland was ruled by a succession of short-lived, center-right coalition governments.

For the 1993 parliamentary election, electoral thresholds were introduced to reduce parliamentary fragmentation - five percent for parties, eight percent for coalitions. The two major post-Communist parties - the Democratic Left Alliance (SLD) and the Polish Peasant Party (PSL) - ably exploited widespread discontent with the economic reforms introduced by previous Solidarity governments, and secured a large Sejm majority (303 of 460 seats) with only 35.8% of the vote - largely because the center-right Solidarity parties insisted on running separately in the election, and many of them failed to overcome the electoral barriers. As a result, only eight parties secured representation in the Sejm.

From 1993 to 2005, the center-right and the center-left alternated in power every four years. SLD and PLS ruled in coalition until 1997, when the center-right parties joined forces to establish the Solidarity Electoral Action (AWS) alliance, which won the largest number of seats in the parliamentary election held that year, and subsequently formed a coalition government with the Freedom Union (UW). Meanwhile, in the 1995 presidential election, SLD leader Aleksander Kwasniewski defeated incumbent Lech Walesa.

AWS remained in power until 2001, when SLD returned to power in coalition with PSL. Two new parties, the liberal Civic Platform (PO) and the populist-nationalist Law and Justice (PiS), along with the older, rural-based Self Defense (SRP) emerged as the main right-of-center opposition parties, while AWS was wiped out and lost its parliamentary representation.

However, the post-Communist parties were routed in the 2005 parliamentary election, in which PiS (headed by twin brothers Lech and Jaroslaw Kaczynski) and PO came in first and second place, respectively, with the following (Sejm) results:

Law and Justice (PiS) - 3,185,714 votes (27.0%), 155 seats
Citizens' Platform (PO) - 2,849,259 votes (24.1%), 133 seats
Self-Defense (SRP) - 1,347,355 votes (11.4%), 56 seats
Democratic Left Alliance (SLD) - 1,335,257 votes (11.3%), 55 seats
League of Polish Families (LPR) - 940,762 votes (8.0%), 34 seats
Polish Peasant Party (PSL) - 821,656 votes (7.0%), 25 seats
German Minority - 34,469 votes (0.3%), 2 seats
Social Democracy of Poland (SDPL) - 459,380 votes (3.9%), no seats
Democratic Party-demokraci.pl (PD) - 289,276 votes (2.5%), no seats
Others - 541,548 votes (4.6%), no seats

Law and Justice scored a further victory when Lech Kaczynski was elected president in October 2005, defeating Civic Platform leader Donald Tusk; Jaroslaw Kaczynski became prime minister the following year, forming a right-wing coalition government of PiS, SRP and the staunchly conservative League of Polish Families (LPR).

Poland has been a member of the European Union (EU) since 2004 - Polish voters overwhelmingly approved the country's entry into the EU in a 2003 referendum - but Kaczynski's distinctly Eurosceptic government has been at odds with Brussels over the country's voting strength in the EU Council of Ministers. In addition, last April the European Parliament called on Poland to stop public leaders from inciting discrimination against gays and lesbians, after Kaczynski's government drafted a law to ban the discussion of homosexuality in Polish schools, which the government perceives as "homosexual propaganda." Meanwhile, the Polish government's anti-gay obsession reached truly absurd lengths last May, when a high-ranking official suggested the BBC TV children's show "Teletubbies" promoted a homosexual lifestyle.

Although Prime Minister Kaczynski has presided over a period of strong economic growth and falling unemployment, Poland's relations with both Russia and Germany - the country's major trading partner - have deteriorated markedly during his tenure in office: Kaczynski's government has repeatedly insisted that the country would have a much larger population (and therefore would be entitled to increased voting strength in the EU Council of Ministers) if Nazi Germany had not invaded and ravaged Poland in World War II. However, this approach has done little to advance Poland's cause; instead, it has only managed to re-open old wounds.

Since the end of Communist rule in 1989, Poland has been plagued by persistent cabinet instability, and the country has gone over a dozen prime ministers: only one of them - Jerzy Buzek (AWS), who served from 1997 to 2001 - managed to complete his four-year mandate. As it was, Jaroslaw Kaczynski's government proved to be no exception to the general rule. Last August, SRP pulled out of the coalition government, a month after Kaczynski sacked Deputy Prime Minister (and SRP leader) Andrzej Lepper over a corruption investigation. As a result, the government no longer commanded a parliamentary majority, which made an early election inevitable.

The upcoming election is expected to be closely fought, and Polish politicians have been reaching out to expatriate voters, particularly in the U.K. and Ireland, where approximately one million Poles have settled in recent years. Opinion polls indicate PiS and PO are likely to remain Poland's two major parties, with the SLD-led Left and Democracy (LiD) coalition in third place. PSL may continue to be represented in the Sejm, but SRP and LPR may lose all their seats. While the electoral system slightly favors the larger parties - due to the disparities introduced by the cumulative distribution of Sejm seats over mostly middle-sized constituencies - it's not clear if PiS and its allies will secure a parliamentary majority next October 21. The latest polls show a widening lead for PO, but LiD (and possibly PSL) could hold the balance of power after the election.

Update

Polish Radio External Service's internet portal thenews.pl reports that exit polls show the Civic Platform (PO) has won a clear victory over Law and Justice (PiS) on a sharp voter turnout increase.

Complete Sejm election results, available on the National Electoral Commission of Poland's Elections 2007 website in both Polish and English, were as follows:

Citizens' Platform (PO) - 6,701,010 votes (41.5%), 209 seats
Law and Justice (PiS) - 5,183,477 votes (32.1%), 166 seats
Left and Democracy (LiD) - 2,122,981 votes (13.2%), 53 seats
Polish Peasant Party (PSL) - 1,437,638 votes (8.9%), 31 seats
German Minority - 32,462 votes (0.2%), 1 seat
Self-Defense (SRP) - 247,335 votes (1.5%), no seats
League of Polish Families (LPR) - 209,171 votes (1.3%), no seats
Others - 208,128 votes (1.3%), no seats

Voter turnout in the election rose dramatically from 40.6% in 2005 to 53.9% on Sunday.

Elections to the Polish Sejm - Results Lookup has 2001, 2005 and 2007 election maps and statistics.

The results confirmed exit poll forecasts of a sizable Civic Platform victory, although the party fell short of an absolute parliamentary majority. Nonetheless, in November 2007 PO leader Donald Tusk formed a coalition government with the Polish Peasant Party (PSL), which improved upon its 2005 result. Meanwhile, Left and Democracy (LiD) failed to match the combined showing of its constituent parties two years ago, while both Self-Defense (SRP) and the League of Polish Families (LPR) were wiped out, losing all their Sejm seats.

Civic Platform also won a comfortable majority in the Senate, where it secured 60 seats to 39 for Law and Justice; one independent captured the final seat.

Employment and Unemployment in Poland

by Edward Hugh: Barcelona

This post is essentially a research note on the current state of the Polish labour market. It forms part of a series of posts being prepared by Global Economy Matters to accompany the up and coming Polish elections, which are due to be held this weekend. Alongside this post you can find a general review of the electoral situation by Manuel Alvarez, and I will be writing additional notes on the Polsih trade balance and on migration and remittances in the Polsih context, while Claus Vistesen will be taking a look at indebtedness, capital flows and the current account balance situation. All in all a rather full analysis, which given the key role which Poland may play in any Eastern European emerging markets disarray is probably only fitting.

Now, at the end of September the Polish Statistical Office published its unemployment report for the second quarter of 2007, and very interesting reading it is.


Before going into the details of the report, perhaps a bit of background information would be useful. First of all, economic growth. GDP has been growing at a pretty nifty clip in Poland in recent quarters, not as fast as in the Baltics, but pretty fast, as we can see in the chart below. Over the last twelve month the rate has been hovering in the 6% to 7% region.




Now the question is, is this growth sustainable? Stripped to its bare minimum, an economy needs three things for growth - labour, capital and raw materials - pretty much in the same way as a cement mixer needs sand, cement and water, all in the right proportions, of course. The analogy, in the present context, is not completely devoid of significance, since construction activity, and hence the production of cement, is an important part of the recent Polish story in its own right.

So as I say: is this sustainable? Well, capital is at present in pretty plentiful supply, although the danger does exist - since this capital is to a large extent not the product of domestic Polish savings - that this supply could dry up, and even be sucked backwards, as Claus will explain in his post. Raw material are available, but not always at the most favourable price, as we are currently seeing in relation to food and energy.

But what about labour? What is the position with the labour supply situation in Poland? Well this brings us directly to the tricky topic of Polish unemployment, which we will now proceed to explore.

Long Term Unemployment Decline

Historically unemployment in Poland has been pretty high. Most recently it peaked in 2003, and has now been dropping for a number of years, as can be seen from the annual unemployment chart below.




If we come to look at the monthly unemployment data for the last twelve months then we can see that this decrease in unemployment has been accelerating steadily in recent times.





The decrease in the numbers of unemployed is in part, of course, a reflection of an increase in employment, and the volume of employment in Poland has, as can be seen below, been increasing steadily since the end of the contraction which took place between 1999 and 2004.

Here is the annualy % change in the volume of employment:




And here are the numbers of employed on a quarterly basis since the begining of 2004:




The number of people registered with the Polish labour offices as unemployed at the end of June 2007 was 1,895,100 (of which 1,107,700 were women). This constituted a reduction of 337,400 on the number of unemployed in March (the end of Q1). Compared with June 2006 unemployment was down by 592,500 (or by 23.8%). Thus, viewed on a quarterly basis, the decline has been very dramatic, as can be seen below.




Perhaps also worthy of note is the fact that the decline in the numbers of unemployed has been more rapid among men - 322,800 (or 29.1% of the total unemployed) - than among women 269,800 (or 19.6%).

When compared to June 2006 unemployment decreased in all the Polsish voivods, and the declines have been quite dramatic. The most significant declines took place in in Dolnośląskie (30.2%), Wielkopolskie (29.8%), Pomorskie (27.5%), Opolskie and Śląskie (26.8%).

(Please click over image for better viewing)




The unemployment percentage rate at the end of June 2007 was 12.4% of the economically active civilian population, and was thus 2.0 points lower than in Q1 2007, and 3.5 % points lower than in June 2006.

There is still considerable territorial difference in the levels of unemployment in Poland. The highest unemployment rate is to be found in the voivods of Warmińsko-Mazurskie (19.6%), Zachodniopomorskie (17.9%), Kujawsko- Pomorskie (16.2%) and Lubuskie (by 15.8%), while the lowest unemployment rate exists in the voivods of Wielkopolskie (9.3%), Małopolskie (9.5%), and Mazowieckie (10.2%).

(Please click over image for better viewing)




Looking at the two maps taken together, it is very clear that the area where labour tightening is most dramatic at the present moment is Wielkopolskie, since the unemployment rate is already comparatively low, and the pace of reduction in the unemployment rate is also pretty rapid. Wielkopolska Province is second in area and third in population among the sixteen Polish voivods, with a land area of 29,826 km² and a population of 3.4 million. The province's principal cities are Poznań, Leszno, Kalisz and Gniezno. It also hosts part of the Kostrzyn-Slubice Special Economic Zone.


In general terms what we can see is that as the Polish economy has been expanding, it has been consuming labour, and rapidly so. One interesting calculation here is to make an estimate of how much labour is needed to produce 1% of GDP growth with the current proportions of sand, cement and water which are being shoveled into the economic mixer (ie at today's rate of productivity increase). A rough and ready, rule of thumb type, calculation would tell us that to get 6% annual growth the unemployment roll is coming down by about 600,000 peopple per annum, that is that each annual percentage point of economic growth reduces the numbers of available unemployed by 100,000. (This is a rough and ready calculation, but it is a more sophistocated one than first meets the eye, since it does, in approximate way, implicitly incorporate the ageing and withdrawal from the labour force dimension).

What this means quite simply is that, given the relatively low size of the younger cohorts about to enter the labour force, a 6% growth rate just is not sustainable for that much longer. If we imagine that unemployment could only with great difficulty fall below 500,000 without producing spiralling hyper-inflation, then we have an outer limit of 2 years at the present growth rate I think.

After that, what is the sustainable - capacity - growth rate? This is very hard to say without a much fuller econometric analysis, since it depends among other things on the direction and intensity of both migratory and capital flows. Many people, and especially those with a relatively poor understanding of how economic processses actually operate, tend to raise the objection at this point that such a calculation may not be accounting for productivity growth. This would be a mistake, and an elementary one, since the present rate of unemployment attrition already incorporates a certain level of productivity improvement.

So what such an argument normally wants to claim is that some sort of rapid improvment in the rate of productivity growth is on the horizon - rather like Alan Greenspan argued in the late 90s based on the arrival of the internet. A continuing increase in Polish productivity is, of course, to be expected, but it is not clear why people are expecting a dramatic acceleration in the rate of productivity growth. If this expectation is to become more than a simple vain hope it does need some sort of analytical justification. In the meantime we might do well to bear in mind that such improvements are a by product of stocks and flow movements in human capital formation, which is why the age structure of the existing population, and their education level, is such an important topic.

So, if we said that between 2010 - 2012 Polish capacity economic growth might be something in the region of 2 to 3%, then we probably would not be that far from the mark. Post 2012 it is much harder to estimate things, especially since, among other issues, the ageing population component will begin to have an ever greater impact.


Labour Quality


One of the main issues on which we are focusing in this analysis is the rate of reduction of the unemployment level in Poland and the evolution of the future labour supply. It is important to be aware that this future evolution is in great part conditioned by two factors:

1) The very low numbers of live births (in historical terms) which there have been in Poland since the late 1980's and;

2) The relatively high levels of out migration which Poland has expecienced in the last three or four years, which mean certain key groups of workers in the main productive age ranges will not be available to Poland to fuel growth as we move forward.

I have a much fuller (examination of the Polish fertility vackground in this post , but the following graph should make the underlying position pretty clear:



Basically live births dropped from a level of around 700,000 per year in the mid 1980's to around 400,000 per annum in the mid 1990s. That is a net loss of 300,000 potential labour market entrants per year (or a reduction of around 40% in the labour flow, I can hear that cement mixer starting to crunch as I write), a loss which will increasingly make its presence felt between now and 2015.

With these points in mind it is interesting to note that in Q2 2007 the number of people who left the unemployment rolls was 873,000. The largest group who went off the unemployment rolls in Q2 2007 did so as a result of finding a job. In fact 364,000 people left the rolls to take up work in Q2 2007 (or 41.7% of the total leaving) as compared with 425,300 (or 46.8%) in Q2 2006.


It is also interesting to note that during Q2 2007 264,900 people who were previously registered as unemployed did not confirm their readiness to take a job. This seems to suggest that the Polish authorities are busily cleaning up their unemployment registers - the reduction for "non-availability" constituted some 30.3% of the total reduction in the number of people on the unemployment rolls during the quarter (in Q2 2006 the figures were respectively 259,500 and 28.6%) - and many of the people removed were more than likely already working, whether the work in question was inside or outside of Poland.

So one part of the apparent Polish "reserve army" may in reality simply not exist. Another part may - speaking in plain English terms - be far from serviceable for modern economic growth purposes.

In this context it is interesting to note that the long-term unemployed constituted 65.7% of the Q2 2007 total (1,245,000), and many of these people may turn out to be very hard to "recycle" into the modern world. In terms of the relative age structure of the remaining unemployed, under 25 year olds constituted 18.9% of the total (358,600), while persons aged over 50 were 21.0% (398,1oo thous).

At the end of Q2 2007, 1,639,300 people on the rolls did not possess the right to unemployment benefit, and this group represented 86.5% of the total number of registered unemployed, (in the previous quarter it was respectively 1,930,700 and 86.5%). Among this group 43.4% were people living in rural areas.

There were also more female than male unemployed. At the end of Q2 2007 58.5% of the total unemployed were female, and this was up by 3.1 % points on Q2 2006. The highest percentage share of women in the total number of the unemployed is to be found in the Wielkopolskie (65.6%), Pomorskie (64.0%), Kujawsko-pomorskie (62.3%) and Małopolskie (61.5%)vovoids.

One of the key difficulties in evaluating the remaining unemployed labour force in Poland is getting a precise reading on the quality of the labour which remains available. It is hard to get a clear picture here, but one indication which is not without importance can be found in the fact that the majority of the unemployed registered in the labour offices were persons with relatively low levels of education. The share of registered unemployed who did not have any occupational qualification whatsoever was 30.7% of the total registered unemployed (582,000).

In addition the two largest groups among the unemployed were persons having only basic vocational orlower secondary education (30.1% of the total), or persons with only primary or even incomplete-primary education (32.5% of the total number of the unemployed registered at the end of June 2007). Combined these groups constitute 62.6% of the total number of the unemployed.

On the other hand some 22.3% of the total had the certificate of completion of post-secondary and vocational secondary schools, while 9% had completed secondary education and 6.1% were graduates from tertiary schools.

So, in conclusion, and to reiterate. Poland is facing a potentially very acute and imminent trade off between economic growth and inflationary cost push. Some indication of this can already be found in the producer price index, which has been coming under increasing pressure since early 2006:



The earlier interest rate tightening from the central bank seems to have had some sort of short term impact during the March to July period, but, as we can see, the thing now seems to be taking off again. This position is only even more strongly confirmed if we look at the construction producer cost index.



It is also very clear that the steady tightening of labour market conditions is having an impact of Polish wages and salaries.



The annual rates of increase have been steadily picking up speed, and while they are still below those to be found elswhere in Eastern Europe (like the Baltics, Romania, Ukraine) the early warning signs of the "Baltic Syndrome" are there, which is hardly surprising since the underlying causes are essentially the same.

Information for this report comes, by and large from the Polish Statistical Office and Eurostat. In particular the recently publishedunemployment report for the second quarter of 2007 was evry useful, while additional information was taken from the Q2 2007 Labour Report (archive).