Mieczyslaw W. Socha

The Polish Wage Inequality Explosion

This paper presents and analyses the sharp increase in hourly wage inequality after 1998 in Poland. The increase was similar in magnitude to the much-studied increase in British wage inequality during the 1980s. Using data from the Polish Labour Force Survey, we find this increase to be associated with rising wage differentials and within-group variances at both the upper and lower ends of the wage distribution. These increases are associated with differences in wage-setting patterns between the public and private sector as well in the rapid increase in the demand for educated labour. One important difference between the sectors is the lack of an impact of local labour market conditions, or wage curve, clearly evident in private sector wages, on public sector wages.

Labor market transition in Poland

The economic reforms and privatization in the wake of political changes in Poland after 1989 have led to rapid growth in the private sector. Although many new companies have been established, there has been a sharp increase in unemployment. Compared to the public sector, employees in the private sector tended to be less educated, younger and predominantly male. The private sector is also more dynamic, with higher rates of labor turnover, recruitment and separation, and average monthly wages were lower but, in recent years, have become close to those in the public sector. The Gini coefficient is higher in the private than in the public sector, showing that earnings are less equally distributed in this sector.