Polish style: In-work poverty

The economic crisis has been taking its toll on the societies of many European countries. Unemployment and poverty are two of the main problems. Strangely enough, sometimes it is better (and more profitable) to be unemployed than to have a job with the minimal wage. So-called “in-work poverty” is becoming a severe problem in the European Union, and Poland is badly affected by it. Indeed, Poland ranks near the very top of the list of countries where this phenomenon is clearly visible.

daniel kulinski

According to Eurostat data, the problem affects 10.4% of Poles aged 18-64. The only countries worse off than Poland are Greece, Spain, Italy and Romania. Interestingly, among the countries where it is much less of a problem are our Visegrad neighbours: Czechs (4.5% people in work and at risk of poverty) and Slovaks (6.2%).

Graph: Percentage of the working poor in EU, source: Eurostat 2012

“In-work and at risk of poverty”, as the very expression suggests, refers to people who, despite receiving a salary, do not earn enough to fulfill basic needs.

According to the Eurostat definition, this means a group of people living in a household with a combined disposable income below the risk-of-poverty threshold. This threshold is set at 60% of the national median of equivalised disposable income in the given country. In Poland in 2012, the average gross monthly salary was 855 euros. (It is now slightly higher: 927 euros). It is easy to calculate that 60% of those amounts is respectively 512 euros and 560 euros, which is more or less 1390 euros net income per month. However, the calculated “biological minimum wage” – the amount required to cover the costs of food and accommodation – was 341 euros of net income in 2012 for a four-person family. For a single-person household it was 127 euros. Renting a one-bedroom flat in a district on the outskirts of Warsaw is at least 268 – 290 euros, the basic monthly ticket for public transport is 27 euros, a loaf of bread or 200 grams of butter costs almost one euro.

There is also the “social minimum wage,” which not only covers basic survival but also basic social requirements such as hygiene and cultural needs. According to experts, you would need twice as much money as the biological minimum wage – that is, 829 euros per month – for a family with two kids. It is worth emphasising that this is the necessary minimum amount.

Who works, who starves 

The most precise analysis so far of the “in-work and at risk of poverty” group was presented in the CBOS report for the year 2008. It reveals that this problem affects mostly people with a lower education, working as manual laborers or in agriculture. However, 19% of the affected group are service workers and 16% are white collar workers. These figures are confirmed by the Main Statistical Office (Główny Urząd Statystyczny or GUS) for the year 2013 in research analysing the types of poverty in Poland.

Graph: working poor in Poland, source: CBOS

The GUS and CBOS data also shows that the main group affected is hired laborers whose average age is between 40-49 years old. More and more often, however, the research shows that young, educated people are also getting into trouble. One of the main reasons is the fact that they are often employed on the basis of so-called “junk contracts”, without any guarantee of long-term employment or social insurance. According to Eurostat, people employed on the basis of temporary contracts are twice as likely to be at risk of poverty as these who have full-time permanent jobs. It is difficult to be precise about the number of people in this category, but based on the data from the Ministry of Labour and Social Policy and from GUS, there are 1 million employees on “junk contracts” in Poland out of almost 15.6 million people employed in 2012.

The main question is where the working poor come from. The phenomenon has been analysed for years, including in the European Commission report European Commission “In-work Poverty and Labour Market Segmentation in the EU: key lessons” published in 2010, in which experts point out a few basic factors. The phenomenon is largely related to the labour market itself and its structure; particularly flexible or temporary forms of employment can generate a high percentage of people who work but still suffer from poverty. In this regard, the level of the minimum salary is crucial. In Poland it is now 410 euros (gross) and 288  euros (net). This shows that there is state acceptance for paying a salary which pushes an employee into poverty.

According to GUS, this is the case for 1.3 million people employed on full-time contracts.

It is better to be unemployed than to work

Another important factor is the level of social benefits. In Poland, social benefits mostly take the form of direct financial help, depending on the level of income. It can be paid each month or during a limited period of time, or it can be designated for one particular purpose (such as medicine or coal to heat the house). There are also benefits for children (between 19 and 28 euros). All of them are, however, available only when the income does not exceed a defined minimum. This minimal level is set so low that the working poor are usually deprived of state help and left on their own. Most of them do not have the right to receive any state support because – paradoxically – they do have some income.

Let’s take the example of a family with two kids. Even if one of the parents is unemployed and the other earns only 60% of the average salary, their income will be too high to get any benefits. According to the law, since the end of 2012 a person has the right to ask for financial support only when the income for one person in a family does not exceed 111 euros per month. In the case of a one-person household, the income cannot exceed 132 euros. This is the main data that social workers are interested in. If the family does not have social problems, there is no violence, nobody is handicapped, etc. and its income exceeds the level defined by the rules by even a fraction, there is no chance for any help. This was noticed by the authors of the European Commission Report, who stated that social help in Poland is ineffective.

Graph: countries ranked according to effectiveness of social support, source: Eurostat

Those entitled to benefit from state help are, first of all, those unemployed and living in poverty. Being employed, even with the smallest salary, blocks all routes to benefits – not only to financial help, but also to other forms of support such as further education courses to increase professional qualifications. Thanks to donations from the European Union, there are many such opportunities organized by job centers and social workers.

The fact is that the financial situation of the employed is sometimes much worse than the unemployed. Many registered unemployed people get benefits, but on the other hand have time to work illegally for the “black economy”.

Local authorities have their own social policy and usually use so-called “designated benefits” for one-time support. Still, it provides only a drop in the bucket.

Anna, who lives in Warsaw, could tell lot about how absurd the system is. She is 40 years old and has two children. Her husband suffers from a prolonged illness. They spend a few hundred zlotys a month on medicines alone. When she did not have a job, they both received unemployment benefits. They were also automatically granted public health insurance and received an allowance for school supplies for their children. (School materials in Poland are normally paid for solely by the parents, and each September, at the beginning of a new school year, the cost of school books alone can reach between 60-146 euros). Their children also got free lunches at school, and Anna was able to finish a professional course as a seamstress. From time to time she could also earn a bit as a cleaning lady; it was black labour, so she did not have to pay taxes, etc. The entire time she was trying to get a legal, permanent job. Finally she succeeded in gaining employment in the kitchen of a bar. Her husband found a part-time job as a security guard. This is precisely when their problems started, because at this point they exceeded the limit for social benefits by 24 euros.

They lost state support and their actual income ended up being smaller than it was when they were relying entirely on the state. Their children lost free lunches at school, most of the husband’s salary was spent on medicines, and in September they had no money to buy school materials. In sum, getting legal jobs excluded this family from all forms of possible social support and lowered the quality of their life.

Unfortunately, there are many such stories and many people earning a bit more than the working poor who cannot afford to maintain themselves. The cost of school books, school trips and even going to the cinema become unattainable luxuries.

Big family, big problems

European statistics also reveal another problem: namely that the most vulnerable to poverty are children. The report “Poverty in Poland in light of GUS research” published in 2013 reveals that poverty mostly affects people younger than 17 years old. In 2012 poverty affected 10%  or 700,000 children in Poland. The latest UNICEF report points out that Poland is among the countries where the situation for children is worst; every fifth child lives below the standard for developed countries.

It was noticed a long time ago that in Poland there is a very strong relationship between poverty and large families. “Families with many children are the group at the biggest risk of extreme poverty. This affects almost 10% of people in households with three children living under the biological minimum income level and around 27% in households with four or more children”, state the authors of the GUS report. There is no precise data on how many such families belong to the group of the working poor, but it is easy to estimate that the more children in a family, the more difficult it is to care for them on one or two low salaries.

*a child to maintain is a person aged 0-14 (included) being a part of a household, or a person aged 15-25 unless has an own source of maintenance or is in a relationship (married or informal)

Graph: risk of poverty depending on family situation, source: GUS 2013

Because of this danger, state support is more and more often directed at the large families. In some cases it is not based solely on the income of one person in the family. So far the only benefit for children, regardless of family income, is a single payment given after the birth of a baby – the “becikowe” – and it is 244 euros. Recently it has also been made possible for parents to ask for help buying school supplies when there are more than three kids in a family, also regardless of family income.

Some local authorities have introduced additional measures for improving the lives of large families. For example, the Big Family Card entitles families to cheaper or even free public transport and cheaper tickets to cinemas, theatres, swimming pools and other sport facilities. The government also plans to lower the costs of train travel for big families. But as of now it is just an idea, and one things is not changing: families with one or two kids can only count on support when both parents are unemployed.

(More on the Polish debate about forms of employment and the risks of “junk contracts” in an upcoming issue of Visegrad Revue.)

Klara Klinger

Klara Klinger

is a journalist of the daily „Dziennika Gazety Prawnej”. For many years she has lived in Prague, and studied Czech philology.