Paper for the 2012 ESPANET Conference - Stream 6 “Developments in non-standard

employment: theoretical and empirical perspectives”

Edinburgh, 6-8 September 2012

Non-standard employment, organized labour and the politics of labour market

reform.

The case of Poland from adjustment to capitalism to resilience to the crisis in

comparative perspective.

Catherine Spieser

Catherine.spieser@cee-recherche.fr

Centre d'études de l'emploi

Le Descartes I

29, Promenade Michel Simon

93166 Noisy-le-Grand Cedex

France

3 August 2012

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Abstract

This article looks into the process of dualization and the production of outsiders as the

result of a combination of economic and political dynamics. While Poland appears

relatively immune to the current crisis, it followed a trajectory of labour market

adjustment that generated many outsiders over two decades. Using an empirical

investigation into the process and outcomes of labour market reform since the 1990s,

this article investigates the paradoxical development of labour market policies that

undermine worker’s security in a country where the trade union movement was

originally mobilized and powerful. Despite the distinctive role of Solidarity in forging

post-communist institutions, successive labour market reforms failed to produce a

combination of employment flexibility and security. I argue that this can be traced back

to union ideational stances, political strategies and representative bias which fed into a

combination of old and new politics of welfare. The weakness of the old, class-based

politics of welfare and the dominance of narrow interest groups in the politics of labour

market reform resulted in a form of dualization comparable to that observed elsewhere

in Europe, with long-term effects.

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Among EU countries, Poland is the one that has been least affected by the current crisis

if we look at overall unemployment level. It is also among those where precarious forms

of work have expanded most rapidly in the course of the last decade. These

developments question the capacity of the domestic policies and regulation of the labour

market to deliver a new form of workers security in emerging capitalism.

Looking a few decades back, the rise of the only independent trade union movement in

the Eastern block under the banner of Solidarity in 1980 and the fall of the communist

regime in 1989 were associated with a wave of hope for an improvement in the

country’s economic situation and general well-being in terms of income, consumption,

employment conditions and welfare. Not only did Solidarity contribute to the fall of the

authoritarian regime, but union leaders were heavily involved in the first democratic

governments and parliamentary assemblies. Elites associated with Solidarity filled in

many power positions in post-1989 Polish society. By analogy with the rise of the

welfare state in Western Europe, one could have expected the strength of the trade

union movement to lead to generous welfare policies, unemployment compensation and

protective labour law. Poland is also the country in Central and Eastern Europe that

pursued the most radical programme of macroeconomic stabilization and economic

liberalization. Rather paradoxically, successive reforms of labour market policies led to a

relatively little contested marginalization of unemployment compensation. They also led

to a rapid expansion of atypical forms of work undermining the social protection of

employees more dramatically than the introduction of a greater degree of flexibility in

labour law.

Using an empirical investigation into the processes and outcomes of labour market

reform in Poland since the 1990s, this article investigates the paradoxical development

of labour market policies that undermine worker’s security in a country where the

labour movement was originally mobilized and powerful. The consequences of this

intense policy change composed of a vast array of labour market reforms are examined

in a long-term perspective and in light of the social outcomes that they deliver in terms

of labour flexibility and workers’ employment and income security. Three kinds of

consequences of these reforms are assessed: the low protection of the unemployed

against income loss associated with joblessness, the low institutionalization of

employment flexibility and the expansion of precarious employment.

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Linking social outcomes to policy outputs, the article asks how this situation came about.

I distinguish old welfare politics based on class coalitions and new welfare politics based

on more narrowly defined interest to map developments in the politics of labour market

adjustment across two policy domains: unemployment compensation and labour law

reform, which exemplify policies aiming to increase both income security and

employment flexibility. I argue that these developments result from the politics of socio-

economic reform in post-communist transformations, the self-restraining nature of

Polish unions in times of systemic change, the failed institutionalization of the inclusion

of organized labour and a strategy of union politicization which undermined their

autonomous participation in socio-economic policy-making and the fact that they

represent primarily their core constituencies in a context of rapidly declining

unionisation in entire segments of the economy. On the whole, unions did not prove as

militant as one might have expected. Only labour law reform proved a relatively

contentious process. By contrast, in the debates on unemployment insurance, organized

labour came to accept measures aiming to diminish entitlements and increase control on

the unemployed without much protest. The minimalist degree of protection against

labour market risks as a policy output can be traced back to the weakness of old welfare

politics. The dominance of new welfare politics is conducive to a segmentation of social

protection and a widening institutional dualism illustrating a dualization trend observed

in other contexts (Emmenegger et al. 2012).

1. Unions, governments and the course of socio-economic reform: expectations

In many Western European countries, in the post-war period, trade unions have come to

‘share public space’ with the state and employers (Crouch 1993). Powerful unions

tended to engage in centralised wage bargaining and play a substantial role in the

making of social and labour market policy. With the need to cope with structural

constraints, this sometimes translated into social pacts, whereby unions and

government engage in shared governance in a number of socio-economic policy

domains including income and welfare policy. Do developments in Poland mirror these?

A strong form of social partnership has long underpinned the success of the Danish and

Dutch flexicurity model. The current crisis has prompted specific agreements that aimed

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to cope with changing market conditions, for instance in Germany where the unions

agreed to moderate wages as they did in the run-up to EMU in the past. Somehow

similarly, under pressure to control wages-induced inflation and win support for specific

policy changes, often with the unifying goal of joining the EU (and possibly later the

Euro), all CEECs have established institutions for tripartite dialogue. The extent to which

trade unions have been associated to socio-economic policy-making varies considerably

across countries. Most often, however, these institutions are not backed by multi-

employer collective bargaining (Meardi 2011). Except in Slovenia, they rarely produced

the expected policy results. In Poland, rather than engaging in social pacts, governments

opted for unilateral enforcement of macroeconomic convergence, which cost them

recurrent electoral defeats (ibid.:6). The country is known as a case of failed social

pacting despite the existence of formal tripartite institutions (Avdagic 2005; Gardawski

& Meardi 2010; Ost 2000 & 2001). The process of labour market reform over the past

two decades provides a good illustration of resulting policy outcomes and social

consequences.

Even in the absence of an encompassing social pact, unions (and employers associations

alike) can be more or less closely associated to social and labour market policy-making,

decisions about welfare, employment policy or the management of related institutions.

When governments seek to impose reforms, they are likely to expose themselves to

electoral backlash, counteraction by the social partners, and institutional difficulties.

Consultation in social and economic councils or similar bodies provides the social

partners with a little veto power, mainly in terms of ‘voice’, but this serves important

functions for the state, by providing an opportunity for deliberation that is likely to

create a common understanding of policy problems and solutions and legitimates

political decisions through formal participation (Ebbinghaus 2006a). The way in which

organized labour participates in social policy-making and contributes to shaping labour

market reform in particular can be mapped against two distinctive policy models.i

The first one is a model of ‘old politics of welfare’ in which the orientation of socio-

economic policies is determined by broad coalitions which tend to form around class

conflict lines and aim to obtain redistributive gains which serve a large segment of the

population (Lowi 1964). Peak associations are the decisive actors. The success of

political forces, parties or the labour movement, in obtaining or opposing redistributive

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welfare policies is rooted in their ‘power resources’, that is the specific characteristics

that allow them to ‘punish or reward other actors’ (Korpi 1983:15). In West European

history, welfare states establishing extensive social rights and entitlements developed in

response to the claims of social democratic parties and trade union movements (Esping-

Andersen 1990; Korpi 1983). Strong unions and encompassing bargaining coverage

tend to be associated with a higher degree of collective protection of workers with

respect to employment and social benefits (Ebbinghaus 2010:203).

The second model departs from class politics and takes the ‘new politics of welfare’ in

times of austerity into account (Pierson 1996). It assumes that the set of existing welfare

policies and privileges generate new distributional cleavages that in turn have an impact

on interest group formation, organisation and mobilisation through feedback effects.

Past social and labour policies led to vested interests among those profiting from them.

The decisive actors are interest groups more narrowly defined than in the first model.

The policy arena is dominated by interest politics, a typical configuration of regulatory

politics (Lowi, ibid.). This configuration is conducive to a dualization of protection

whereby insiders defend their rights and benefits at the expense of non-benefiting

outsiders and policies increasingly differentiate rights, entitlements and services

according to different categories of recipients (Emmenegger et al 2012:10).

Labour market policy entails both a redistributive and a regulatory dimension.

Therefore, I hypothesize that labour market reform may follow one or the other model

according to the issues at stake, the degree of mobilization and the encompasingness of

collective actors representing organized labour. In both cases, they may act either as

policy proponents or veto players. To investigate this, I examine the processes and

outcomes of labour market reforms, paying particular attention to the stance of

organized labour in the debates and policy making process — or its absence.

2. Two decades of labour market reform: from systemic adjustment to world crisis

This section shows that the generally weak representation of labour interests in the

making of new policies related to employment and unemployment resulted in a failure

to produce a new combination of flexibility and security in Poland’s emerging capitalism.

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This general weakness was combined with a strong militancy on a selection of specific

issues and in particular instances. When organized labour was more actively involved as

in the case of labour law reform, this led to a persisting form of ‘institutional dualism’

(Emmenegger et al. 2012) at the detriment of labour marker outsiders.

2.1. The institutionalization of unemployment as a new social status with limited

entitlements

The Act on Employment of 29 December 1989, reformed in 1990, established an

unemployment benefit with an extensive eligibility targeting all working-age people

who were not employed. In the initial version, the level of the benefit was set relatively

high (70% of the last wage, declining to 50% after three months) and unlimited in time.

A new Labour Fund, financed by social contributions and the state budget was set up to

cover labour market policy expenditure. The rationale for this was to provide a readily

available compensation for the losers of economic restructuring. At the time the scheme

appeared both generous and extremely costly in light of the state of Poland’s public

finances. Arguably, the government in its search for social acceptance of one-off far-

reaching reforms ‘was more interested in a temporary solution’ and intentionally opted

for short-term measures (Gardawski 2002:2).

The unconditional unemployment entitlement was cut down in significant ways from

1991 onward, so that in effect, the initial ‘generosity’ quickly eroded. The level of the

benefit, its duration and eligibility conditions were restricted on successive occasions.

When a limited duration was introduced, those who remained unemployed for a long

time were de facto excluded. The relationship between the level of the benefit and one’s

previous wage was eliminated in 1992 with the transformation into a flat rate benefit

fixed at 36% of the national average wage, later lowered to 20% and below.

Meanwhile, unemployment insurance failed to become a fully legitimate branch of the

welfare state. It lacked legitimacy, concerned only a minority of the unemployed – in the

mid-1990s about half were without a job for longer than a year which left them

ineligible - and the erosion of the benefit meant that it stopped playing the leading role

in cushioning the negative effect of transition. By the cumulative effect of instrumental

and institutional reforms, the social insurance logic faded away in favour of a flat-rate

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benefit primarily financed by taxation to supplement insufficient contributions. At a

later stage, policy discourses started to point to the non-deserving ‘false unemployed’,

which further undermined the legitimacy of income support for the jobless (Czapiński &

Panek 2007; Góra 2004; Spieser & Sztandar-Sztanderska 2011).

Finally, eligibility criteria became gradually more restrictive as a result of successive

reforms. In 2004, the Act on employment promotion and labour market institutions

established the criteria defining the unemployment status: it was to be reserved for

Polish or EU citizens aged between 18 and 60 (women) or 65 (men) years of age, not

employed, not involved in training nor in any kind of paid work, not entitled to an old-

age or invalidity pension, not owing more than two hectares of land, but willing and

available to start full time work immediately, and registered with the local employment

office. These offices were given a new task: controlling the effectiveness of job search

and the deservingness of those granted an unemployment benefit.

Although they belonged to a new, developing area of state activity, policies targeting the

unemployed never entered the world of old welfare politics associated with welfare state

expansion. The trade unions expressed little voice over these changes. Union officials

from OPZZ and NSZZ Solidarnosc at the central level tended to consider unemployment

insurance an issue of lower concern than pension or labour law reform even in the years

when unemployment was peaking at 20% (interviews carried out by the author in

Warsaw and Gdansk in 2005). By contrast, unions had been heavily involved in the

1996-1997 pension reform: NSZZ Solidarnosc proposed their own reform plan; both

organisations were militant veto points actively involved in the negotiations of the

unresolved issue of early retirement conditions that followed.

2.2. The organization of mass exit from the labour market

The other arm of the policy response to job destructions and rising instability in the

labour market was an array of particularistic exit schemes, which persisted for a

relatively long time, partly substituting universal unemployment insurance and

undermining its legitimacy. These policy choices thus granted more favourable

conditions to the groups that had the biggest capacity to mobilize against economic

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transformations, workers with a long career under the previous regime who had no

future in the capitalist economy, and workers in strongly unionized sectors such as

heavy industry and mining, who were able to negotiate particularistic adjustment

schemes. This resulted in ‘dividing and pacifying’ groups opposing market reforms by

lowering their visibility and mobilization capacity, be it at the price of a high level of

inactivity (Vanhuysse 2006).

The first kind of particularistic scheme applied to workers with a relatively long tenure

in the pre-1989 system who approached the end of their career. As in Western Europe in

the past (Kohli et al. 1991; Ebbinghaus 2006b), early retirement provided an alternative

way to manage mass dismissals. In addition to the continuation of early retirement

privileges granted to selected professions and strategic sectors well after the radical

pension reform of 1997-1998, a specific pre-retirement benefit, financed on the labour

fund, was created to bridge the period between becoming unemployed and the legal

retirement age, targeting especially the long-term unemployed (Czepulis-Rutkowska

1998:196). There is ample evidence of the widespread use of early retirement to

alleviate the effects of unemployment. The number of people retiring significantly

exceeded those reaching legal retirement age in several given years. While the number

of employed people fell by 14% between 1989 and 1996, the number of pensioners of all

kinds simultaneously rose by 34%. Among these, the number receiving a retirement

pension increased by 46% and those receiving a disability pension by 22% (Müller

1999:96). In 2003, over half a million people were receiving a pre-retirement benefit or

allowance. Out of around one million of unemployed who were receiving some kind of

benefit (less than 30 percent), slightly more than half received a preretirement benefit,

while only the remaining part received a proper unemployment benefit. Similarly,

disability pensions were distributed to 13% of the working-age population in 2002,

which suggests an abnormal rate of invalidity (Burns & Kowalski 2004:6-7). These

schemes targeted primarily people approaching the end of their careers who were

thought to have inadequate skills for a reconversion. The strategy of compensated exit

fostered a peaceful institutionalization of unemployment by making it less visible and

alleviating the individual cost of job loss more generously than the unemployment

benefit. As a long-term consequence, it permanently removed the beneficiaries from the

labour market, eventually resulting in mass inactivation of the cohort of older workers.

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The second kind of particularistic scheme concerns workers in previously ‘strategic’

industries who enjoyed privileged conditions and kept a high level of unionisation.

Polish law only set basic rules for large workforce reductions with measures to protect

affected employees and obligations on the employer, such as limited redundancy

payments. However, under the influence of powerful unions, restructuring plans

involved intense negotiations and complex agreements in some cases of large company

or sector restructuring, first and foremost steel and mining, where they retained a

significant mobilization capacity.

In the years 1994–1997, under the threat that the miners’ unions would block the

restructuring of the whole sector, particularly generous social packages were granted to

them in the form of a significant one-off severance payment. As a consequence of

geographical concentration, prolonged state support, strong local unions and better than

average welfare entitlements, restructuring was contentious and coordination between

the unions and employers came high on the agenda. In spring 1995, representatives of

socio-political, professional, local government, and economic circles agreed to cooperate

in a program for restructuring and development in Upper Silesia. The outcome reflected

the traditional power structure of actors in the region, that is, the prominence of

industrial actors linked to the biggest plants, which made it difficult to envisage

innovative solutions. Half a dozen successive restructuring plans were drawn up but

most of them were never fully implemented due to industrial conflict. Nevertheless, the

workforce was reduced from a million people in the 1980s to a quarter of this by 2003.

Conflicts over collective dismissals were eventually avoided by granting generous

packages in line with the bargaining power of the miners unions. There are reports of

sums approaching 2 years of the Polish average wage at the time to secure a definitive

exit from mining employment (Gardawski 2003; author’s calculation).

This contrasts with the steel industry, where employment was reduced in the same

proportion, but under very different conditions. Until 1998, jobs were lost principally to

retirement or disability benefits, or transferred to other entities and in 1999 a social

package led to further jobs reductions, among which slightly less than half were

transferred to other companies and the rest made redundant (Towalski 2003). In 2003,

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a second social package for steelworks, focusing on activation, was adopted by the

government and endorsed by the sectoral tripartite team. Its major innovation was to

facilitate reemployment in other industries, by linking severance payments to enrolment

in training contracts. In comparison with the mining sector, this process was also

remarkably peaceful and conflicts were scarce, a contrast that can be traced back both to

the different role played by the unions (opposing, or even obstructing restructuring of

the mines while cooperating in the steel sector), and to the ultimate objective (closing

down the mines as opposed to reducing workforce to build smaller, competitive steel-

melting plants).

These generous particularistic compensations for job loss reflect the bargaining power

and mobilization capacity of the trade unions in specific sections of the workforce: older

generations, workers in industrial sectors with a previously privileged position who

constitute sectoral interest groups (Gilejko 2010). The trade unions proved more active

in lobbying in favour of these core constituencies than in defending universal

unemployment insurance, which led to a form of dualization of protection against job

loss.

2.3. Governing adjustment by labour law: how the uneasy institutionalization of

employment flexibility led to institutional dualism

The third element which contributed to shape the Polish path of adjustment is the

reform of labour law, in which the unions were more systematically involved.

Employment flexibility first developed largely unregulated, as the employment

relationship remained governed by an old instrument, the 1974 Labour Code, revived

and adapted to market economy after 1989. While in the early 1990s, unemployment

was the most prominent manifestation of labour market adjustment, from the end of the

decade; it increasingly took the shape of flexible work as employers sought labour

flexibility at the margin of legal employment rules. These opportunistic practices

triggered a significant expansion of flexible contracts, especially fixed-term ones and

contracts not covered by labour law, leading to a de-standardisation of the employment

relationship and greater insecurity for workers. Therefore, institutionalizing flexibility

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became a major policy issue with two salient points on the agenda: the regulation of

flexible forms of work (temporary agency work, fixed-term contracts, the use of civil

contracts), and the introduction of a degree of flexibility in the standard employment

relationship.

The issue of a fundamental reform of the outdated Labour Code, for long considered ill-

suited by employers, came high on the political agenda relatively late, in 1995, as it

became clear that the existing rules allowed for too little protection in some areas and

too much bureaucracy in others. The most contentious issue was the definition of the

employment contract. The spreading practice of by-passing the labour code by using

work or task-based contracts for assignments that, given their regularity and a unique

employer, would normally require more binding employment contracts, had revealed

the holes in the existing legislation. The Labour Code by definition only governs

employment contracts, while contracts covering the execution of a precise task within a

specific, limited time frame - so-called civil contracts - fall under the rules of the Civil

Code. The latter comprises no rules on employment regulation, which meant that the

contractor was neither considered an employee nor protected against employers' abuse:

it is a work-based contract (Streeck 2005). In an attempt to remedy this situation, the

Extraordinary Parliamentary Commission, in charge of the reform project from 1994 to

1996, put forward a proposal to modify the legal definition of employment.

The trade unions, the labour inspectorate and the social insurance institution called for

the introduction of a legal provision stating that every job automatically implied an

employment contract unless the employer proved that it qualified for an agency

contract. The proposal was opposed by the Ministry of Labour and Social Policy and

eventually rejected with the argument that it would have created legal uncertainty and

high implementation costs. The compromise consisted in adopting a solution that

defined the employment contract as ‘work under a principal’s supervision’ (Surdej

2004:30-31), as opposed to task-based contracts designed in principle for independent

workers. This seemed an insufficient measure given that some enterprises were already

using civil contracts in abnormal situations. A restriction on multiplying fixed-term

contracts was also introduced: only two such contracts between a given employee and a

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given employer can succeed to each other, the renewal for a third contract automatically

taking the shape of an undetermined, long-term one.

Between 1997 and 2001, repeated attempts to liberalize the labour code were promoted

in the parliamentary arena by various organizations representing business and

employers, but the continued pressure of trade unions (in particular Solidarity, given its

involvement in the ruling coalition) and business lobbying inefficiency led to a

consolidation of the standard employment contract.

In 2001, following general elections and in the face of rapidly rising unemployment, the

new left coalition government made boosting economic development the highest

priority on the agenda. To achieve this, it planned reforms aiming to improve flexibility

of the labour market. With a new approach to law-making emphasizing social dialogue,

the government managed to win the support of unions (with the notable exception of

Solidarity, this time siding with the opposition for political reasons) and pass a

compromise proposal.

The changes introduced by the law of 2002 entailed a redefinition of the employment

relationship, aiming to limit the substitution of the employment contract by work-based

contracts not subject to the Labour Code. The employment relationship was claimed to

exist ‘irrespective of the name of contract made by the parties’ and defined by the fact

that ‘the employee agrees to perform a specified type of work for and under the

directions of the employer, in a place and at times designated by the employer, and the

employer agrees to employ the employee in return for remuneration’. A provision

aiming to counter the misuse of civil contracts was spelt out as follows: ‘a contract of

employment shall not be replaced by a civil law contract on the same terms of

performing work as those specified’ (LC article 22.1.1). While the aim was to render

illegal the practice of dependent self-employment based on unprotected civil contracts,

these rules remain insufficient to grant an effective protection given their weak

enforcement.

Other measures introduced by these laws resulted in increasing flexibility. First, in a

backward move, the law of 2002 suspended, until the day of EU accession, the rule

imposing that after two fixed-term contract, an employee should be offer a

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undetermined one, allowing for an indefinite number of short-term contracts in a row.

Secondly, a change in the law on collective dismissals of 1989 diminished both their cost

as it introduced more restrictive conditions for being granted severance payment, and

their visibility by limiting the consultation requirement to the enterprise union instead

of, previously, the regional office. Thirdly, the law modified the way in which working

hours were calculated, allowing for more flexible arrangements and making maximum

working time less of a constraint. Finally, it cut significantly the level of overtime pay.

In the run-up to EU accession, law-making took a more technical character with the

urgent necessity to bring Polish legislation in line with EU norms and some of these

changes were reversed. The ban on more than two consecutive fixed-term contracts was

re-introduced, yet with a list of exclusions. A new law on collective dismissals

considerably enlarged the requirements for information and consultation of employees

in the case of mass redundancies in line with EU norms. On the other hand, various

provisions introduced more working time flexibility. More decisively, temporary work

was eventually institutionalised and regulated by a specific law offering temporary

workers a formal status and labour law protection.

In these successive reforms of labour law (and attempted ones) which served to

institutionalize different forms of employment flexibility between the mid-1990s and

the mid-2000s, the trade unions intervened most when the standard employment

relationship was at stake, and least when new flexible forms of work were concerned.

This confirms that they represent better their core constituencies (insiders in standard

employment) than outsiders in less standard work patterns. Although labour law reform

tends to belong to the world of old welfare politics, this representative bias tends to shift

it to the world of new welfare politics.

3. Trade unions and socio-economic policies in post-1989 Poland

Neither unions nor left-leaning governments were able to make strong claims in favour

of welfare state building in post-communist Poland: old welfare politics hardly existed

for a number of reasons. First, macro-economic policy was a priority in the first years at

the expense of social and labour market policy. Second, unions were not willing to

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pursue an active role and militate for more universal generosity, except employment

protection. Third, social actors and state authorities failed to engage in a social pact on

substantive issues, even when tripartite institutions were revived. Fourth, the political

strategy that they pursued served the protection of insiders at the expense of the

interests of the unemployed at large and support for universal welfare policies.

3.1. Unions and the general orientation of socio-economic policies: Solidarity as an

umbrella for neoliberal reform in exceptional times

In the comparative political economy of the welfare state, we usually think of unions as

‘collective associations for advancing the interest of employees in their workplace and in

society’ (Ebbinghaus 2010:200). While their strength depends on their membership and

their material, symbolic, political resources, their mobilization capacity and degree of

active militancy is also a function of the organizations’ history and ideological

orientation. To what extent did Polish unions, in particular Solidarity, which initially

appeared strong in light of its wide (though declining) membership base and political

role, fit this conventional role in times of systemic change?

In the first decade, Solidarity played a leading role in protecting economic reform at the

detriment of the social agenda. A significant ideational shift took had taken place in the

underground years, when most union leaders became convinced that the market was

the solution and the state the problem after the failure of the ‘self-limiting revolution’

through which they had pursued a reform of the socialist system in 1980 (Weinstein

2000). From then on, Solidarity departed from a view of democracy entailing broad

political participation and switched ‘from promoting labour citizenship (…) to

promoting labour quiescence and a weakened civil society’ (Ost 2005:57).

The failure of the early 1980s was blamed on Solidarity’s socialist roots: the view that

the independent union should have played a role in price-setting in the socialist system

was increasingly countered by a liberal orientation opposing the primacy of

egalitarianism and collectivism. The 1987 programme was officially based on the

creation of a market economy and emphasised property rights. Solidarity activists

distinguished themselves from their counterparts in the CEECs by supporting radical

neo-liberal reforms. Before the economic reforms had even started, ‘instead of building a

15

strong union, Solidarity set out to build a weak one […] that would follow the

government as it pursued a painful economic reform’ (Ost 2001: 82).

The union leaders at the national level sought to reassure the members of their

organisations. In autumn 1989, Walesa said that shock therapy would cause a downturn

for three months, and then things would get better, and called for suspending strikes

despite the rapid erosion of real wages (Ost 2001: 85). For Solidarity’s national

leadership, the role of a protective umbrella for economic reforms took primacy over

other trade union functions and objectives.

3.2. The failed integration of labour interests through tripartite institutions

Policy outputs also reflect the failure of social partnership. In response to the industrial

conflicts of 1992-1993, the Minister of Labour and Social Policy Kuron attempted to

establish a Pact for State Enterprise Transformation - also named ‘Kuron pact’ after its

initiator - to deal with the privatisation and restructuring of state enterprises. Perhaps

the only working example of a relatively comprehensive social pact in Poland, it was

largely inspired by Solidarity, although formally established under a social-democratic

government and in line with a public opinion favourable to national level social dialogue

as the best way to defend workers’ interests. The institutionalization of tripartite social

dialogue was seen by some political actors as a way to overcome the corporatist

interests rooted in the communist regime (Hausner 1994: 138). The pact provided an

alternative system of interest representation, fostering the development of a market

economy by helping to build a consensus for state enterprise reform and secure long-

term gains.

Nevertheless, the agenda was never broadened and the record of Polish tripartite

negotiations is considered the poorest among the CEECs (Hausner 1996; Avdagic 2005).

In late 1989 – early 1990, the overall transformation strategy was decided upon without

any tripartite negotiations. Once institutionalised, they failed to play a major role in

formulating principles of socio-economic policy or labour relations. The functioning of

the national tripartite commission on socio-economic issues was often interrupted, and

its function was only consultative. Neither centre-right nor social-democratic

governments saw it as an essential pillar of the policy making process (Avdagic

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2003:12). When the unions were represented in government majorities, the need for

social dialogue at the national level was seen as secondary.

The establishment of a better organised Tripartite Commission for Social and Economic

Issues, which started working in 2002, seemed to signal a renewal, all the more as

Hausner, an academic long committed to social dialogue, became the Minister of

Economy and Labour of a new leftist government in January 2003. However, his attempt

to negotiate a Pact for Work and Development associated with a plan to reduce budget

deficit in February 2003 met with strong hostility. Solidarity pulled out, arguing that it

refused to negotiate a package deal that would legitimise the (left) government plans too

strongly. Other unionists saw it as bringing not enough material gains for workers,

especially workers in the heavy industrial and state sectors that remained highly

unionised and were the most penalised by the measures included in the pact (Gardawski

& Meardi 2010: 383). After the rejection of the social pact, a series of agreements of

smaller scale were nevertheless signed on selected single issues such as pay rise

indicators, social security and pensions, but they suffered from poor institutionalization

and a lack of binding character (ibid.).

Between 2005 and 2007, the conservative right-wing coalition led by the Law and

Justice party defended a programme marked by a statist solidaristic agenda, and made

an attempt to revive the idea of a broad social pact. It spoke mainly to Solidarity, an

explicit political ally, but the trade unions were reluctant to bypass the official tripartite

body. The breakdown of the coalition signalled the end of this project.

With the improvement of economic prospects shortly after EU accession, marked by a

rapid decline of unemployment due to the large Polish immigration to other EU

countries and the rise of wages in an uncoordinated manner as the international crisis

was looming, the idea of a social pact came back on the agenda in a new economic and

political context (ibid.:387). It led to the adoption of a small-scale anti-crisis package

introducing an economic short-time work scheme in 2009, which turn out to be little

used.

3.3. The politicization of the trade unions and their involvement in the

parliamentary arena

17

The strategy of political unionism privileged by the unions in the 1990s contributed to

weaken tripartite social dialogue and concertation in socio-economic policy-making

because ‘the widely accepted party incorporation of unions combined with the highest

degree of inter-union conflicts has enabled respective governments to marginalize the

role of the tripartite institution’ (Avdagic 2005:47). When unions were represented in

government majorities, they felt little need to get strongly involved in the national

tripartite commission: unions tended to accept the proposals of its respective allied

parties were in office, or, on the contrary, systematically oppose these when they were

not.

In the run up to the parliamentary election of 1996, Solidarity opted for a strategy of

direct involvement in politics. An electoral alliance, Electoral Action Solidarity (AWS)

was created in June 1996 at a meeting gathering trade union representatives and

leaders of right- wing parties with the declared main goal of “creating a broad electoral

bloc, capable of winning the next parliamentary election” (Wenzel 1998: 144). Originally

intended to closely reflect the union goals, the programme of AWS turned out to be a

composite assembly of the platforms of various parties plus that of the trade union.

Although the alliance was dominated by Solidarity, the union and some constituting

parties disagreed on pursuing neo-liberal economic policies (ibid.:145-146). Despite

electoral victory, this alliance had a rather negative impact on representing labour’s

interests in the policy-making process. The more Solidarity became involved in politics,

the less it tended to promote labour-friendly policies. Besides, this political strategy

came at the price of a divorce from grassroot organisations: the union became a

vertically fragmented federation, with a widening divide between the centre and the

regional and sectoral branches.

To remedy this, in 2004, at its 17th congress, Solidarity adopted new statutes with an

article that definitively prohibited combining a union management position with that of

a senator or deputy in the Parliament, bringing to an end the strategy of direct

involvement in politics. However, some members of the presidium still favoured party

alliances in the run-up to the general election of 2005, which led the organization to

explicitly support the Law and Justice party.

18

At the other side of the political spectrum, the strategy pursued by OPZZ mirrors the

moves initially pursued by Solidarity. OPZZ has consistently sided with left-wing parties

and supported left-wing governments, and still had a considerable number of MPs in the

previous parliament. These were sufficient to constitute a parliamentary club and, more

importantly, to propose a bill - a right that they have openly used on behalf of the trade

union to, for instance, put forward their own proposal on the reform of early retirement.

The strategy of alliances and involvement in the parliamentary arena simultaneously

undermined the union’s negotiation and protest capacity in organized collective

bargaining while failing to advance labour’s interests, as the review of successive labour

market reforms shows.

3.4. The dualization of employee representation in the 1990s and 2000s,

eventually fading away?

In the 1990s and 2000s, the unions pursued the narrow interests of their core

constituency. In the few instances when intense union mobilization could be observed in

the politics of post-communist labour market reform, it resulted in strengthening a form

of institutional dualism rather than improving support for more universal labour-

friendly policies. In the reform of labour law, an issue on which unions invested a lost in

the parliamentary arena in alliance with political parties, they mobilized primarily for

the defence of standard employment conditions, sometimes at the expense of a greater

institutionalization of flexible forms of work that would benefit precarious workers. In

the negotiation of mass redundancies, sectoral interests prevailed over universal

employment protection. As a result of membership decline and the growth of the private

sector where unions had little presence, entire segments of the workforce remained

outside the sphere of union representation while unionisation remained higher among

older generations of workers and in the former state sector.

There are several recent signs of change, however. First, unions have undertaken efforts

to recruit in the private and service sectors, targeting also young employees. Solidarity

innovated by setting up a dedicated recruitment team already in the 2000s. Second, they

have gained expertise and interest in social partnership more broadly speaking in

relation to social policy. Finally, they have become more militant on issues concerning

primarily non-standard workers, ie outsiders.

19

4. Social outcomes: labour market dualism and the hidden cost of the Polish

adjustment path

Even if Poland’s low exposure to the international crisis since 2009 gives it a taste of

success story, this path of labour market reform had two major side-effects which

illustrate the idea of dualization as a political process with long-standing social

outcomes (Emmenegger et al. 2012). First, a quick erosion of employment and a high

cost in terms of unemployment and inactivity in the first decade. Secondly, an expansion

of flexible forms of work deviating from the standard employment relationship leaving

workers largely unprotected against economic downturn (short-term contracts and

‘civil contracts’ circumventing labour law). The combination of segmentation and

deepening institutional dualism is likely to trigger ever greater divides between insiders

and outsiders (ibid.:12).

4.1. The impoverishment of the unemployed

The institutionalization of an unemployment benefit has failed to provide a proper form

of income security. In 2010, the unemployment benefit provided only 21% of those

registered as unemployed with a allowance at a low level of income replacement. In

1999, there were 2.3 million unemployed, out of which only one in four (554,000)

received an unemployment benefit, against 3.2 million unemployed (almost one million

more) and only 539,000 beneficiaries in 2002 (one in six). The proportion of the

registered unemployed entitled to a benefit declined from barely half in the period

1992-1996, down to 20% in 2000, stabilized around 14% in 2004-2007, and reached

21% again in 2010 when Poland turned out to be relatively immune to the world

recession. The replacement rate, an indicator showing the level of the benefit in relation

to wages, stood at 76 percent of the minimum wage and 30.5 percent of the average

wage in 1998, whereas one decade later it accounted for only 49 percent of the

minimum wage (2008) and 20 percent of the average wage (2007).

Both developments led to the further impoverishment of those who remained in

unemployment for a long time. Those who stopped being eligible for benefits over time

are unlikely to receive any other form of income replacement and may only qualify for

20

basic social assistance such as food aid. In 2000, the average annual subsistence

allowance paid by the social services barely amounted to one month of the average wage

(Gardawski 2002). Survey data on the economic means of the unemployed confirms that

social assistance is not a valid alternative source of income: in 1997 only 22 percent of

the unemployed mentioned the unemployment benefit as their main source of economic

support; 50 percent relied primarily on partner or family support; and only 5 percent on

social assistance (ISSP 1997).ii ‘Solidarity with the unemployed’ was reaffirmed as a

union priority only recently (NSZZ Solidairty 2010).

4.2. The rising share of short term employment

From 2000, the percentage of employees on fixed-term contracts has risen steadily to

over one in four, a level only surpassed by Spain in the EU in the same years. The use of

fixed-term employment contracts at the expense of contracts of undetermined length

developed especially rapidly from 2002 to 2004 due to a particularly permissive

legislation which provided neither for a maximum duration of fixed-term contracts nor

for a limited number of renewals. Since 2005, 25 to 28% of all employment relationships

are formalised by a fixed term contract (table 2). Most new jobs are offered on fixed-

term contracts, and the young are primarily employed in this way.

The restriction on the number of consecutive fixed-term contracts allowed between a

given employee and a given employer was reintroduced in alignment with a European

Directive, according to which a third successive renewal of a short-term contract shall

result in its automatic transformation into a permanent, open-ended contract.iii The

postponement of this measure until the day of EU accession provided a window of

opportunity for unrestricted used of fixed-term contracts. The continuous rise after

2004 shows that the regulation had no immediate impact in terms of restricting fixed-

term contracts; besides the legal limitation of two consecutive fixed term contracts was

again eliminated in later years.

The proportion of the employed working under a fixed-term contract lends itself to a

twofold interpretation. On the one hand, it shows overall vulnerability in the labour

market (Portet & Sztandar-Sztanderska 2007:360), as fixed-term employees face greater

uncertainty over their future, especially when the shorter notice of employment

termination applicable to them is combined with a low level of protection for the

21

unemployed. On the other hand, it is also a sign of the relative strength of the legal

protection of standard long-term contracts. Enterprise managers appear to be

employing short-term contracts as a device for external flexibility, to bypass the term of

dismissal notice, since Polish employees on a permanent contract benefited from a

rather long notice period (up to three months for those who had been employed for

three years or more versus two weeks for fixed-term employees), or even to mobilise

the workforce by playing on uncertainty (qualitative survey, Portet 2005: 276-78). By

contrast, unlike in some Western European countries, part-time work, a constant 10 or

11 per cent of total employment since the 1990s, does not appear to be a significant

source of flexibility in Poland.

4.3. The expansion of civil contracts bypassing employment law: institutional

dualism at work

In Poland, self-employment is an exceptionally popular type of work: in 1997, 80% of

the people questioned about their work orientations stated that they preferred to be

self-employed than being employees (ISSP 1997). iv In social representations, it is often

associated with independence and entrepreneurship, both particularly valued in Polish

society. The self-employed represented between 25% and 30% of the working

population in recent years according to both the Polish statistical office and

international sources.

It is not obvious, however, that this corresponds to a huge rise in truly independent

workers. There are several types of civil contract that may substitute for an employment

contract, among which the two most widely used (and sometimes misused) are umowa

zlecenie (contract of mandate) and umowa o dzielo (contract to perform a specified task

or work) (Portet 2005: 280-83).v The contract of mandate is based on the performance

of services for a mandator who commissions it to the contractor. Its obvious advantage

for the mandator is that it entails neither daily nor weekly working time limits for

performing the job nor necessitates the payment of overtime, thereby providing more

freedom in the definition of the task and the relationship to the executing party than an

employer would normally enjoy (Towalski 2002). Finally, it does not generate rights to

social protection. The contract to perform a specified task or work slightly differs, as it is

based not on a pre-defined service but on a result, i.e. an objective to achieve (ibid.). It

22

ties the executive party to a result; however, the contractor is less subordinated to the

mandator than in the contract of mandate, where the latter can give orders to the

former. Similarly, it does not entail paying social contributions or rights to social

protection.

In 2002, the Labour Code introduced an explicit obligation for employers to conform

with the employment contract according to the situation, in response to demands of the

trade unions, but the degree to which it has affected actual practice remains uncertain.

The ‘self-employed’ category covers many different realities, including workers who are

on their own account but still in a dependent situation vis-à-vis a single client, without

the protection of labour law (Portet 2005: 279-80). A fraction of the self-employed may

actually be former employees continuing the same activity, sometimes for the same

boss-client, simply without an employment contract (Burroni et al. 2008; Sula 2006).

Self-employment can be a way to escape the constraints of employment regulation

(including social contributions and income taxes, the flat-rate taxation on business

entities being less stringent). As such, it constitutes a low protection and security trap

from which these workers find it difficult to escape. These civil contracts were long

ignored by the unions but they have been the object of increasing criticism in recent

years. The unions have now made the fight against ‘junk contracts’ a priority on their

agenda with the launch of a dedicated campaign of protest and mobilization which

culminated in the fall 2011 (NSZZ Solidarity 2010; Pankow 2012).

Conclusion

This article contributes to a better understanding of the Polish paradox, that is how the

distinctive role of organized labour in economic reform produced a form of labour

market exclusion in the past two decades. It has reviewed labour market policy

outcomes against their capacity to deliver a combination of employment flexibility and

security. Furthermore, it has assessed the degree of involvement of organized labour in

policy-making processes. Both invite us to rethink the Polish success story in the face of

the current crisis. While the Polish economy continues to grow remarkably well and

create jobs, thereby exhibiting exceptional resistance to the turmoil affecting growth

rates and leading to a rise in unemployment everywhere else in Europe, this ‘miracle’

23

comes at a cost: the rapid expansion of precarious employment. Fixed-term employment

has reached a proportion that is matched only by Spain. Combined with a high level of

self-employment, it contributes to marginalize the standard, long-term, stable

employment relationship. The young generation seems particularly exposed to this

trend. The labour market policies that have gradually taken shape since the early 1990s

largely fail to provide a form of income security to the unemployed. In turn, those

excluded from standard employment tend to be similarly excluded from unemployment

insurance, other aspects of social protection and union representation. In effect, this

leads to reinforcing the insider / outsider divide.

How did this come about? The peculiar stance of Solidarity in the face of the change of

economic regime has now come to be well-known. The involvement of the trade unions

in labour market reform very much depends on the issue at stake. Retracing successive

reforms in the area of income compensation on one hand and labour law on the other

hand, allows us to observe the role of the trade unions in the process of aggregation and

representation of workers’ interests. The conditions of standard employment tend to be

negotiated in class terms, involving a two-side conflict opposing employer associations

and representatives of workers, dominated by peak associations and redistributive

politics. They reflect the model of ‘old politics of welfare’. However, this does not apply

to the institutionalization of new flexible forms of work, which appear less salient as

they concern essentially workers that are little represented in the membership of the

trade unions. By contrast, the conditions of unemployment have for long not been a

matter of union mobilization, leading to a depoliticized retrenchment facilitated by the

low degree of involvement of peak associations and the low visibility of the unemployed

as a group. In the period of high unemployment, the debate on its causes tended to shift

onto employment regulation. There are major exceptions reflecting the ‘new politics of

the welfare state’ hypothesis: a high level of mobilization to obtain more favourable

dismissal conditions could be observed in a few highly unionised, regionally concentrated

sectors (heavy industry and mining). The pattern of income compensation for job loss

via early retirement and disability benefits goes in a similar direction. Again, the

existence of these particularistic schemes illustrate a deepening insider/outsider divide

and the bias of workers’ representation towards the protection of insiders with a

privileged status inherited from the previous regime, rather than more universalistic

forms of social protection.

24

In the 1990s and 2000s, when they were involved in social governance, Polish trade

unions represented primarily their core constituencies, but there are recent signs of

change. This mirrors developments in several other countries with heavily segmented

labour markets, where unions used the low density of state regulation as an opportunity

to become more involved in the regulation of atypical work. In Italy, the state retreat of

atypical labour regulation in the 2000s left a vacuum that the social partners invested. A

variety of measures obtained through collective bargaining resulted in a reduction and a

re-collectivization of the risks faced by atypical workers (Johnston et al. 2011 :357).

Similarly, in France, since the beginning of the crisis, collective agreements were signed

in the private and the public sectors aiming to give temporary workers the same rights

and protection as workers in a standard long-term employment. Polish trade unions

now share the same issues and dilemmas than those faced by their counterparts in

continental and Southern Europe.

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28

(to be inserted after section 2.1)

Graph 1

19901991

19921993

19941995

19961997

19981999

20002001

20022003

20042005

20062007

20082009

20100

102030405060708090

Unemployment rate & benefit coverage

Registered unemployment rate Entitled to benefit (% of registered unemployed)

Table 1 – Unemployment and benefit coverage

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Registered unemployment rate

6.1 11.4 14.3 16.4 16 14.9 13.2 10.3 10.4 13.1 15.1 17.5 20 20 19.0 17.6 14.8 11.2 9.5 11.9 12.3

Entitled to benefit (% of registered unemployed)

79 79 52 48 50 59 52 30 23 24 20 20 17 15 14 14 14 14 18 20 21

Sources: public employment service; Ministry of Economy and Labour (data end of year)

29

Table 2 – Summary data: employment in Poland

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Unemployment rate (LFS) 18.6 20.3 20.0 19.3 18.0 14.0 9.7 7.2 8.3 9.7 9.8

Employment rate (% working age pop)

53.5 51.7 51.4 51.9 53.0 54.5 57.0 59.2 59.3 59.3 59.7

Permanent employment (% of dependent employment)

88.3 84.6 80.6 77.3 74.3 72.7 71.8 73.0 73.5 72.7 n.a.

Temporary employment (FT,% of dependent employment)

11.7 15.4 19.4 22.7 25.7 27.3 28.2 27.0 26.5 27.3 n.a.

Part time employment (% total) 10.3 10.8 10.5 10.8 10.8 9.8 9.2 8.5 8.4 8.3 8.0

Self employment (% total empl) 28.0 28.1 27.3 26.7 25.8 24.4 23.5 22.9 22.8

Source : OECD (LFS data), except part-time employment (Eurostat)

30

i This distinction is also made, among others, by Ebbinghaus in his work on pension politics (see for instance Ebbinghaus 2011). He focuses on the constrast between austerity and welfare expansion and the relation between unions and government in these situations. My concern is slightly different : it is the degree of encompassingness of labour representation that unions provide that distinguishes old from new welfare politics. I examine this in the context of labour market reform specifically. ii International Social Survey Programme, Module on Work Orientations (II), 1997/1998. The Polish survey concerned 922 adults. Unfortunately, Poland was not included in the replication of this module in wave III (2005), thus, making it impossible to assess a change in social attitudes over time.iii Article 12 of Directive 99/70/EC of 28 June 1999.iv It was the highest figure from all twenty-three countries participating in the survey.v Interestingly, these civil contracts are not a new instrument : before 1989, they already provided a major tool for adjusting working time to the changing intensity of activity, using supplementary hours. It is likely that in some places, managers have continued to use these contracts to serve the same function (Portet 2006: 257).