The government of the right wing Law and Justice party, which came to power in Poland in 2015 after eight years in the opposition and won a second term in 2019, is perceived as being not only socially conservative but also dedicated to redistribution. Its flagship social program, Family 500+, which offers parents 500 PLN (approximately 118 USD) of unconditional monthly benefits for every child, is a prime example of the ruling party’s dedication to social welfare. This image, however, has grown distant from reality. And the economic downturn caused by the Covid-19 pandemic is making this discrepancy even greater.
Although Family 500+ did contribute to a substantial reduction in poverty among Polish families, its extension in 2019 to every child (initially firstborn children, except those from the poorest families, were excluded) not only multiplied costs of the program, but also severely reduced its redistributive effects. Economists from the Polish think tank CenEA calculated that while families from the lowest income quintile received an additional sum of 800 million PLN, those from the highest quintile received 5,4 billion PLN. The program also failed to compensate for increasing inflation. Just before the start of the pandemic in Poland, inflation had risen significantly up to 4.7% by February 2020, the highest it has been since 2011. Family benefits were not re-valorized accordingly, which meant diminishing benefits for poorer families that spent a larger part of their income on necessities than did more affluent ones. It should not come as a surprise that official poverty rates in 2019 rose significantly.
These shortcomings will become even more acute in the upcoming months, with onset of the economic crisis triggered by the pandemic. The IMF had initially expected Polish GDP to shrink by 4.6% in 2020, but later warned that contraction of the economy could be more severe. Even a drop of less than 5% in GDP would triple current Polish unemployment rates from 3.3% to 9.9%, significantly increasing poverty. According to political scientist Ryszard Szarfenberg’s calculations, 1.7 million people will be forced into extreme poverty, with many more threatened with relative deprivation.
The Polish government, akin to other European governments, dedicated significant resources to alleviate negative economic effects of the lockdown. The so-called Tarcza Antykryzysowa (Anti-crisis Shield) is a vast program of state subsidies, loans, and financial exemptions meant to keep companies of different sizes afloat. Its first version was heavily criticized for being insufficient and putting most of the financial burdens on employers and employees, with very limited commitments from the state budget. The second version was substantially expanded and its financing includes the biggest quantitative easing policy in the history of the Polish economy. Even though the nominal value of the shield is much lower than that of similar programs in more affluent countries of the EU, it is still by far the biggest assistance program ever launched by a Polish government.
The problem, however, is not the scale of the program. It is the inherent logic of saving companies and theoretically also workplaces even at the cost of dividing the workforce into uneven and disparate categories. The shield was recently revised for the fourth time and one of its latest incarnations allows companies as well as state institutions to more easily lay off workers, especially those who have more than one job or have reached retirement age. Moreover, as pointed out by labor market experts, the program offers significant financial assistance to the self-employed, but nothing to regular employers, who have to rely on already existing unemployment benefits and social assistance.
In the last stage of the electoral campaign incumbent president Duda did what should have been done much earlier. He proposed a law raising unemployment benefits. A parliamentary majority quickly approved it to increase Duda’s chances for reelection. However, increased unemployment benefit is still significantly lower than the financial assistance offered to the self-employed as part of the anti-crisis shield.
The system of support for the unemployed remains terribly inadequate to deal with a very rapid increase in the number of people requiring help. Without going into complex details, it suffices to say that only 16% of the registered unemployed in Poland qualified for unemployment benefits before the crisis. With few additional funds and with soaring applications, this already very low percentage is bound to drop even further. And this will translate into a serious drop in living standards for many Polish families.
Unfortunately, this is not all. We can also expect that the economic crisis triggered by the pandemic will raise inflation rates to levels not witnessed by European economies since the end of World War II. As Paweł Bukowski, an economist from the London School of Economics and expert on income inequalities, pointed out recently, inflation is degressive – it puts a disproportionately larger financial burden on the less affluent. With soaring costs of living and depreciating value of their small savings, they find themselves pushed against the wall.
In Poland, inflation was high even before the crisis, now we can expect it to reach levels dangerous for social cohesion. Severe limitations in consumption and low oil prices may keep inflation at bay for some time, but this will come at the expense of declining living standards, and experts are expecting inflation to rise significantly after an initial moderate decrease. With some people protected by the government’s shield and others left without sufficient protection – the idea of some form of temporary universal basic income was never discussed by Polish decision makers – we can expect that negative effects of inflation will mount.
It takes social solidarity for societies to survive serious economic downturns. Burdens of recovery, but also benefits of assistance, should be distributed proportionately and transparently, so that both sacrifice and help become part of the common experience during times of hardship. Covid-19 hit Poland at the moment when not only was Polish society polarized over issues of culture and identity but also when the shortcomings of the supposed redistributive conservative system built by the ruling party were becoming more visible.
The government failed to address these problems and was content with its own propaganda of success. It did not re-valorize benefits in response to growing inflation. It never seriously considered reforming a flawed tax system, which in many instances is de facto regressive. And when it became clear that the pandemic was going to trigger a serious economic crisis, its response was inadequate exactly in the way its previous social policies were: generous, but selective in the worst possible way. It undermined social solidarity instead of bolstering it.
Dr. Paweł Marczewski is a sociologist and head of a research unit, Citizens at the ideaForum, think tank of the Batory Foundation.
This piece was a contribution to the Democracy & the Pandemic Mini-Conference of the Democracy Seminar held on May 20-21, 2020.