Flow and stock analysis of Polish unemployment: January 1990 - May 1991

Unemployment is and will be for the foreseeable future one of the major issues of economies in transition. Not only is unemployment in Post-communist economies a socially explosive problem, what happens on the unemployment front allows us to also make inferences about the state of the transition process in general. In this paper we look at Polish unemployment as it evolved from January 1990 to June 1991. A framework is developed which allows us to discuss flows into and out of unemployment. In analyzing the determinants of the various flows we discuss the macroeconomic environment brought about by the reforms and the role of prices and wages. However, we above all, stress institutional and structural factors which have an impact on labour flows in the Polish Post-communist economy. The stocks of several variables are also analyzed. We relate the trends of some unemployment stocks (especially the stocks of school leavers and group layoffs) to the trend of the overall stock of unemployment. We also look at the trends of vacancies and of various U/V ratios and touch upon the short run and long run trends of employment by sector. The main conclusion of the paper is that the high level of unemployment in Poland is neither due to the elimination of hidden unemployment (it actually increased in 1990!) nor a result of restructuring. The level of unemployment is high because of large inflows form outside the labour force and because of large inflows from outside the labour force and because hirings have been much smaller than in previous years while separation have only been slightly higher.