Saturday, August 05, 2006

Polish Labor Economics 101

Looking back to the Solidarity era in Poland, as I sometimes do, one of the most striking things of it is that the underlying social movement really could not be justified in terms of standard of living (or geopolitics for that matter). Because the initial consequence of the strikes, social discord, and resistance to communism was to worsen economic conditions from their previously low base. In fact, at many times it probably looked as though that would be the only consequence.

Nonetheless, Polish politics today are dominated by standard-of-living issues, at least that's the way it looks to me.

How did that happen? Ok, let's pretend we're back in the US for a moment and look at the American labor market, especially the entry level. Roughly speaking we can divide into thirds. First is the big firms; Deloitte & Touche, JP Morgan, Caterpillar, 3M, Intel, etc. Every year they stand ready to hire thousands of eductated young people, both college graduates and MBAs.

Second, there are semi-entrepreneurial jobs as well. Say a guy is a fairly sharp businessman and over the course of a couple of decades he accumlates 2 rental houses, 4 apartments, a little Italian restaurant, and a bowling alley. Managing all of it becomes a pain after a while so he hires his best friend's nephew to help him out. Or alternatively, a young person turns a high school hobby into a decent consulting business, like a recording engineer or computer repair person.

Finally, there's the basic service jobs, like working at the Gap, or as as a bartender or hostess.

Well, in Poland, the first is out. There is no Polish McKinsey or GE or Citibank. The second possibility exists, but that sector of the economy is much smaller than an American would recognize. That leaves the basic service jobs, which by default everybody has to get. This means that intelligent, college-educated young people, the ones who would be qualified to work for Booz-Allen, have to fight for a job at a hotel instead. In wage terms, a $10-12 / hr job is a fairly big deal in Poland.

So essentially half the available entry-level labor force up and left (or is in the process of leaving), mostly to the UK. Parts of the Polish political establishment think this is a bad thing, but I'm not sure. First, as I talk to people in that situation, most of them think of themselves as Polish and intend to return to Poland when they have some money or opportunity here. Certainly the majority of those who do have some opportunity here never leave in the first place. And even if it were different, you couldn't blame them anyway. You only get one life.

The point being, this will change when and if the Polish capital base is sufficient to profitiably utilize the talents of the labor force that it already has.

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