Friday, September 29, 2006

Poland Faces Labor Shortage as Its Proverbial Plumbers Go West

Edward Suchan, the president of a construction company in Krakow, Poland, can't find enough bricklayers, carpenters and electricians to hire. So he has turned to the local jail, hiring 10 ex-convicts and awaiting the release of 20 more.

``Workers have vanished into thin air,'' Suchan said in an interview. ``More people have left this country than during martial law. We have to turn down contracts because we can barely meet deadlines.''

In Western Europe, the ``Polish plumber'' is a catchphrase for the flood of workers who've migrated since the expansion of the European Union in 2004, sparking resentment from London to Berlin and feeding a growing conviction the newcomers are taking jobs from natives. Less reported is what the migration is doing to the economies those workers left behind.

A World Bank report issued yesterday concluded that the impact is greater on nations losing craftsmen and laborers.

``Even though post-accession labor flows have been absorbed with little evidence of any negative impact on the receiving economies, they did have a significant impact on the sending countries'' the bank said in its quarterly report on the eight eastern states that joined the EU in 2004. ``Massive outflows of workers may lead to labor shortages, signs of which are already visible in the Baltic States and Poland.''

Latvia and Lithuania

Latvia, the EU's poorest nation per capita, says as many as 120,000 people, or 10 percent of the labor force, work abroad. Lithuania's Statistics Department says about 126,000 people emigrated between 2001 and 2005, accounting for 7.9 percent of the workforce.

In Poland, the Labor Ministry estimates more than 600,000 Poles have left. Krystyna Iglicka, an economist at the Warsaw- based Public Affairs Institute, says the real figure may be as high as 1.2 million. Some 228,000 long-term Polish workers are registered with the U.K. Home Office; Ireland has 105,000. Another 330,000 Poles are holding temporary seasonal jobs in Germany.

That number is likely to grow. Warsaw researcher PBS DGA in a telephone survey this month found half of Poles under 24 years of age expect to move away within the next two years.

For companies like Suchan's PBP Chemobudowa-Krakow SA, that means delays in projects and loss of revenue. The National Statistical Office says 45 percent of domestic builders are short of workers, almost triple last year's figure.

Closing Wards

Forty-three percent of domestic companies complain that the shortage of qualified workers is affecting their business, according to Lewiatan, the association for private employers. The Polish Health Ministry estimates about 5 percent of doctors have emigrated since EU membership, forcing some hospitals to ditch services and close down wards.

The EU's 2004 expansion, which created a single market of 450 million people and opened doors long denied to the citizens of former communist regimes, also aimed to bring down barriers to cross-border investment. In Poland's case, the government says that foreign companies are creating about 51,000 new jobs annually -- far fewer than those being lost to emigration. And foreign companies may run up against the same issues domestic employers are already dealing with.

Wroclaw, the fifth-largest Polish city, boasted about the country's annual economic growth rate of 5 percent and its educated and cheap labor force to lure foreign companies such as LG.Philips LCD Co., which will spend $550 million in the area by 2011.

`All for Nothing'

These employers are still waiting for enough local people to sign up for factory work, said Mayor Rafal Dutkiewicz.

``I promised 100,000 new jobs four years ago and will keep my word,'' said Rafal Dutkiewicz. ``But it seems all for nothing because these big foreign companies we invited, after hiring 40,000 local workers, now can't find enough hands.''

To counter the trend, the city of 670,000 began a campaign in the U.K. and Ireland, with billboards proclaiming, ``Come back Poles, we have work for you, Wroclaw loves you.''

The problem is the wage differential that exists even in foreign-owned Polish factories, said Ireneusz Jablonski, an analyst at the Adam Smith Center, a research group in Warsaw.

In Poland, the average monthly wage is $850, while in neighboring Germany, the average is more than $4,000.

``The government successfully tempted foreign investors with tax exemptions and low labor costs,'' said Jablonski. ``Poles, though, prefer emigration rather than humiliating salaries that are not enough to keep up even a basic standard of living.''

The central bank reported in August that 16.5 percent of domestic companies plan to raise wages in the third quarter, while the European Commission said on Sept. 6 that the shortage of employers in some industries will boost wages and spark inflation.

``Companies must pay more if they don't want to lose employees,'' said Deputy Labor Minister Boguslaw Socha. ``Otherwise, we won't stop that exodus.''