Wages are growing in Poland at the fastest pace for at least two decades

The average wage in Poland rose by 14.7% year-on-year in the second quarter of 2024 – the biggest increase in at least two decades – to 8,038.41 zloty (€1,864.63) per month before tax, new data from Statistics Poland (GUS) ), a government agency, show.

The quarterly GUS data – unlike the monthly figures that are usually reported – take into account the incomes of a broad segment of the population, including people employed in small businesses and the public sector.

The increase in wages this year has been driven in particular by a record rise in the minimum wage at the beginning of the year – a policy introduced by the former government – and a 20% wage increase for all government workers and a 30% increase in teachers created by the new government that took power in December.

The figures show that in the business sector (among companies employing more than nine people), wages rose by a modest 10.9% in the second quarter. About 6.2 million people are employed in such factories compared to 15.1 million workers in the entire Polish economy.

“The high levels are the result of a 20% wage increase entering the economy and a high increase in the public sector,” Arkadiusz Balcerowski, an economist at mBank, told Notes from Poland. “The business sector, least affected by these factors, saw a slight slowdown in strong wage growth.”

“NBP [central bank] studies show that the depth of wage pressures reported by companies has been decreasing for a long time,” he added. “Furthermore, the NBP itself estimates that the current wage growth is largely driven by it is a depreciation of the past.”

After the end of the epidemic and the outbreak of war in Ukraine, inflation in Poland remained stubbornly high for several months and reached a peak of 18.4% in February last year.

Although the rate of price increase has decreased significantly since then, inflation has started to accelerate again in recent months, reaching 4.2% in July after the rise in energy prices.

The latest GUS data shows that, compared to the previous quarter, the average wage decreased by 1.3%. This is something that happens every year in the second quarter, as first quarter earnings are usually increased by bonuses paid at the beginning of the year.

With the fading effect of public sector expansion and limited wage growth, as well as a reduction in wage pressures and perhaps less opportunity for companies to raise wages, the rate of wage growth in the national economy is also is expected to drop.

In its latest inflation estimate published in July, the NBP said it expects double-digit annual income growth to continue until the end of 2024. Then the increase will slow to below 10 % at the beginning of 2025 and may reach 6% at the end. of 2026.

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Original image credit: Marcin Kempa/Unsplash