shocked by therapy: employment patterns across the socioeconomic transition threshold in poland

Shocked by therapy: employment patterns across the socio-economic transition threshold in Poland

Monika Oczkowska

(joint work with Michał Myck)

SITE Academic Conference: 25 years of transition

Stockholm, 06/12/2016

• The socio-economic transition of late 1980s and early 1990s as one of key

developments in modern European history.

• Yet, so far very little quantitative analysis of individual experiences at the time –

largely due to lack of reliable micro-level data.

• Aim to shed some light on the developments across the transition threshold in

Poland with the focus on individual labour market experiences using detailed

retrospective information:• descriptive paper focused on cohorts born between 1928 and 1957 (aged 31-60 in 1988);

• analysis based on data from the Survey of Health, Ageing and Retirement in Europe (SHARE);

• Focus of the paper:

• how much can we learn about the transition in Poland from retrospective data?

• identification of groups most and least affected by the “shock therapy” policies;

• long term effects of transition shocks: health, well-being and material conditions?

Key objectives of the paper

SITE Academic Conference

• Poland on the verge of transition:• a centrally planned economy with underdeveloped private sector, very high inflation and growing

levels of public foreign debt;

• labour market characterized by low levels of productivity, weak relation between productivity and

wages, low levels of returns to education and high rate of labour force participation.

• The “shock therapy” package of the Mazowiecki government (Balcerowicz Plan,

01.01.1990) included:• fiscal consolidation (reductions in subsidies, reform of the tax system);

• restrictive monetary policy to reduce inflation (including strict policies to limit wage growth);

• convertibility of the currency;

• liberalization in foreign trade;

Transition in Poland

• Economic transition and the labour market:• 1989 – very liberal unemployment legislation; tightened until 1995;

• Early 1990s – generous regulations on disability/early-retirement

pensions

Year Rate % unemployed

without benefit

Dec 1990 6.3 20.8

Dec 1991 11.8 21.0

Dec 1992 13.6 47.7

Dec 1993 16.4 51.7

Dec 1994 16.0 49.9

Dec 1995 14.9 41.1

Registered unemployment in Poland

Source: CSO.


• Our approach to examine labour market developments of the Polish transition:

• use international Survey of Health, Ageing and Retirement in Europe (SHARE):

• Panel data on individuals aged 50+ from Europe (+ Israel);

• Regular waves (2004,2007,2011,2013,2015): current conditions

• SHARE-Life (2008/09): detailed retrospective data on individual life history:

childhood conditions, accommodation, detailed labour market history.

• build individual labour market histories: from the end of education till the time of the survey;

• analyse these histories before and after the transition and look at the implications of the reforms for labour market outcomes at individual level.

• Analysis focuses on individuals born between 1928 and 1957

(745 men and 915 women with valid information):

• divided into three birth cohorts;

• compared to same cohorts in selected other SHARE countries:

• “central” Europe: Belgium, France, Germany (West), Netherlands;

• “southern” Europe: Spain, Greece, Italy.

Transition in Poland


Key variables of interest:

Job spells:• start/end,

• basic job characteristics,

• first wage/income,

• reason for leaving.

Gaps between job episodes (min. 6 months):

• labour market status (unemployed,

homemaker, disabled, etc.);

• income sources during gaps;

• situation after last job and preceding

retirement.

Sample

1928-37 1938-47 1948-57 Total

Total N 359 529 772 1,820

Gender

women % 53.2 54.4 56.5 56.1

Years of education

15 or more % 15.6 18.9 32.4 23.9

Living with partner

yes % 88.9 91.5 92.6 90.7

Has children in 1988

yes % 91.6 91.3 89.9 90.7

Employment sit. in 1988

working % 55.7 82.2 86.0 74.9

unemployed % 0.8 0.8 1.9 1.4

retired % 16.2 2.3 0.1 6.9

disabled % 5.3 2.7 2.2 3.2

homemaker % 14.5 10.0 8.6 10.6

other % 7.5 2.1 1.8 3.0

Working in 1988 – employee/self-emp

self-employed % 37.5 23.5 14.8 21.6

Working in 1988 - sector

agriculture % 48.5 33.8 18.4 28.7

industry % 25.0 31.5 41.8 35.0

services % 26.5 34.7 39.8 36.3


0

.2

.4

.6

.8

1

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

Sample: 7743

west

0

.2

.4

.6

.8

1

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

Sample: 7168

south

0

.2

.4

.6

.8

11980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

Sample: 1817

pl

Notes: Weighted with SHARE wave3 individual weightsData release: 29 Apr 2016 Current date: 24 Jun 2016

edu full/e part/e unem n/look unem look ret home dis oth

PL

Employment situation 1980-2008


0

.2

.4

.6

.8

11980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

Sample: 7743

west

0

.2

.4

.6

.8

1

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

Sample: 7168

south

0

.2

.4

.6

.8

1

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

Sample: 1817

pl



Years (1980-2008)

0

.2

.4

.6

.8

1

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

Sample: 7743

west

0

.2

.4

.6

.8

1

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

Sample: 7168

south

0

.2

.4

.6

.8

11980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

Sample: 1817

pl



PL

Employment situation 1980-2008

0

.2

.4

.6

.8

1

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

Sample: 7743

west

0

.2

.4

.6

.8

1

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

Sample: 7168

south

0

.2

.4

.6

.8

1

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

Sample: 1817

pl




0

.2

.4

.6

.8

11980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

Sample: 7743

west

0

.2

.4

.6

.8

1

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

Sample: 7168

south

0

.2

.4

.6

.8

1

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

Sample: 1817

pl



ES, GR, ITBE, DE-West, FR, NL

Years (1980-2008) Years (1980-2008) Years (1980-2008)

1928-1937

Employment situation for ages 17-59 y.o. in cohorts in Poland, men


0

.2

.4

.6

.8

117

19

21

23

25

27

29

31

33

35

37

39

41

43

45

47

49

51

53

55

57

59

Sample: 168

pl gender1 cohort1

0

.2

.4

.6

.8

1

17

19

21

23

25

27

29

31

33

35

37

39

41

43

45

47

49

51

53

55

57

59

Sample: 240

pl gender1 cohort2

0

.2

.4

.6

.8

1

17

19

21

23

25

27

29

31

33

35

37

39

41

43

45

47

49

51

53

55

57

59

Sample: 332

pl gender1 cohort3

Notes: Weighted with SHARE wave3 individual weightsData release: 29 Apr 2016 Current date: 23 Nov 2016


0

.2

.4

.6

.8

117

19

21

23

25

27

29

31

33

35

37

39

41

43

45

47

49

51

53

55

57

59

Sample: 168

pl gender1 cohort1

0

.2

.4

.6

.8

1

17

19

21

23

25

27

29

31

33

35

37

39

41

43

45

47

49

51

53

55

57

59

Sample: 240

pl gender1 cohort2

0

.2

.4

.6

.8

1

17

19

21

23

25

27

29

31

33

35

37

39

41

43

45

47

49

51

53

55

57

59

Sample: 332

pl gender1 cohort3



Age (17-59)

1928-1937 1938-1947 1948-1957

Employment situation for ages 17-59 y.o. in cohorts in Poland, men


0

.2

.4

.6

.8

117

19

21

23

25

27

29

31

33

35

37

39

41

43

45

47

49

51

53

55

57

59

Sample: 168

pl gender1 cohort1

0

.2

.4

.6

.8

1

17

19

21

23

25

27

29

31

33

35

37

39

41

43

45

47

49

51

53

55

57

59

Sample: 240

pl gender1 cohort2

0

.2

.4

.6

.8

1

17

19

21

23

25

27

29

31

33

35

37

39

41

43

45

47

49

51

53

55

57

59

Sample: 332

pl gender1 cohort3



Age (17-59) Age (17-59) Age (17-59)

Who became unemployed during transition?

• Descriptive analysis of labour market states before and after transition:work => unemployment

• 1988 used as the “pre-transition” period:

• Experience of unemployment between 1989-1991 as a measure of

transition shock:

• how true is the unemployment inflow story?

• did people come onto the labour market to claim benefits?


Situation in 1988 Men Women Totalworking % 77.8 62.2 67.3 unemployed % 22.2 35.1 30.9 homemaker % 0.0 0.0 0.0other % 0.0 2.7 1.8

Total% 100.0 100.0 100.0 N 18 37 55

Declared unemployment between 1989-1991

Unemployment in early 1990s, conditional on working in 1988

• Probability models to examine which cohorts were most/least affected

• Different impact of unemployment at transition threshold and in early 90s

Pr 𝑤 = 𝑈8991 𝑋,𝑤88 = 1 = 𝛽𝑋 + 𝜀


Pr 𝑤 = 𝑈9295 𝑋,𝑤88 = 1 = 𝛽𝑋 + 𝜀


Coeff. SE Sign.

Years of education>15 -0.000 (0.012)

Female 0.014 (0.011)

Cohort 1948-1957 0.026 (0.013) *

Agriculture in 1988 -0.018 (0.016)

Family background included

Childhood circumst. included

N 1,138

* p < 0.10 ** p < 0.05 *** p < 0.01

unemployed between 1989-1991



Pr 𝑤 = 𝑈8991 𝑋,𝑤88 = 1 = 𝛽𝑋 + 𝜀


Pr 𝑤 = 𝑈9295 𝑋,𝑤88 = 1 = 𝛽𝑋 + 𝜀

Probability of unemployment if worked in 1988, marginal effects


Coeff. SE Sign.

Years of education>15 -0.000 (0.012)

Female 0.014 (0.011)

Cohort 1948-1957 0.026 (0.013) *

Agriculture in 1988 -0.018 (0.016)



N 1,138

* p < 0.10 ** p < 0.05 *** p < 0.01




Pr 𝑤 = 𝑈8991 𝑋,𝑤88 = 1 = 𝛽𝑋 + 𝜀



Pr 𝑤 = 𝑈9295 𝑋,𝑤88 = 1 = 𝛽𝑋 + 𝜀

Coeff. SE Sign.

Years of education>15 -0.045 (0.019) **

Female 0.026 (0.015) *

Cohort 1948-1957 0.045 (0.018) **

Agriculture in 1988 -0.043 (0.022) **



N 1,138

Probability of unemployment if worked in 1988, marginal effects

Transition shocks and current outcomes

• Matching experiences of unemployment shocks in early 1990s to:

• indicators of health, well-being and material conditions from the 2007 survey and

from SHARE-Life (2008/09):

• health indicators: 1+ADLs, 2+symptoms, poor self-reported health

• well-being indicators: CASP-12 4 categories, life satisfaction 0-10 scale,

EURO-D 0-12 depression symptoms

• HH material situation: great difficulties in making ends meet (MEM),

total HH income

• Outcomes compared conditional on working in 1988 and

experiencing unemployment between 1989-1991:

• unemployment in the early years treated as exogenous job loss resulting from the

shock therapy;


Shocks in the past and future outcomes

* p < 0.10 ** p < 0.05 *** p < 0.01


Unemployed 89-911 Other 89-911 Female Education yearsN Meth.

Coeff. SE Coeff. SE Coeff. SE Coeff. SE

Health

1+ ADL (2007) 0.990** (0.417) 0.355 (0.257) 0.374** (0.180) -0.001 (0.026) 1214 logit

2+ health symptoms (2007) 0.612 (0.385) 0.011 (0.237) 0.619*** (0.143) -0.049** (0.021) 1218 logit

Poor self-rep.health (2007) 0.688* (0.406) 0.540** (0.226) -0.027 (0.158) -0.148*** (0.028) 1214 logit

Poor self-rep.health (2008/09) 0.294 (0.396) 0.496** (0.210) 0.080 (0.146) -0.088*** (0.024) 1386 logit

Material conditions

great difficul.with MEM(2007) 0.694* (0.360) 0.384* (0.222) -0.155 (0.145) -0.136*** (0.025) 1383 logit

ln HH income , imput. (2007) -0.217* (0.121) -0.004 (0.069) -0.058 (0.044) 0.026*** (0.006) 1377 OLS

ln HH income (2008/09) 0.050 (0.135) 0.021 (0.076) -0.053 (0.049) 0.025*** (0.007) 1281 OLS

Well-being

CASP-12 4 categ. (2007) -0.352* (0.209) 0.060 (0.128) -0.252*** (0.078) 0.055*** (0.012) 1177 oprobit

Life satisfaction 0-10 (2007) -0.609*** (0.179) 0.032 (0.106) -0.165** (0.067) 0.046*** (0.010) 1206 oprobit

EURO-D 0-12 (2007) 0.333* (0.179) 0.089 (0.107) 0.546*** (0.068) -0.048*** (0.010) 1190 oprobit

Controls: age gr., regional dum., industry in 1988, work experience until 1988, severe injuries until 1988, childhood health, family SE sit. at age101 Reference group for unemployed/other 89-91: working continously 89-91

Sample: working in 1988

• Unemployment increased dramatically in Poland after 1989 in Poland –

officially from 0% in 1989 to over 16% in 1994.

• We conduct first micro-level analysis of labour market flows across the

transition threshold.

• We find some support for inflow into unemployment from among those not

working before the transition (30% of those who experienced long-term

unemployment in early 1990s).

• Different nature of unemployment at transition threshold (1989-1991) and in

subsequent years (1992-1995):

• losing a job in early years of transition unrelated to such characteristics as gender,

age and education.

• Strong implications of unemployment during transition on later life outcomes :

• poorer health, worse material situation, lower indicators of well-being.

Summary


men women

Employment situation for ages 17-69 y.o., Poland


0

.2

.4

.6

.8

117

19

21

23

25

27

29

31

33

35

37

39

41

43

45

47

49

51

53

55

57

59

61

63

65

67

69

Sample: 791

pl gender1

0

.2

.4

.6

.8

1

17

19

21

23

25

27

29

31

33

35

37

39

41

43

45

47

49

51

53

55

57

59

61

63

65

67

69

Sample: 1020

pl gender2



Age (17-69) Age (17-69)

shocked by therapy: employment patterns across the socioeconomic transition threshold in poland

Economy & Finance