Shocked by therapy: employment patterns across the socioeconomic transition threshold in Poland
1. 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
2. • 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
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3. • 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.
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4. • 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
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5. 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
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11. 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?
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Situation in 1988 Men Women Total
working % 77.8 62.2 67.3
unemployed % 22.2 35.1 30.9
homemaker % 0.0 0.0 0.0
other % 0.0 2.7 1.8
Total
% 100.0 100.0 100.0
N 18 37 55
Declared unemployment between 1989-1991
12. 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
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Pr 𝑤 = 𝑈9295 𝑋, 𝑤88 = 1 = 𝛽𝑋 + 𝜀
13. Unemployment in early 1990s, conditional on working in 1988
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
• 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
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Pr 𝑤 = 𝑈9295 𝑋, 𝑤88 = 1 = 𝛽𝑋 + 𝜀
Probability of unemployment if worked in 1988, marginal effects
14. Unemployment in early 1990s, conditional on working in 1988
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
• 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
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unemployed between 1992-1995
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) **
Family background included
Childhood circumst. included
N 1,138
Probability of unemployment if worked in 1988, marginal effects
15. 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;
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16. Shocks in the past and future outcomes
* p < 0.10 ** p < 0.05 *** p < 0.01
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Unemployed 89-911 Other 89-911 Female Education years
N 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 age10
1 Reference group for unemployed/other 89-91: working continously 89-91
Sample: working in 1988
17. Shocks in the past and future outcomes
* p < 0.10 ** p < 0.05 *** p < 0.01
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Unemployed 89-911 Other 89-911 Female Education years
N 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 age10
1 Reference group for unemployed/other 89-91: working continously 89-91
Sample: working in 1988
18. • 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
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19. men women
Employment situation for ages 17-69 y.o., Poland
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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: 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
Notes: Weighted with SHARE wave3 individual weights
Data release: 29 Apr 2016 Current date: 23 Nov 2016
edu full/e part/e unem n/look unem look ret home dis oth
Age (17-69) Age (17-69)