The population of Poland is aging rapidly. To keep the labour market and pension system balanced, the number of foreign workers in Poland would need to increase by over 2.6 million by 2033. Currently, there are just under 1.2 million, according to Grzegorz Siemionczyk, economist at money.pl But is mass immigration the panacea for all economic problems? This article will go on to explore both sides of this contentious issue.
According to the latest data from the Social Insurance Institution (ZUS), at the end of the second quarter of 2024, there were 1.16 million foreigners contributing to social insurance. This roughly indicates the number of foreign workers in Poland. Mid-year, they made up just under 7% of the total workforce. Five years ago, this figure was just under 4%.
However, the growth of foreign workers in the Polish labour market is slowing. In the second quarter of 2024, their numbers were about 6% higher than the previous year. Excluding 2020, when migration was hindered by the pandemic, this is the smallest increase since at least 2014. Meanwhile, according to a ZUS simulation in a new report, maintaining balance in the labour market and pension system would require a significant increase in immigration.
Ageing Population: An Issue for Taxpayers
“Poland is experiencing an aging population, caused by declining birth rates and increasing life expectancy. The proportion of the post-working-age population is growing, while the proportion of the working-age and pre-working-age population is shrinking. The demographic dependency ratio, understood as the ratio of post-working-age to working-age people, is also rising,” explain the authors of the report “Foreigners in the Polish Social Insurance System 2023”.
Currently, the demographic dependency ratio is 39.8%. This means that for every 100 people of working age (18 to 60/65 years), there are nearly 40 people of post-working age (60+ for women and 65+ for men). According to the demographic forecast by the Ministry of Finance in 2023, this ratio will reach 45 by 2033.
From a pension system management perspective, an increase in the demographic dependency ratio means a growing deficit in the Social Insurance Fund, from which current pensions are paid (this year’s deficit is expected to be 71.1 billion PLN). The number of people paying contributions will decrease relative to the number of pension recipients. This deficit is covered by the state budget, its increase will mean higher taxes, burdening working individuals.
How Many Foreign Workers Are Needed?
ZUS conducted a simulation to determine whether an influx of foreigners could keep the demographic dependency ratio at its current level or at least slow its expected rise. The conclusions are pessimistic.
To maintain the ratio of 40 post-working-age people for every 100 working-age people by 2033, the number of working-age foreigners in Poland would need to increase by 2.65 million. This would require an annual increase of nearly 270,000 people. To slow the growth of the dependency ratio to 42.5% by 2033, the number of working-age foreigners would need to increase by 1.25 million, or 125,000 annually.
We Need 2.6 Million Foreign Workers in 10 Years.
ZUS calculated how many foreigners would need to settle in Poland to keep the demographic dependency ratio at its current level. The conclusions are not optimistic (ZUS, ZUS)
Is this a lot? In the best year so far, 2022, ZUS registered 188,000 foreigners (the actual influx of working-age people was slightly higher, but not all registered for social insurance). This was the year of Russia’s attack on Ukraine and the resulting refugee wave. In 2023, the number of foreigners insured with ZUS increased by just 65,000.
“Considering the trend change in the number of foreigners in 2023, it’s unlikely that the number of working-age foreigners will increase by 100,000-180,000 annually in the coming years,” the ZUS report’s authors evaluate. “Foreigners coming to Poland can somewhat improve the demographic situation, but they won’t stop the negative trends related to the aging population,” they concluded.
Immigration and Economic Dependency. Is mass immigration the panacea for all problems?
In terms of policy options, lifting labor-force participation among the general population, and education-selective migration if accompanied by high integration, could improve economic dependency. On the other hand, high immigration volumes combined with both low education and integration leads to increasing economic dependency. This shows the high stakes involved with integration outcomes under high migration volumes.
Would Poles would be open to the influx of immigrants needed to stabilise the demographic dependency ratio? This scenario would mean that by 2033, over 3 million foreigners would be working in Poland. Assuming the current employment level remains, nearly one in five workers would be a foreigner.
“The mechanism of filling gaps in the Polish labour market mainly through migration is exhausting. Investments in automation and activating Poles are needed,” noted Andrzej Kubisiak, deputy director of the Polish Economic Institute, on social media. He also emphasised the need to combat xenophobia and myths about the consequences of immigration to Poland.
ZUS itself debunks one such myth. Some right-wing politicians claim that opening up to immigration would overly burden the Polish social benefits system.
ZUS calculated how much would be spent on foreigners’ pensions in various scenarios. Even if the number of foreigners insured with ZUS grew as it did from 2021 to 2023 for the next five years, and then maintained a constant proportion to the total insured, spending on their pensions in 2070 would only amount to 0.3% of Poland’s GDP – with total pension spending at 5.7% of GDP.
For neo-liberal left-wing politicians the economic argument for immigration is predicated on the increase in GDP of the country as a whole. However this is usually at the expense of GDP per capita. The arrival of 2 million immigrants in the UK since 2019 has not positively impacted GDP per capita, which remains 1.5 per cent below its level at the end of 2019. Poland might face a similar fate if it decides to recruit millions of foreign workers without ensuring they possess the qualifications and skills needed to replace the highly skilled workforce that has established Poland as the manufacturing hub of Europe. Importing low skilled workers into low wage jobs may inject more workers on the market but will have a negative impact on GDP per capita. This may result in lower living standards, less infrastructure, and less advanced industries. A less educated workforce can result in lower levels of technological innovation, which can all contribute to lower levels of productivity.
Source of the main body of the article: Money.pl
