How is inflation impoverishing Poles?

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Report’s main findings

  • The year 2023 marks two years since average price growth in the Polish economy began to accelerate significantly. The consumer price index has increased cumulatively by about 27 percent since the end of 2020.
  • For the first time in 30 years – despite GDP growth – real wages are falling. According to the CSO (Central Statistical Office), real wages in 2022 fell by more than 2 percent, and estimates suggest that total real household incomes of salaried workers could fall by 5-11 percent between 2021 and 2022 (depending on the type of work performed). This is the result of pro-inflationary policies implemented by the government and the central bank, which had dire consequences for Polish society during the pandemic.
  • The largest declines in income have affected salaried workers, especially in non-worker positions. Those in worker positions have lost more than 5 percent of their income in real terms over the past two years, while those in non-worker positions have lost as much as 11 percent of their income.
  • Compared to workers, pensioners have faced a relatively smaller (about 4 percent) decline in real income over the past two years. This, in turn, is probably a result of their political power – they are the primary group of interests usually taken care of by governments that want to win the next election. Therefore, in addition to the usual indexation, they could again count on the 13th and 14th pensions, as well as favorable income tax changes.
  • The only group that was able to experience minimal growth in real income (less than 2 percent) over the past two years was entrepreneurs. In part, this is the result of underestimating depreciation – it costs more today to replace equipment with new ones than at the time the currently used machines were purchased. This situation may change drastically this year, when we are likely to face an economic slowdown that will strike entrepreneurs’ profits first.
  • Inflation has affected Poles’ wallets with similar severity regardless of their shopping habits. The prices of typical baskets of goods of all social groups increased by a very similar degree. This has happened despite the fact that the typical baskets of goods purchased by different households vary, and inflation has not uniformly affected all types of goods. First rising fuel prices put more strain on the incomes of richer people, and then rising food prices put more strain on the incomes of poorer people.
  • The government’s policies to deal with the effects of inflation must be evaluated negatively because: 1) it often conflicted with other ongoing policies (e.g., subsidies for fossil fuel consumption versus energy transition policies), 2) it suppressed price signals, thereby undermining the efficiency of the economy, and 3) it often went to wealthy individuals who did not need support.
  • A more sensible policy would instead involve structuring the social policy system so that its resources do not go to the wealthy. Some of the money saved this way could be used to support the poorest people, mitigating the effects of inflation for them.
  • Inflation should never be the goal of economic policy. This is because it is difficult to control – it destroys the incomes of all social groups and is a poor means of implementing social policy tasks. Patching up its effects causes more problems than inflation alone can supposedly overcome.



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