Abstract
Research background: The share of temporary workers in Poland is one of the largest of any EU country, which may affect the output unemployment relationship. The Polish case seems to be a natural experiment. Contrary to many advanced European countries, the spread of temporary contracts in Poland was not caused by labor market reform but instead resulted mainly from spontaneous processes.
 Purpose of the article: This paper investigates the effect of the widespread use of temporary contracts on the relationship between output and unemployment in Poland.
 Methods: The analysis is based on the ?dynamic? version of Okun?s law and uses OLS regression, OLS split-sample regression and OLS rolling regression. The sample period is 1996?2018.
 Findings & Value added: The study found that unemployment?s sensitivity to output increased over time and was related to the greater use of temporary contracts, particularly among young people and women. Initially, at the turn of the 21st century, the expansion of temporary jobs changed the employment composition and had an insignificant effect on unemployment since firms mainly replaced permanent contracts with temporary contracts. Then, starting around 2006, temporary contracts began affecting unemployment levels and unemployment?s responsiveness to output. During this period, firms used temporary contracts as the main workforce adjustment device during the business cycle.
Highlights
Poland experienced high unemployment rates at the turn of the 21st century, but, by 2018, the unemployment rate had fallen to 4%
Where ∆u is the change in the unemployment rate in percentage points, ∆y is the rate of real gross domestic product (GDP) growth in per cents, the subscript t is the index of the period and ε is an error term
The analysis begins with a presentation of the time-variability of the changes in unemployment rates and real GDP growth
Summary
Poland experienced high unemployment rates (about 20%) at the turn of the 21st century, but, by 2018, the unemployment rate had fallen to 4%. Journal of Economics and Economic Policy, 15(4), 735–760 same time, the number of temporary employees in Polish dependent employment rose significantly, from 8% in 2001 to 25–26% in 2005. This number continued to grow after 2005 with temporary employees accounting for 25–28% of employment in the following years (see Figure 1). Temporary employees are ‘cheaper’ than permanent employees due to a gap in employment protections (e.g. a short notice period and no right to severance payment). These lower labour costs may encourage employers to create temporary jobs and to replace permanent workers with temporary workers. The gap in protection may reduce the cost of employment adjustment to business cycles and increase unemployment volatility
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