Enlargement brings rising incomes to Poland

The European Union will admit 10 new ex-communist and Mediterranean states in 2004. The following feature is part of a series Reuters is running to highlight some of the challenges and opportunities presented by EU enlargement, which should be agreed finally at the Union's summit of leaders in Copenhagen next month.

Shops in the frontier town of Slubice show prices in zlotys and euros to lure in both local clients and crowds of Germans who cross the river Oder in search of bargains, in a precursor of the borderless commerce EU enlargement is set to stimulate.

Unlike Polish towns that border Ukraine or Belarus in the east, the western town of Slubice has a disproportionate number of hairdressers and dentists, rather than the food stalls and foreign exchange booths of a typical frontier outpost.

Slubice has gone where much of central Europe could head after the region enters the EU in 2004, developing a booming customer-driven service economy relying on skills and initiative rather than the commands of the state as in the communist past.

Joining the EU will hasten the shift in Poland and seven other central European countries to job creation in the services sector, the key employer in the 15-nation bloc, and away from agriculture and heavy industry.

Health care, real-estate broking, construction and hi-tech services will be the first winners in the Czech Republic, Poland, Hungary, Slovakia, Slovenia, Estonia, Latvia, Lithuania when they join along with Cyprus and Malta.

EU leaders are set to give the nod to enlargement at their December summit in Copenhagen, although it is not yet clear if new members will join in January or July 2004.

The effects of enlargement are not one-way, with changes in the job market unlikely to make a quick dent in central Europe's unemployment figures, at their highest at some 17 per cent in Poland and Slovakia versus the EU average of eight per cent.

The hope is enlargement will also bring rising incomes, which should mean higher demand for financial, leisure and health services to offset the loss in price advantage.

Trained civil servants will also be in demand to handle the estimated e23 billion in EU aid funds set to flow into largely undeveloped regions.

"Enlargement means thousands of jobs to implement and service EU-related administration and funding," said Maciej Duszczyk, labour market analyst at Poland's European Integration Committee (UKIE).

Polish negotiators estimate that 18,000 EU-related jobs will be created locally with another 1,800 open for Poles in various EU institutions, mostly for translators as the number of the bloc's official languages will grow to 20 from the current 11.

As European populations age, eastern nursing staff will be sought by western employers able to offer much higher wages to underpaid nurses in Poland, Slovakia and the Czech Republic.

"Young and mobile nurses are bound to go and who can blame them if their monthly pay check is 800 zlotys ($200) while they can get e1,500 to e1,800 in the Netherlands or Ireland?" says Bozena Banachowicz, the head of Poland's nurses union.

But analysts say weak foreign language knowledge and incompatible medical training will limit migration by nurses, and EU expansion is broadly seen as unlikely to send labour flooding across borders in the search of higher wages.

Surveys show most Czechs, Poles and Hungarians would prefer to seek employment at home. But Germany and Austria have nonetheless won bans on the free movement of labour from new member states for up to seven years to ease domestic fears.

Enlargement will expand the EU by a fifth to above 450 million people, adding 75 million consumers.

The new states also bring high unemployment, low productivity and over-dependence on agriculture and industry, despite much economic reform since the revolutions of 1989.

Among the 10 new members Poland is key as it represents more than a half of the working-age population of the new members.

It faces the most daunting changes since 27 per cent of its workforce is still linked to the farm sector, a far cry from the Czech Republic which has an EU-like four per cent rate.

Poland, whose farmers produce just three per cent of gross domestic product, wants to follow the lead of Spain, which since its 1986 EU entry has seen its farm-based workforce drop to less than seven per cent without a fall in agricultural output.

"There is no question that enlargement will demand significant changes in rural employment, hopefully allowing a switch from that disproportionably large and inefficient sector to services," UKIE's Duszczyk said.

But opinion polls show farmers resistant to change and wary of the EU, with many predicting social turmoil in the Polish countryside, despite an EU promise of aid and subsidies.

A large number of the region's labour-intensive jobs in heavy industry will also have to go as Brussels forces an end to the state subsidies that keep mines and steel plants open.

"Just as in some other candidate countries, Poland's industry is simply too labour-intensive, and some of those jobs to be scrapped will be replaced by new jobs in services," said Miroslaw Marek, head of the Polish Entrepreneurship Agency.

Hungary and the Czech Republic have already shifted towards more capital-intensive IT and car industries, helped by huge foreign investments attracted by their cheap skilled labour.

Enlargement will also see the gradual dismantling of the barriers between member states, although the new countries will not join the Schengen free entry system immediately.

But officials say that the change, which threatens the work of thousands of border officials, is a textbook example of the labour relocation EU enlargement will stimulate rather than the straightforward job elimination that it first appears to be.

Poland's 15,000-strong border guard force will have to grow by 3,000 by 2006, despite cuts in staff at the German frontier, to police what will become the EU's eastern front.

In the Czech Republic, which will be surrounded by EU states, many of the current 9,000 customs officers will be dispatched to other duties, such as excise tax collection, said Jiri Bartak, spokesman for the Czech customs authorities.