Dissertation_Paula Aleksandrowicz_12 ... - Jacobs University

other workers, with the exception of commissioned work. The law of 1988 allowed persons
who retired at the standard age of 60/65 to work without pension cuts. In 1992, early
pensioners gained the same right, which contributed to the early exit trend (Urbaniak 1998:
196ff). That failure was repaired only with the 1999 pension reform. Nowadays, earnings
thresholds are in place, and pensions of those who continue to work at their former
employer are discontinued.
The main outcome of this chapter is that the Polish pension system provided broad
incentives to early exit before the 1999 reform. Drawing an old-age pension at an earlier age
did not substantially reduce the old-age pension, as each additional year of work was
credited only by 1.3 per cent.
The origins of the early exit trend in Poland can be traced back to many factors. Firstly,
the fact that only employers paid social security contributions in the old system had
generated „constant pressure [by employees] to raise benefits and to enhance the
possibilities for early retirement” (Księżopolski 1997. 342). Secondly, the differentiated
retirement age for workers of the first and second category is an institutional legacy from
the socialist past, and even from the times of the annexation. It has created lock-in effects
and is difficult to revert due to the high coverage of persons entitled to those privileges.
Thirdly, the opportunity to work without limitations while receiving an early pension
(valid 1992-1999) supported the drift towards retirement even if the employers would have
kept them as regular employees (Urbaniak 1998: 201). Especially women had strong
incentives to retire early and immediately take up an additional job (ibid: 196). This
opportunity was also frequently used by disability pensioners due to the low level of
disability pensions (Golinowska/Pietka 2003: 329). Employers had (and still have) strong
incentives to hire disabled workers and to create ´sheltered workshops´ with more than 50
per cent of those workers as such firms are partially exempted from tax and receive financial
support (ibid: 330).
Fourthly, the system has invited early exit after the transition due to the misuse of the
pension system for solving labour market problems. The employees played an active role in
that trend – early retirement pensions for workers from closed companies moved employees
to stop working even if they would not have been laid off (Golinowska/Pietka 2003: 338).
Despite of earnings disregards, the “escape into disability” (Golinowska 2004: 153) is
still favourable due to the old pension formula which may generate a higher income than the
old-age pension, especially if combined with additional wages. Earnings disregards will thus
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