Distributional Effects of Evolving Spending and Tax Policies in Post-Socialist Poland

Poland’s socialist economic system, which collapsed in 1989 after a decade of gradual disintegration, was highly egalitarian. Wages and other incomes in the public sector, the main employer, were largely set administratively—with the explicit aim of assuring a ‘fair’ distribution of income and consumption. Incomes in the private sector were also regulated, either through direct taxation (often quite discretionary) or via administrative controls of prices of that sector’s products and of its production inputs supplied by the public sector. Within that system private farming, accounting for about one fourth of total employment, had a privileged position, with the average per capita income consistently higher than in the public sector. The comprehensive incomes policy stipulating low levels of inequality in personal incomes and ‘wealth’ was complemented by a generous public pension system. All kinds of education were free, as were the services of the public health system. With full employment (endemic and acute shortages of labor), the system did not generate extensive areas of poverty, malnutrition or homelessness.