We examine the consequences of changes in work incentives in Poland between 2005 and 2011 resulting from a complex tax and benefit reform package and substantial real wage growth. While marginal and participation tax rates (PTRs) in the majority of analysed cases fall as a result of the introduced reforms, the conclusions from looking at replacement rates (RRs) for the population eligible for means tested benefits are generally different. These suggest that despite significant tax giveaways incentives on the labour market weakened for families with children and for those eligible to safety net benefits. Yet despite these negative policy implications, we show that work incentives improved substantially over the period due to significant real wage growth. When analysing the effect of the reforms on financial incentives to work, we often find conflicting conclusions when using the PTRs and RRs to reflect financial attractiveness of employment. This is not necessarily surprising, but serves as a note of caution on the use of each of them independently.

The poverty rates based on the OECD scales are frequently used in public debate. In this scale, large families are usually identified as those most in need of financial support. Poland is an interesting case for applying an alternative, subjective approach to calculating equivalent scales, as Poland has a large mean size for households, and is dependent on means-testing in social policymaking. The overall poverty rates for the two approaches are not distinctly different but they lead to significantly different distributions of poverty, as different types of households are considered in line with the result in Bishop et al. (2014) for the eurozone countries. The subjective approach suggests that one-person households, not large families, should be considered most at risk of material poverty. Futhermore, the relative positions of households in the income distributions also differ considerably. As a consequence, the current shape of social policy in Poland may need to be reconsidered in order to distribute public transfers more accurately.