Evaluating 500+ Program in Poland


The introduction of the controversial 500+ program in Poland has so far resulted in no increase in fertility rate. Noteworthy, 12% of the program budget would be sufficient to eliminate extreme child poverty. Meanwhile, 100,000 women were pushed out of the labor market.

Under the 500+ program introduced in Poland by the Law and Justice party parents can receive a tax-free benefit of PLN 500 (about EUR 120) per month for the second and any consecutive children until they reach the age of 18. Before the European Parliament elections in 2019 the program was extended to cover also all first children.

From the moment of launching the 500+ program until the end of April 2019, the state’s expenditure on this purpose has already exceeded PLN 70 billion.

After the extension of the program by the first child, its annual cost per employee will reach almost PLN 2,500.

A multidisciplinary team of the best experts in demography, the labor market, poverty, and social policy, composed of: Iga Magda, Michał Brzezinski, Agnieszka Chlon-Dominczak, Irena E. Kotowska, Michal Myck, Mateusz Najsztub, and Joanna Tyrowicz prepared the analysis and evaluation of the 500+ program, published in May by the Civil Development Forum.

The declared objectives of the 500+ program were to improve the financial situation of families and increase the fertility rate. The realism of the main declared objective, increasing fertility rate, was questioned from the outset by experts.

There are four main conclusions of the report.

1. The 500+ program did not increase the number of births

The 500+ program has not worked well in relation to its primary objective, i.e. to increase birth rates and improve the demographic situation.

Between 2016 and 2017, there was a slight increase in the number of births, but this number already fell in 2018.

According to the authors of the report, 500+ did not have a significant impact on the decision to have the first child or subsequent children. International experience and research indicate that “fertility cannot be attributed in any way to social benefits”.

The fertility rate is a result of many factors, in particular the assessment of the general financial situation and prospects on the labor market, on which 500+ does not have much influence, as well as the quality of care and education for children, flexible leaves, infertility treatment, and reducing the asymmetry in the burden of domestic duties of women and men.

After three years of the 500+ program’s operation, it is clear that it did not change the unfavorable trends in demography in Poland, including postponing of decisions about having children.

2. 12% of the 500+ budget would be sufficient to reduce extreme child poverty

According to the Central Statistical Office (GUS), the poverty reduction of families with children is much smaller than assumed by the authors of the program.

Only 37% of the money spent under the program goes to poor families, and only slightly more than 12% of the funds allocated by the state to 500+ would be enough to eliminate extreme child poverty.

At present, approximately PLN 1.5 billion from the program goes to the richest families each year, and thanks to the extension of 500+ also to first children, another PLN 5 billion will be transferred to them.

3. 500+ pushed 100,000 women out of the labor market (especially those with low incomes, lower education and from small towns).

4. The high program costs limit the room for maneuver in public finances, induce tax increases and crowd out other expenditures.

In its current form, the 500+ program would cost PLN 22 billion in 2019, and in 2020. After the extension, the costs will increase to PLN 41.2 billion. Therefore, when some new problems arise and the government needs money additional taxes are introduced.

So far, the government has introduced:

  • a tax on financial institutions, i.e. the tax on bank credit (PLN 4.6 billion),

  • an environmental fee on fuel (PLN 1.3 billion),

  • a recycling fee (PLN 1.4 billion),

  • a “solidarity tax” from the highest personal incomes (PLN 1.2 billion).

By 2020 the government is planning to:

  • abolish the cap on the annual pension system contributions (PLN 5.2 billion),

  • liquidate the private pension funds and impose tax on money transferred to the 3rd pillar of the pension system (PLN 3.5 billion),

  • apply social security contributions to all civil law contracts (PLN 2.5 billion),

  • introduce a “business test”, under one name or another, to limit number of self-employed payers of flat tax for companies (PLN 1.2 billion),

  • increase excise duty (PLN 1.1 billion),

  • introduce a digital tax (PLN 0.2 billion),

  • change the rules in special economic zones (PLN 1.1 billion).

Moreover, the policy of freezing personal income tax (PIT) thresholds is to be continued, which in the period 2015-2020 will amount to PLN 6.5 billion. Freezing of salaries in the public sector will result in another PLN 9.2 billion.

It is the 500+ program that is the main cause of the increase in spending on social transfers from 14.3% GDP in 2015 to 15.3% GDP in 2020.

As a result, despite the reduction in expenditures on other objectives, the total expenditures are to increase from 41.7% GDP in 2015 to 42.8% GDP in 2020. This entails an increase in the tax burden in the economy from 33.2% GDP in 2015 to 37.5% GDP in 2020, including taxes such as those mentioned above.