12 Specific poverty rates are also higher in households affected by unemployment. In Poland, Bulgaria and Hungary, the poverty rates for the households where at least one member is unemployed, are between 2% and 4 times higher than the country average. In Poland, for which we have very detailed data for 1993, one can observe the increase in poverty incidence as unemployment becomes more severe: households with one unemployed member who is not the head of the household had poverty rates twice the average; for households with a long-term unemployed, the incidence is 2.6 times higher than the average; for households with two or more unemployed members, it is 3.3 times higher, and for households headed by an unemployed person 4 times.“ We can expect that even if unemployment no longer rises, the share of the long-term unemployed will, and the linkage between unemployment and poverty would grow stronger.

But, while unemployment is an important cause of poverty, it is not the most important. Most of the poor—maybe as many as %—are the working poor. The poverty of these families is due to low-paying jobs held by their active members. And, indeed, it would be surprising if the working poor (including their children) were not the main category of the poor. Since drops in real GDP which ranged between 10 and 50 percent (excluding the countries at wars; see Table 2) did not lead to equivalent decreases in employment, output-per-person and real wages for many of those who remained employed plummeted.” By how much has poverty increased? Measures of poverty are notoriously unreliable and difficult to interpret. They depend not only on how frank people are in reporting their incomes (or expenditures), but also how good the statistical offices are in collecting the data (how representative are the surveys) and what is the poverty line used. Yet, one could makea fairly strong proposition that for any real poverty line, we are bound to find an increase in poverty in all the transition economies.” The recorded increase is, probably, greater than the actual increase. This is because before the transition, the estimates of the poverty rates were biased downwards, while today, they are biased upwards. Downward bias before the transition was because the surveys excluded people from the groups that were likely to be poor (institutionalized population, vagrants, the few unemployed), or underrepresented the groups with higher specific poverty rates (pensioners, farmers, large households, students). Income data, on the other hand, were relatively reliable. Today, the situation is reversed. The surveys are improving, bringing in some of the previously

> *Hidden unemployment is the most obvious effect of the mismatch between (larger) output and (smaller) employment declines. Many jobs are low-paying because they are redundant. In the FSU countries, in particular, both the government, in order to stem further increases in unemployment, and enterprises, in order to let workers continue enjoying some non-cash benefits associated with jobs, prefer to let redundant workers stay on the payroll even if they do no work and are paid irregularly.

*°This excludes “unreasonably” low or high poverty lines for which poverty may be unchanged at 0 or close to 100 percent.