With almost 50 per cent of the working age population not working, improving labour market performance represents an essential and daunting challenge for Poland. While some of today’s joblessness is cyclical in nature, most of it appears to be structural. This paper argues that to increase employment levels policy will need to focus on reducing significantly the inactivity traps inherent in the Polish personal transfer system, while improving the efficiency and targeting of social transfers to ensure resources flow to those truly in need. Simultaneously, efforts must be extended to increase firms' propensity to hire the outof-work, by lowering the costs of low-skill labour, reducing associated administrative and regulatory costs and in the longer term by providing graduates with more relevant skills. This paper outlines reforms in each of these areas which, if implemented, would serve to reverse the recent decline in employment and improve the fairness of income ...