Persistent high unemployment in Poland is mainly caused by institutional factors. Actual GDP growth rate and its fluctuations exert much smaller impact. In Poland the effects of such a situation are stronger than in other EU countries. Higher labour supply growth causes the need to modernise the labour market's institutional structure more challenging than in other European countries. The situation is aggravated by the low activity rate which is a more difficult problem than high unemployment itself. Low activity is a cause rather than the effect of high unemployment. A deep institutional reform of the labour market is required to reduce the unemployment rate to one digit level.