Based on empirical evidence, this report assesses changes in social welfare and policy in Poland during the economic transition. The report reviews changes in three areas of social welfare: state provision of cash benefits and social services (Chapter 1); changes in the labor market (Chapter 2); and income distribution (Chapter 3). Chapter 1 addresses the question of whether the transition is associated with the withering away of the welfare state built under the communist regime, as some observers claim. Contrary to prior expectations, social expenditures as a share of Gross Domestic Products have grown during the transition. In the wake of economic liberalization, employment and wages began to be determined by the interplay of supply and demand. This had two key welfare consequences: the emergence of unemployment and the widening of earnings differentials. Chapter 2 examines these changes in employment prospects and in the wage structure. Specifically it concentrates on the labor market prospects of different worker groups. The transition brought about a significant increase in the premium on education. Highly skilled workers have a strong incentive to seek private sector jobs. Chapter 3 analyzes distributional consequences of the transition and tests the validity of the claims that income inequalities have polarized the Polish society. These fears are not supported by the evidence since Poland remains relatively egalitarian, with a large middle class.