Page 5 - IDEA Study 3 2018 Low skilled

Study 3 / 2018

The low-skilled in the Czech Republic1

MARCH 2018
ALENA BIČÁKOVÁ2, KLÁRA KALÍŠKOVÁ3

Summary

 This study provides evidence on the characteristics, labor market conditions, and labor market
outcomes of the low-skilled in the Czech Republic. It considers the most relevant policies to
ensure the long-term inclusion of the low-skilled in the labor market. We use the standard
definition of the low-skilled as those individuals with primary or lower-secondary education.

 The low-skilled in the Czech Republic form less than 7% of working age individuals. While
the share of the low-skilled has been declining over time, there are indications that the trend
may have reversed in recent years, as a rise in early school-leaving has increased the share of
the low-skilled among the youngest cohorts. It is alarming that these new cohorts of low-skilled
early school-leavers have very high inactivity rates.

 While the share of the low-skilled in the Czech working age population is relatively small, they
fare much worse in the labor market than the rest of the population and also worse than the
low-skilled in other EU countries. Over the 2014-2016 period, the employment rate among the
low-skilled was as low as 41.8%, the share of unemployed was 11.4%, and the share of inactive
was as high as 46.8%.

 What policies, then, can help to (re)integrate the inactive low-skilled into the labor market?
Currently, the non-working low-skilled have low incentives to work. Their participation tax
rates are as high as 50%, and thus half of their potential earnings would be lost in taxes paid
or benefits lost if they started working. First, reducing tax rates for the low-skilled may be the
most important tool to stimulate their participation in the labor market. Second, it is crucial
to employ preventive measures against early school-leaving to stop the increasing share of the
low-skilled among the youngest cohorts and avoid further accumulation of the low-skilled

1 This publication has been produced with financial support from the European Commission. Responsibility
for the information and views in this study lies entirely with the authors. The content of this study does not
reflect the official opinion of the European Union institutions. Neither the European Union institutions and
bodies nor any person acting on their behalf may be held responsible for the use of the information contained
herein. This paper is based on data from the Czech Statistical Office (Labour Force Survey 2014-2016 and
Survey of Income and Living Conditions 2016) and the Average Earnings Information System (AEIS)
collected by a private consulting company, Trexima Ltd. The responsibility for all remaining errors and
conclusions drawn from the data lies entirely with the authors.
2 CERGE-EI, a joint workplace of Charles University and the Economics Institute of the Czech Academy of
Sciences, Politických vězňů 7, Prague 1, 111 21, Czech Republic. E-mail: alena.bicakova@cerge-ei.cz.
3 CERGE-EI and the University of Economics, Prague, nám. W. Churchilla 1938/4, 130 67 Praha 3. E-mail:
klara.kaliskova@cerge-ei.cz.

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