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Czech Republic: new analysis on low-skilled people

In 2018 the Institute for Democracy & Economic Analysis, a think tank operating under Centre for Economic Research and Graduate Education - Economics Institute, published a study on the low-skilled (those with only primary or lower secondary education) in the Czech Republic. The authors determine from available data the characteristics, labour market conditions and labour market outcomes of this group. Based on this evidence, the most relevant policies to increase employment among the low-skilled are suggested.

For a long time, the share of low-skilled people was relatively low in the Czech Republic (less than 7% of working age population) and slowly decreasing. In recent years, however, there are signs that this trend may change. The share of the low-skilled increased among the younger cohort due to larger numbers of drop-outs from education. This has been caused by the introduction of the unified maturita exam for all upper secondary four-year study programmes (ISCED 354). For many programmes, the unified maturita test is more demanding than previous school-designed tests, so a larger number of students fail and do not finish their upper secondary education.

Although the share of low-skilled people is below the EU average, the problems associated with this status are much worse than in many other countries. The employment rate of low-skilled people is only about 42 %. They are often long-term unemployed (61% of those who search for a job) and they often accumulate additional socioeconomic drawbacks. If the low-skilled are in employment, this is likely to be precarious work. They struggle to maintain stable long-term jobs and have only low earnings. Employers in private sector are not motivated to hire the low-skilled even if they can receive subsidies from the labour market policy schemes for employing them, which makes the low-skilled frequent participants of the public work programmes. And also, the current taxation system does not motivate the unemployed or inactive low-skilled people to participate in the labour market. They would lose half of their potential earnings in taxes paid or benefit loss if they started working.

From their analysis, the authors conclude that intervention in several directions can be recommended to improve the prospects of the low-skilled in the Czech Republic. Upskilling and motivation seem to be the main effective pathways to reach this goal. Training courses tailored specifically to the needs of low-skilled should be promoted, combining theory with practice. Incentives should be introduced for employers to provide long-term contracts to the low-skilled and invest in their development. Reducing tax rates for the low-skilled would increase their benefits from paid jobs and motivate them to participate in the labour market. Timely prevention of early drop-out from education is also a key option. Policies should specifically take into account the needs of low-skilled women, as they are overrepresented in this disadvantaged group.

Read more:

The low-skilled in the Czech Republic