Search

The current recession in the Czech Republic is driven by aggregate demand, unsustainable growth of wages, weak enforcement of the legal system, non-operational bankruptcy law, and poor corporate governance. The wage dispersion has been growing continuously, and wage setting has become increasingly more responsive to market forces. Education has become more highly valued on the labor market. Income inequality has increased considerably. The current recession should cause a substantial increase in the low-income share of the population and a heavier reliance on social transfer. The unemployment rate has been rising steadily for almost 3 years, is currently 8 percent, and should surpass 10 percent by the end of 1999. The share of the population with secondary-level vocational education is extraordinarily high and highly stratified; workers have few of the flexible skills required for success in the changing labor market. Links between labor market needs and the vocational system are weak, as is involvement of social partners in vocational education development. Social policies, such as the high level of the state-guaranteed minimum income defining eligibility for social support benefits, act as work disincentives. (Appendixes include: tables; sources of the economic recession; schemes of labor market administration; and map of district unemployment rates. Contains 26 references.) (YLB)