Selected issues of the minimum wage in the Czech Republic

Abstract

The minimum wage is one of the measures of economic policy, which raises contradictory
\nreactions. The Czech Republic is one of twenty EU Member States that have implemented
\na
\nstatutory minimum wage. Since its introduction in 1991, the gross minimum wage was increased
\nsixteen times by the government. In addition to increases in the gross minimum wage, the
\npurchasing power of the minimum wage is affected by the development of price levels and also by
\nchanges in tax and social security and health insurance. In the Czech Republic three periods in the
\ndevelopment of the minimum wage can be distinguished. In the first years after its introduction, the
\ngross minimum wage did not increase significantly and its real value declined. The period
\n1999–2006 is a period of rapid growth in both the nominal and the real minimum wage. In the
\nperiod 2007–2012, the nominal wage was constant and its real value gradually decreased. These
\nthree phases correspond to the political orientation of Czech governments. Leftist governments
\nraised minimum wages faster than right-wing governments. The article also provides an analysis
\nof the motivational function of the minimum wage. It compares the net minimum wage with the
\nliving minimum. It appears that the motivational function of the minimum wage has been reducing
\nin recent years. This is true especially for persons with dependent children. The last part of the
\narticle includes an analysis of the relationship between the increase in the minimum wage and the
\nunemployment rate in the Czech Republic. In addition to total unemployment, the impact of the
\nminimum wage on unemployment of young people and people with low levels of education is
\nanalyzed. It shows that there is no clear relationship between the minimum wage and the
\nunemployment rates in the Czech Republic.