Page 31 - IDEA Study 3 2018 Low skilled

Figure 4. Regional Variation in Wages and Employment Rates of the Low-skilled emplr = .23322 + 1.2e-05 med_2016 R2 = 10.5% Karlovarsky Plzensky Pardubicky emplr = .27675 + 1.3e-05 p25_2016 R2 = 7.7% Karlovarsky Plzensky Pardubicky Praha Praha Zlinsky Vysocina Jihocesky Jihomoravsky Kralovehradecky Liberecky Stredocesky Zlinsky Jihocesky Vysocina Liberecky Jihomoravsky Kralovehradecky Stredocesky Olomoucky Ustecky Moravskoslezsky Olomoucky Ustecky Moravskoslezsky 16000 17000 18000 19000 20000 21000 median wage low-skilled n = 14 RMSE = .0586781 11000 12000 13000 14000 15000 16000 25th percentile wage low-skilled n = 14 RMSE = .0595656 Source: AEIS data and LFS data 2014-2016, own calculation. Incentives matter: The low-skilled are more likely to be inactive in regions with low wages. The relationship illustrated in Figure 4 is partly driven by the regional variation in the overall economic situation across regions. However, it is also related to the regional variation in the work incentives of the low-skilled given by the region-specific wage levels relative to the nation-wide levels of social transfers and benefits received by the non- employed. The importance of the work incentives given by the wage level is also documented by a negative relationship between the inactivity rate and the median wage (left panel of Figure 5). There is also a weak negative relationship between the unemployment rate and the median wage (right panel of Figure 5). However, except for the three regions withvery high unemployment rates (Moravskoslezský, Ústecký and Karlovarský), the unemployment rate among the low-skilled tends to be higher in regions where the low- skilled are more costly (where they have a higher median wage, see right panel of Figure 29 .35 .4 .45 .5 .55 .6 employment rate of low-skilled .35 .4 .45 .5 .55 .6