Page 40 - IDEA Study 3 2018 Low skilled

child bonus is largely misused. Consequently, there is little political will to strengthen this measure. Another approach to avoid high labor taxation in the Czech Republic is to work as a self- employed person, as their tax rates are much lower (Dušek, Kalíšková, and Münich 2013). This strategy is mostly used by women with children, as it also allows them to have more flexibility in their work life (Hašková et al., 2015). However, our statistics suggests that the low-skilled are rarely able to start their own business. Therefore, if our goal is to help the low-skilled to enter the labor market (under lower taxation) as self-employed workers, we need to provide them with further assistance and know-how regarding how to become an entrepreneur. The best solution to improving the work incentives of the low-skilled thus seems to be decreasing the social security contribution rates, which could be further tailored to specific groups of disadvantaged individuals. Decreasing the participation tax rates then needs to be complemented with other specific measures tailored to different groups of the low-skilled and aimed at facilitating their entry to the labor market. First, the majority of the inactive low-skilled are either pensioners or individuals with a disability. Therefore, it may be difficult to activate them and increase their labor market participation. The high share of the low-skilled who are pensioners reflects the evolution of the skill structure of the population, as there are more low-skilled among the older cohorts, but it also reveals the high use of early retirement in this group. While there is no reason to reintegrate regular pensioners into the labor market, policies reducing the incentives for early retirement among the low-skilled could help reduce the share of the inactive low-skilled. Further, the share of people with a disability who are employed is much higher in the other skill groups than among the low- skilled. Thus, there may be some room for improvement also in that case, with policies designed to attract at least some of the low-skilled disabled (who are not seriously constrained) to the labor market Second, while the low-skilled are primarily concentrated among the older cohorts, one alarming finding of this study is the recently increasing number of early school-leavers who increase the share of the low-skilled among the youngest cohorts, and who also tend to have high inactivity rates. Here, we see a major role in preventive measures that keep individuals at school, such as relevant and engaging curriculum, flexible educational pathways, high-quality and attractive vocational education, etc. (for details on policy recommendations, see European Commission, 2013). 38