Page 5 - IDEA Study 3 2018 Low skilled

Study 3 / 2018 The low-skilled in the Czech Republic1 MARCH 2018 ALENA BIČÁKOVÁ2, KLÁRA KALÍŠKOVÁ3 Summary  This study provides evidence on the characteristics, labor market conditions, and labor market outcomes of the low-skilled in the Czech Republic. It considers the most relevant policies to ensure the long-term inclusion of the low-skilled in the labor market. We use the standard definition of the low-skilled as those individuals with primary or lower-secondary education.  The low-skilled in the Czech Republic form less than 7% of working age individuals. While the share of the low-skilled has been declining over time, there are indications that the trend may have reversed in recent years, as a rise in early school-leaving has increased the share of the low-skilled among the youngest cohorts. It is alarming that these new cohorts of low-skilled early school-leavers have very high inactivity rates.  While the share of the low-skilled in the Czech working age population is relatively small, they fare much worse in the labor market than the rest of the population and also worse than the low-skilled in other EU countries. Over the 2014-2016 period, the employment rate among the low-skilled was as low as 41.8%, the share of unemployed was 11.4%, and the share of inactive was as high as 46.8%.  What policies, then, can help to (re)integrate the inactive low-skilled into the labor market? Currently, the non-working low-skilled have low incentives to work. Their participation tax rates are as high as 50%, and thus half of their potential earnings would be lost in taxes paid or benefits lost if they started working. First, reducing tax rates for the low-skilled may be the most important tool to stimulate their participation in the labor market. Second, it is crucial to employ preventive measures against early school-leaving to stop the increasing share of the low-skilled among the youngest cohorts and avoid further accumulation of the low-skilled 1 This publication has been produced with financial support from the European Commission. Responsibility for the information and views in this study lies entirely with the authors. The content of this study does not reflect the official opinion of the European Union institutions. Neither the European Union institutions and bodies nor any person acting on their behalf may be held responsible for the use of the information contained herein. This paper is based on data from the Czech Statistical Office (Labour Force Survey 2014-2016 and Survey of Income and Living Conditions 2016) and the Average Earnings Information System (AEIS) collected by a private consulting company, Trexima Ltd. The responsibility for all remaining errors and conclusions drawn from the data lies entirely with the authors. 2 CERGE-EI, a joint workplace of Charles University and the Economics Institute of the Czech Academy of Sciences, Politických vězňů 7, Prague 1, 111 21, Czech Republic. E-mail: alena.bicakova@cerge-ei.cz. 3 CERGE-EI and the University of Economics, Prague, nám. W. Churchilla 1938/4, 130 67 Praha 3. E-mail: klara.kaliskova@cerge-ei.cz. 3