The minimum wage will be increased in the Czech Republic

Posted by bara 27/11/2014 at 12h28

The Czech government adopted a proposal for a minimum wage increase. It comes into effect on 1 January 2015. The minimum wage will increase from the current 8, 500 CZK per month to 9, 200 CZK per month or from the current 50, 60 CZK per hour to 55 CZK per hour.

The Regulation applies to the valorisation of wages to employees whose wages are not established in in collective agreements and workers in public services. Increasing the minimum wage does not apply to employees in receipt of disability pensions; for these people remains the minimum wage CZK 8,000 per month or 48.10 CZK per hour. This measure is important for stabilization of this specific group in the labour market.

The minimum wage was increased to the current 8,500 crowns a month in August 2013. Between 2007 and 2012 the minimum wage was not increased which means that the purchasing power of workers earning the minimum wage is low. The stagnation of the minimum wage contributed to the fact that the amount of the net minimum wage is currently not sufficient to cover all personal needs (for example housing costs). Czech Republic reflects developments in other developed countries. Minimum wage should achieve in the future to 40 percent of the average wage (currently around 10 000 CZK.) However, economists doubt the benefits of higher minimum wages.

Hand with money

Economic evaluation of policies guaranteed minimum wage

A minimum wage worker receives three percent, which means 100 to 120 thousand people. Increasing the minimum wage is important for all workers, as a minimum wage must increase tariffs for each occupational group. Increasing the minimum wage can be bad for businesses. The rapid growth of the minimum wage harms especially companies with a high share labour costs and it but also affect economically less developed regions. This measure means that higher minimum wages cause deformation in the higher income groups. The impact of increased minimum wage will feel every economic entity. Regulation on the minimum wage in the business sector also reduces the competitiveness of domestic companies. It also can affect the development of unemployment. An expansion of the shadow economy is another negative aspect of raising minimal wage.

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