Agreeing to low-paying employment at the level of the minimum wage can, in some cases, lead to less income for a family than if its members were to remain unemployed and draw welfare. Many people have little financial motivation to accept such employment and low wages, including the minimum wage, play a significant role.
Those are the findings of a detailed study called "When Work Pays Off" ("Kdy se práce vyplatí") released yesterday by the Czech Government Agency for Social Inclusion. "The results of this study make it possible for us to view the issue of unemployment and so-called ‘welfare dependency’, which is often mentioned by the public during election campaigns, a bit differently. The study shows that in many cases, people for whom it is complicated to find well-paid work risk a decline in the real income of their entire family if they accept low-paid jobs. Accepting what is often insecure employment could pose a risk to them in the long term," says Agency director Martin Šimáček.
The study presents five models of households with various numbers of adults and children and describes how the incomes of those households would change after accepting salaries ranging from CZK 8 500 per month (the minimum wage) to CZK 14 500 per month. For example, if a single adult living in a rental apartment accepts a minimum wage job, and if the costs associated with that employment (commuting, meals and work clothing) amount to CZK 2 000 per month, then his monthly income would be reduced by CZK 115 per month compared to the income he would receive as an unemployed person.
A household with two adults and two children where both adults work minimum wage jobs experiences a reduction in real income compared to one adult working and one adult receiving unemployment income. If the monthly costs of the employment and of childcare (babysitting or preschool costs) amount to CZK 3 000 per month, then the family’s monthly income is CZK 731 less when both parents work minimum wage jobs compared to one or both parents receiving welfare.
When accepting better paid work, household incomes rise in many cases, but there is often not much of a difference in income between accepting low-wage employment and drawing welfare. "It is interesting, for example, to follow how a three-member household with one child remains in a situation of material deprivation even when their gross wages are as much as CZK 18 000 per month – that is, even when both parents work minimum-wage jobs," says Alena Zieglerová, the manager of the Agency’s department of experts who has long been involved in the area of employment policy.
"This is not so much the result of a generous welfare system as it is a result of the fact that even full-time employment is not enough to cover a household’s basic expenditures – the household incomes of employed persons often are below the level of absolute poverty. The low level of the minimum wage in the Czech Republic plays a role here, as it is one of the lowest minimum wages in any OECD country," research author Lucie Trlifajová of the Multicultural Center Prague says.
The study also describes the influence of other factors that might affect one’s motivation to accept employment. These are, for example, the opportunity to take advantage of illegal employment or the existence of debts that would mean any legal wages would be subjected to garnishing.
"In Austria, for example, one component of their active employment policy is compensation for the initial costs incurred by people transitioning from unemployment to employment. The Labor Office covers the costs of their commute, of preschool tuition for children, and of the purchase of essential clothing," says Zieglerová.
The study is the first part of an extensive examination of the financial advantages of employment in the Czech Republic. It is being produced for the Agency by the Multicultural Center association and SPOT (the Center for Social Questions).
The entire study and an excerpt from it are available on the Agency’s website (in Czech only). The findings are being made available for the needs of Agency staffers, experts, and the general public.
