Even before the coronavirus pandemic and the current sharp price increases, a large part of Czech society was not able to earn sufficient remuneration for their work to enable workers and their households a decent material existence.
People who were not earning a minimum decent wage in previous years, or whose income was only just above it, are now extremely vulnerable to the rapid rise in energy prices and general inflation, not least because they have not been able to make enough savings from their income to meet emergencies.
Therefore, both because of current developments and for the longer-term resilience of society in the face of such crises, it is crucial to look for concrete ways to deliberately keep raising wages, salaries, and other types of income so that, at least in the medium to long term, they approach what can be considered a decent material minimum.
If we fail to do this, there is a risk of negative consequences both at the individual level and, ultimately, at the societal level. Social resilience and political stability are intrinsically linked to the decent provision of its members and the associated sense of basic security.
How to proceed?
The principle of decent working conditions can be applied by the state and local governments whenever they outsource services or grant institutional or project support. Public procurement already has a legal condition of social responsibility, and the commitment to pay the decent minimum wage can be a concretisation of this requirement.
Why is it important?
The selection of service providers on the basis of the lowest price offered, or the pressure for low wages in grant competitions and subsidies, often creates additional costs for the state. Especially materially, as it eventually has to make up for the low income itself through the benefit systems, but it is also a matter of eroding trust in the state as a guarantor of justice. Moreover, this principle often translates into a lower quality of work done, with corresponding consequent extra costs.
It is particularly important to provide for decent wages in programmes aimed at green transition and for structurally disadvantaged regions and groups. A positive side effect is the upward pressure on wages even where public funds are not involved, otherwise poverty and social inequalities are replicated.
Relevant legislation and documents for review:
The State and its agencies may take the current level of the minimum decent wage into account when establishing pay scales. In particular, it is unacceptable that the minimum decent wage should not be paid to employees with longer years of service.
An example of positive practice is the increase of the minimum wage in the US public sector to $15 per hour as of January 2022, which more than doubled the current minimum guaranteed wage in order to guarantee decent pay.
Why is it important?
Public employers should set an example and provide their employees with a salary on which they can live decently. Wage growth in the public sector can then have a positive impact on wage growth in the private sector.
Specific regulations for review:
In setting minimum remuneration standards, it is necessary to take into account the costs that can be covered by the wage. A legal minimum wage or a non-forfeitable amount for people under asset seizure should provide at least for the basic necessities.
For this purpose, it must first grow significantly before being periodically indexed according to a set rule. At the same time, however, the adoption of an indexation mechanism must not serve to put future incremental increases out of the question.
Guaranteed wages linked to the minimum wage should reach a decent minimum at a faster pace, especially for highly skilled workers or workers key to the functioning of the society (essential workers).
There is currently an ongoing debate at EU level on a directive to set a minimum wage in all member states. Within the EU, minimum wages should guarantee a comparable standard of living and thus effectively combat income inequalities between Member States.
If the minimum wage or the non-forfeitable minimum does not reach a decent minimum, it fails to fulfil its protective function, resulting in so-called “working poverty”, leading, among other things, to indebtedness or the topping up of low wages with benefits. A low non-forfeitable minimum after deductions resulting from asset seizure pushes workers out of the legal labour market, because they simply have to provide additional funds for necessary expenses.
It has been clearly established that growth in the lowest wages does not lead to an increase in unemployment.
The introduction of a European minimum wage offers an opportunity to improve the remuneration for work across the EU. However, it also risks perpetuating wage differentials between Member States if it is linked only to national wage levels and does not respect the living wage principle on which the minimum decent wage is based.
Relevant legislation and documents:
Lowering taxes and contributions toward health insurance and social security would leave the lower-income class with more of the resources they need to live in dignity. But this must necessarily be coupled with other steps to ensure that the cuts are compensated so that there is sufficient funding for a stable or even expanding range of free or affordable public services. These also contribute to a decent life for people on low wages.
There should be a review of tax credits, with the aim of reconsidering those that primarily benefit high-income households (and often not those with the lowest incomes), and higher tax burdens on the high-income classes, including property or capital taxes.
The determination of the tax progression rate can be based on the calculation of the minimum decent wage as a threshold for non-taxable or low-taxable income.
The tax system can play a key role in ensuring decent wages, but also in ensuring overall social justice. So far, however, it is rather out of focus in this respect, although in its current set-up it tends to make the situation for low-income earners even worse.
The state can either guarantee the existing free or price-regulated public services (e.g., in the areas of health, transport, or culture) or, better still, further expand them, thus contributing to a decent life independent of income from work. Particularly in the area of housing, it is extremely urgent to accept regulation and to start acting as a market actor.
The lowest income groups are also the ones most affected by the taxation of consumption through VAT on basic necessities, as they directly consume the largest share of their income. Reducing the rate on the most essential goods and services is thus another way of contributing to a materially decent life, especially in times of high inflation.
The decent provision of all basic needs does not necessarily take place only through rapid wage increases. Wage growth corresponding to the current rise in costs (housing, energy) is not realistic for many employers. The availability of public services can compensate more flexibly and satisfactorily. Solutions at the level of the individual, who tries to make the best of the free market, may even counterproductively drive up prices, as is currently happening in the housing market, for example.
In many cases, the expansion of public services could also have other positive effects (e.g., replacing individual car transport with public transport also contributes to combating the climate crisis and improves the quality of life in cities).
The benefits which are intended to play the role of wage replacement in the benefit system must at least cover basic expenses, better still a decent material minimum, and ideally allow people to maintain the existing standard of living.
A number of benefits play the role of wage replacement in the social security system – whether in situations of sickness, temporary loss of income, full-time childcare, etc. The insecurity caused by income dropping out in normal life situations such as illness has negative effects on individuals and their households, and is also seen as one of the causes of political radicalisation.
This is particularly relevant in the context of increasing pressure for flexibility in the labour market and the expected impact of technological and other changes, where short- to medium-term unemployment and retraining will become a normal part of a career. There is evidence that sufficient support also allows for better re-entry into the labour market by allowing people to wait for an offer that matches their qualifications and experience and offers an appropriate wage grade.
Specific tools to review:
How to proceed?
In order to prevent downward pressure on wages and ultimately to maintain social peace, it will be crucial to advocate for decent remuneration for newcomers who join the labour market.
People in need are often willing to accept poorer working conditions, work for lower wages or longer hours. They are also usually in a weaker position to bargain for respect for fundamental rights. If they are not protected, this will not only have negative effects on the foreign workers themselves (poverty, spatial segregation, etc.), but is also highly likely to lead to increased tensions in society. The experience that new arrivals lower the standards of what is normal for all people in similar positions leads to a rise in anti-immigration sentiment.
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