Why is it important?

Inadequate financial resources may cause people to:

fall into a cycle of debt as a consequence of little or no savings;. According to research conducted by Median (2018), assets seizures by debt collectors is often the result of people taking out loans for everyday items or to cover their rent or phones;
work in their free time, in order to have enough money (e.g., according to OECD, the number of working hours in the Czech Republic is significantly above the EU average). This often has a negative effect on health and family life;
often have health problems. Research points to the negative effects of a long-term uncertain economic situation, notably in term of mental health or cognitive abilities;
get trapped in unequal or dependent relationships. This is especially true for women who are more likely to work in lower-ranking positions. This specifically affects women with a history of domestic violence;
often make purchases based on price rather than quality. This can also mean that organic or local products are unattainable for them (which otherwise need not necessarily be purchased only by those with higher wages);
not be able to manage quickly rising housing prices. The increase in rental prices mainly affects households with lower incomes, as they often rent housing;
have poorer access to health care. Mainly this refers to paid procedures, such as dental care, psychological services, supportive and preventive medicine, and for the poorest also even copays for medicine, etc.;
have fewer opportunities for educating their children. Results from PISA illustrate a strong correlation between the socio-economic standing of parents and their child’s (lower) achievements in school. The negative effects on a child’s education are extremely exacerbated by housing instability and their parents’ asset seizures;
have limited opportunities to engage socially, whether due to a lack of finances (i.e., lack of money for free-time and cultural activities) or existential worries causing them not to have time or energy.
are more at risk in the event of societal fluctuations and crises (such as the covid, rising energy prices, inflation). Long-term low wages mean that households have limited opportunities to save, and are at risk of falling into poverty if spending rises sharply or income falls. People with unstable (‘precarious’) incomes are particularly at risk.

Purchasing power of Czech wages is below the European average

The absolute value and purchasing power of the minimum wage in the Czech Republic is still one of the lowest in Europe (despite repeated increases). In real terms, thanks to the increase at the beginning of 2025 , it has risen by 7.7 per cent, but it will take time to offset the falls in its purchasing power from the inflationary period. The planned increase to 47 per cent of the average wage by 2029 means that it will still remain below the internationally respected income poverty line, which is usually set at 50 per cent of the wage average (or 60 per cent of the median).

But it is not just the minimum wage – the average annual earnings in the Czech Republic in 2023, at €23,454 , were just below the EU average of €37,863. The purchasing power of Czech wages is also low in the long term, and they have also experienced one of the highest real declines in recent inflation – 7.5 per cent in 2022 and 2.9 per cent in 2023.

A significant share of the population faces economic uncertainty

Comparative poverty statistics show the Czech Republic doing well in the long term, but this is because they relate to the median income in a given country and thus say nothing about the purchasing power or quality of life of the population. They reflect income inequality, which is relatively low in the Czech Republic (unlike wealth inequality).

As a result of the recent exceptionally high inflation, the number of households that are unable to save any of their income, or even whose expenditure exceeds their income, is rising to nearly a third of all households by January 2025. The proportion of people in rented accommodation affected is as high as 44 per cent. Meanwhile, households with children with below median income and higher costs than income are up to 13 per cent. According to the January 2025 data, just over a third of respondents rate their household situation as fairly or very good, and even falling inflation has not yet led to a significant improvement in this rating.

Asset seizures indirectly affect up to a quarter of the population

The debt map shows that 608,170,000 people are in foreclosure in 2025, with more than five people in foreclosure for every one of them. A further 92 279 thousand people are going through the process of debt relief. If we count the members of their households who are directly affected by this situation, as much as a fifth of the population in the Czech Republic may be directly affected by over-indebtedness, foreclosures and the relatively strict insolvency regime. At the same time, the basic amount guaranteed to all people in foreclosure and insolvency is lower than the minimums in the social benefit system. People in foreclosure are also not guaranteed a minimum wage, because debts are also deducted from that wage.

As a society we all end up paying:

Political radicalization and instability: Frustration stemming from uncertainty, inequalities, and the feeling that no one cares or that no one is addressing these problems can result in a loss of trust in the current political system. It could take on the form of political radicalization or populist party inclinations or even resigning from participation in democratic processes.

Populations low purchasing power: Economic uncertainty disproportionately impacts inhabitants from various regions. The weaker purchasing power of a region’s inhabitants has negatives impacts on the entire development of the local economy and, in turn, contributes to the growth of spatial inequalities.

Dependence on social benefits: The state’s budget has to be used to compensate for lower wages, as the poorest groups of the population must supplement their pay with social benefits. This is relevant in the Czech context mainly in terms of the growing importance of social benefits for property renters due to a rise in housing prices.

Outflow of profits to foreign countries: Profits of companies in the Czech Republic are significantly higher in total volume than wages of employees. The low level of wages (combined with other factors related to the tax system and its “optimization” possibilities) contributes to the fact that a large part of the finances generated in the Czech business sphere flow abroad in the form of dividends.

Increased threat of poverty for women: Lower wages are concentrated in professions where women often are employed. Among other things, this results in a greater threat of poverty for single mothers and senior citizens.

Intergenerational transfer of poverty: Poverty can be a de facto barrier to social mobility (lack of funds for studies, the need to start work early, etc.), but it is also an experience that influences strategies and aspirations, perceived opportunities and possibilities of active effort. In the Czech education system, these inequalities are often multiplied. This contributes to internal polarisation and a lower capacity of society to respond to the challenges of a rapidly changing economy.

Low spatial mobility: Low wages in combination with a high rate of homeownership (limited availability and high prices of housing in economic centres) has a negative effect on spatial mobility and hence also on the balancing of supply and demand in the labor market.

Negative impacts on workplace relations: The psychological effects of economic insecurity associated with low wages negatively affect people’s performance, safety, self-activity, and relationships in the workplace.

Growth of the black market: A high rate of debt, a secondary effect of low wages, leads to the growth of the black market and is costly for society because of both tax evasion and the long-term social issues associated with it.

The possibility of adequate pay is key to social cohesion.

The inclusion of a decent wage as a right in international documents (whether the Declaration of Human Rights or documents from the International Labour Organization) created after World War II is not a coincidence; rather, it reflects the experience of war and the awareness of the negative social consequences of inequality that caused pre-war political frustrations and preferences for radical political parties.

Awareness of the negative effects of growing economic and social polarisation is reflected in the strategic documents produced over the last decade at EU level, which emphasise the need for fair wages. In particular, the European Pillar of Social Rights, which is subsequently reflected in the EU Fair Minimum Wage Directive adopted in autumn 2022, emphasises collective bargaining and trade union membership.

The growth of wages of low income earners will also contribute to economic growth.

According to a recent analysis by the International Monetary Fund, an increase in the wages of 20% of high income earners will lead to a decrease in gross domestic product (GDP), while an increase in the wages of 20% of the lowest wage earners will have precisely the opposite effect.