Selected issues of the minimum wage in the Czech Republic

The minimum wage is one of the measures of economic policy, which raises contradictory reactions. The Czech Republic is one of twenty EU Member States that have implemented a statutory minimum wage. Since its introduction in 1991, the gross minimum wage was increased sixteen times by the government. In addition to increases in the gross minimum wage, the purchasing power of the minimum wage is affected by the development of price levels and also by changes in tax and social security and health insurance. In the Czech Republic three periods in the development of the minimum wage can be distinguished. In the first years after its introduction, the gross minimum wage did not increase significantly and its real value declined. The period 1999–2006 is a period of rapid growth in both the nominal and the real minimum wage. In the period 2007–2012, the nominal wage was constant and its real value gradually decreased. These three phases correspond to the political orientation of Czech governments. Leftist governments raised minimum wages faster than right-wing governments. The article also provides an analysis of the motivational function of the minimum wage. It compares the net minimum wage with the living minimum. It appears that the motivational function of the minimum wage has been reducing in recent years. This is true especially for persons with dependent children. The last part of the article includes an analysis of the relationship between the increase in the minimum wage and the unemployment rate in the Czech Republic. In addition to total unemployment, the impact of the minimum wage on unemployment of young people and people with low levels of education is analyzed. It shows that there is no clear relationship between the minimum wage and the unemployment rates in the Czech Republic