Is there a cure for record high unemployment?

The Czech Republic's unemployment rate reached nearly 11 percent of the workforce at the end of February. The figure has beaten all expectations and further fuelled the debate about measures to tackle long-term problems on the Czech labour market.

Is there a cure for record high unemployment?

The unemployment in the Czech Republic, source: CTK

The unemployment rate in the Czech Republic reached 10.9 percent in February, up from the previous all-time high of 10.8 percent in January. The result comes as a surprise as most experts predicted stagnation or slight decrease of the jobless rate.

The total number of unemployed people reached 570 thousand, and labour offices now register 13 job seekers per vacancy on average. The number of job-seeking fresh graduates has reached 54 thousand. The number of school leavers who cannot find a job has been a cause for concern, because young people are unable to obtain necessary working habits and practical experience, which further aggravates their position on the labour market. According to Petr Kaplan from the Ministry of Labour and Social Affairs, one of the causes is a lack of communication between the education system and the business sector:

"We are trying to establish such communication on the regional level, where we think it is most effective. Schools should adjust their offer of education to the needs of the regional labour market."

The unemployment in the Czech Republic, source: CTK

Analysts predict that unemployment will start falling in the coming months due to seasonal jobs in construction and agriculture, possibly to below 10 percent in May. However, the long-term problems of a structural nature will persist. Some industries have been dying away, other industries are forced to reduce unit labour costs. At the same time, job creation has slowed down due to a marked decrease in the inflow of foreign direct investment. These factors are coupled with low workforce mobility, both territorially and between industrial sectors.

Another factor has been a soft unemployment benefits system, which fails to motivate people to seek jobs. The government is now looking for ways to reform it. Industry and Trade minister Milan Urban went as far as to describe the unemployment benefits system as anti-social:

"There are many people who live on unemployment benefits while they work illegally: my estimate it is as much as 30 percent of people on the dole. I think it is high time to do something about it. This harms people who work legally and earn a wage that is connected with high associated costs for the employer. If the additional costs were not so big, the net wage could be higher. This is what I consider anti-social. I think we need to seek ways to reform the system as soon as possible. There has been a proposal for recipients of unemployment benefits to be obliged to work certain number of hours in community work, otherwise, they would lose the benefits."