Even during the time of the common Czechoslovakian state, the Slovak and the Czech parts were economically and socially different. The average income in the Czech part, as well as the standard of living, were slightly above the respective values in Slovakia. The separation of the two countries hit Slovakia economically harder than the Czech Republic. The Czech economy was left with an industry producing higher level products and its workforce was more skilled – also, many Slovaks working in the Czech Republic stayed there after 1993.
These differences had their consequences for economic and social developments. The Czech economy proved to be the most dynamic among the Visegrad countries (Czech Republic, Hungary, Poland, Slovakia), and it was able to attract most foreign investors. Slovakia lagged behind, and not even the much-hailed recent economic and social reforms managed to close this gap.
Different social situations
The level of relative poverty has many connections to the social and income inequalities in the economy. The fact that more people in Slovakia earn less than 60% of the national median income (Eurostat's threshold for defining people living in relative poverty) also means that the distribution of incomes is more unequal.
This proves to be true in the Slovak and Czech case. The quoted Eurostat report uses two indicators of income inequality:
- The Gini coefficient, which measurs the full distribution of income in the economy (if there were perfect equality, i.e. each person receiving the same income, the Gini coefficient would be 0%. It would be 100% if the entire national income were in the hands of only one person.)
- The S80/S20 ratio, which compares the 20% of the population with the highest income to the 20% with the lowest.
In both cases the Czech Republic belongs to the group of countries with the lowest ratios (together with Slovenia, Sweden, Hungary and Denmark). Slovakia, together with Greece, the United Kingdom, Estonia and Latvia, is the country with the highest inequality of incomes.
Different social systems
Different historical experiences and slightly different income levels cannot fully explain differences in the relative poverty rates and inequality of income. That is shown by Eurostat's comparison of the impact that social transfers have on the rate of relative poverty in various EU countries. This impact is measured as a difference between the poverty rate in a hypothetical situation without any social transfers (except for pensions) and the actual poverty rate. In other words, this figure shows how many people are "saved" from poverty by social transfers.
In Slovakia, this number is below the EU 25 average, in fact sixth-lowest after Greece, Spain, Italy, Cyprus, and Malta. The Czech Republic scores third best, after Denmark and Sweden.
The indicator of poverty risk before social transfers must be interpreted with some caution, as no account is taken of some other transfer payments, which can have the effect of raising the disposable income of households and individuals. Furthermore, the poverty risk before social transfers is compared to the poverty risk after transfers keeping "all other things equal" – i.e., assuming unchanged household and labour market structures. However, this comparison can give a picture of different approaches to social help in the EU countries and the way they influence the level of relative poverty.
Differences are visible also in OECD statistics. The OECD selection of social indicators for Slovakia and the Czech Republic for the years 2001 and 2002 shows that public spending on social and health policy in the Czech Republic, as a percentage of HDP, is higher than in Slovakia. It is important to note that these figures describe the situation prior to recent changes in Slovak social policy, which have introduced further cuts.
With the Czech elections looming in 2006, the social system and social spending are becoming issues for political discussions. Comparisons with the neighbouring state are more and more often used to support political arguments. The Czech centre-right opposition is using a "Slovak model" – labour market deregulation, cuts in social spending, flat tax, pension reform, putting most of the emphasis on the capitalization pillar, etc. – as a successful example to follow. Czech social-democrats point to the social consequences of such a path. In Slovakia, the centre-right government presents Slovak reforms as the way that all of Europe, sooner rather than later, will have to choose to stay competitive on a global level. On the other hand, social democrats, who are in the opposition in Slovakia, use the Czech Republic as an example of teh achievement of economic growth and competitiveness without a "socially unconscious" policy.
This article is written by Euractiv.sk , EurActiv's Slovakian partner portal