Czech Republic - Poverty and wealth

Four decades of communist rule (1948-89) had a strong effect on the distribution of incomes, an effect that remains visible today in the Czech Republic. The communist system resulted in a social hierarchy very different from the class system in most capitalist countries. Under communism, wages were artificially kept at similar levels, so professionals such as doctors earned wages similar to those of factory or construction workers. Because property had belonged to the state and housing was distributed through state channels, those individuals who obtained

Exchange rates: Czech Republic
Czech crowns per US$1
Jan 2001 37.425
2000 38.598
1999 34.569
1998 32.281
1997 31.698
1996 27.145
SOURCE: CIA World Factbook 2001 [ONLINE].

GDP per Capita (US$)
Country 1975 1980 1985 1990 1998
Czech Republic N/A N/A 4,884 5,270 5,142
United States 19,364 21,529 23,200 25,363 29,683
Germany N/A N/A N/A N/A 31,141
Slovakia N/A N/A 3,630 3,825 3,822
SOURCE: United Nations. Human Development Report 2000; Trends in human development and per capita income.

large homes often did so through political means, such as good standing with the Communist Party.

Ten years later, this system is changing. As property has become privatized, individuals with successful businesses can now afford to buy the larger homes. Political affiliation matters much less for one's living standard than it did before. However, given the fact that the privatization process has been run by the government, political affiliation and social contacts have not been irrelevant, either. In spite of the fact that the Czech Republic's transition has been one of the most transparent, some instances of corruption have allowed a few individuals to improve their economic standing through dishonest means.

Although the social structure is rapidly moving away from relatively equal income distribution to a class system, as of the late 1990s income distribution and consumption in the Czech Republic remained more equalized than in the United States. In the United States, the richest 20 percent of individuals earn and consume 46 percent of available wealth. However, in the Czech Republic, the richest 20 percent of individuals earn and consume 36 percent of available wealth. In addition, the poorest 20 percent earn and consume only 5 percent of available wealth in the United States, but in the Czech Republic the poorest 20 percent earn and consume 10 percent of available wealth.

Distribution of Income or Consumption by Percentage Share: Czech Republic
Lowest 10% 4.3
Lowest 20% 10.3
Second 20% 14.5
Third 20% 17.7
Fourth 20% 21.7
Highest 20% 35.9
Highest 10% 22.4
Survey year: 1996
Note: This information refers to income shares by percentiles of the population and is ranked by per capita income.
SOURCE: 2000 World Development Indicators [CD-ROM].

Household Consumption in PPP Terms
Country All Food Clothing and footwear Fuel and power a Health care b Education b Transport & Communications Other
Czech Republic 24 5 14 5 12 16 24
United States 13 9 9 4 6 8 51
Germany 14 6 7 2 10 7 53
Slovakia 26 7 16 5 12 10 24
Data represent percentage of consumption in PPP terms.
a Excludes energy used for transport.
b Includes government and private expenditures.
SOURCE: World Bank. World Development Indicators 2000.

Under the communist system, higher education and health care were freely provided by the state. The Czech Republic has been implementing reforms that require individuals to pay for these services. These reforms have been difficult for average individuals, because institutions such as a comprehensive student loan system or health insurance have not been developed. The state does provide social security and social assistance, such as unemployment and disability benefits.

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