# Transcript: Every problem has a solution

## Description

Dan will not offer us quick and populist solutions, but those that are proven by good practice and, above all, data.



Who is Daniel Prokop



Daniel Prokop is a sociologist and founder of the research organization PAQ Research. He is a member of NERV and also part of the expert group for the creation of the Education Strategy 2030. He works at the Faculty of Social Sciences at Charles University, focusing on quantitative research in the areas of education, social inequalities and poverty, social policy, and social stratification.In 2020, he published the book Blind spots: on poverty, education, populism, and other challenges of Czech society. For the series of analytical articles on Czech society "Introduction to practical sociology," he received the Journalism Award in 2016. He worked for ten years at the research agency Median, including three years in its management.

## Transcript

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**[00:10:00]** You have a system with two and a half thousand branches and no middle management, and the center manages those two and a half thousand branches.

**[00:10:09]** And it basically lacks the tools to manage it. Everyone can do whatever they want. This is basically how Czech education works,

**[00:10:14]** where there are positive examples, but many negatives when the founders don't want to manage it.

**[00:10:22]** So these are symptoms that show something deeper in the Czech educational and social system.

**[00:10:35]** This is actually a vicious circle, a loop I described in my book,

**[00:10:42]** and you will analyze it, which leads to the fact that on one side, the red side on the right,

**[00:10:48]** we basically create a bit of working poverty and the gray economy through the tax and social system.

**[00:10:55]** And on the left side, the blue side, we reproduce a lot of intergenerational tensions in education.

**[00:11:02]** Why? In our education system, as I said, it largely depends on the family and region you are born into.

**[00:11:08]** We have huge differences in opportunity. I will also show you, if you study at university,

**[00:11:14]** based on whether your parents had a high school diploma or not.

**[00:11:17]** These inequalities are much higher in Czech education than in most European countries.

**[00:11:23]** And if you have on the left side a system that produces such working poverty,

**[00:11:30]** which is not poverty in the sense of not having enough to eat, even the poorest in the Czech Republic usually don't,

**[00:11:35]** but it greatly affects family stability, and on the left side, the blue side, is the education system,

**[00:11:41]** which reproduces this through education, so we effectively close off a large part of society

**[00:11:47]** and those regions remain stagnant.

**[00:11:49]** To change this, both sides of this cycle must be cut or reformed.

**[00:11:57]** And if I divide it, on the left side we have a tax mix that, as I said,

**[00:12:03]** takes a lot from low-income work.

**[00:12:06]** It motivates the gray economy; a person on minimum wage,

**[00:12:10]** some earn 8,500 or 8,700, whatever it is, if you have no children,

**[00:12:16]** many of them obviously have side jobs paid under the table,

**[00:12:18]** because after taxing the minimum wage, there's not much left to say,

**[00:12:23]** so this also fuels the gray economy.

**[00:12:26]** We drain purchasing power from the regions when you have a tax mix that heavily burdens wages between 18 and 30 thousand,

**[00:12:31]** which is how the tax system in the Czech Republic is set up,

**[00:12:35]** so it takes a lot from low-income work,

**[00:12:39]** and of course, you drain purchasing power from poorer regions,

**[00:12:41]** because wages are lower there and there's a lack of money to develop local services.

**[00:12:44]** Therefore, we limit regional development with this tax mix.

**[00:12:47]** We could collect it in a slightly different way,

**[00:12:49]** so that purchasing power remains with low-income employees

**[00:12:52]** and support the development of services in poorer regions.

**[00:12:54]** So, an unfortunately set tax mix,

**[00:12:59]** I'll show its details later.

**[00:13:02]** We have a fragmented benefits system,

**[00:13:04]** which has around 20 benefits in total,

**[00:13:06]** four of those benefits, for example, target the same problem,

**[00:13:08]** you have to apply for them separately and so on.

**[00:13:12]** It is poorly targeted and very broad.

**[00:13:16]** That could be another tip,

**[00:13:18]** but I'll give it without the slide.

**[00:13:21]** How many people do you think

**[00:13:23]** in the Czech Republic

**[00:13:25]** are currently eligible for social support benefits?

**[00:13:27]** That means housing allowance,

**[00:13:31]** subsistence allowance, or child allowance?

**[00:13:34]** Good guess.

**[00:13:36]** Are you guessing, or have you ever calculated it?

**[00:13:43]** In the Czech Republic, where these benefits

**[00:13:47]** are prepared?

**[00:13:51]** In the Czech Republic, where these benefits

**[00:13:53]** are prepared?

**[00:14:21]** In the Czech Republic, where these benefits

**[00:14:23]** are prepared?

**[00:14:51]** In the Czech Republic, where these benefits

**[00:14:53]** are prepared?

**[00:15:21]** In the Czech Republic, where these benefits

**[00:15:23]** are prepared?

**[00:15:51]** In the Czech Republic, where these benefits

**[00:16:23]** are being prepared?

**[00:16:25]** In the Czech Republic, where are those doses

**[00:16:27]** being prepared?

**[00:16:51]** In the Czech Republic, where are those doses

**[00:16:53]** being prepared?

**[00:17:21]** In the Czech Republic, where are those doses

**[00:17:23]** being prepared?

**[00:17:51]** In the Czech Republic, where are those doses

**[00:17:53]** being prepared?

**[00:18:21]** In the Czech Republic, where are those doses

**[00:18:23]** being prepared?

**[00:18:51]** In the Czech Republic, where are those doses

**[00:18:53]** being prepared?

**[00:19:21]** In the Czech Republic, where are those doses

**[00:19:23]** being prepared?

**[00:19:51]** In the Czech Republic, where are those doses

**[00:19:53]** being prepared?

**[00:20:00]** people from the labor market and also to those b-companies.

**[00:20:03]** Thanks to that, we will actually be a very narrow,

**[00:20:06]** thanks to that nervous education, we will be a very narrow elite,

**[00:20:09]** an elite that is educated

**[00:20:12]** really well, simply put, and that is a problem

**[00:20:15]** for some second economic transformation I mentioned, that we are not able

**[00:20:18]** to reach the level needed for

**[00:20:21]** the knowledge economy quite well in the Czech Republic.

**[00:20:24]** And due to limited social mobility, because you have

**[00:20:28]** limited chances to significantly surpass your parents educationally

**[00:20:31]** and then economically, it is closely related

**[00:20:34]** to trust in institutions in the Czech Republic, that the people who are

**[00:20:37]** in those poorer regions and have lower social

**[00:20:40]** and economic capital, lower chances, have very

**[00:20:43]** limited trust in democracy and

**[00:20:46]** democratic parties and so on. So it has

**[00:20:49]** the way the Czech educational social system works has big consequences

**[00:20:52]** both economically, negative, and socially.

**[00:20:55]** So that was an introduction, now I'll try to describe more data-wise

**[00:20:58]** some of the problems. I'll start with

**[00:21:01]** those educational problems and

**[00:21:04]** the connection between educational and social problems.

**[00:21:10]** This is a graph, it is from a study

**[00:21:13]** The idea of the Think Tanks we also collaborate with

**[00:21:16]** shows how it differs

**[00:21:19]** by how much greater your chance of achieving

**[00:21:23]** a university education is if your

**[00:21:26]** parents have a university education.

**[00:21:29]** Compared to if they don't. So when the values are low,

**[00:21:32]** it basically means that

**[00:21:35]** it depends very little on whether your parents are educated,

**[00:21:38]** and the system is permeable, allowing people who have

**[00:21:41]** only elementary education, for example, to achieve

**[00:21:44]** a university education. These are the countries on the left.

**[00:21:47]** We are among the countries on the right.

**[00:21:51]** We are among the countries where the dependence between

**[00:21:54]** whether your parents have a university education

**[00:21:57]** and whether you achieve it yourself

**[00:22:00]** is relatively strong. There are worse countries too.

**[00:22:03]** Like Bulgaria, Romania, and so on. And we definitely belong to those

**[00:22:06]** where the dependence of your education on your parents' education is strong.

**[00:22:09]** It doesn't only show in this way. It also shows in

**[00:22:12]** a very above-average difference when testing

**[00:22:16]** literacy in ninth grade, between how children from poorer and less educated environments

**[00:22:19]** perform compared to children from more educated, wealthier environments.

**[00:22:22]** This is because children from the bottom fifth,

**[00:22:25]** socioeconomically, lag far behind.

**[00:22:30]** More than in Poland, more than in Estonia, and so on.

**[00:22:33]** It's not just because these might be

**[00:22:36]** Romani children from social and majority areas.

**[00:22:39]** It concerns simply the bottom quartile, 25%

**[00:22:42]** in education, who lag behind in literacy.

**[00:22:46]** Very often these are children from that social environment.

**[00:22:49]** So in our country, education depends heavily on the education of the family.

**[00:22:52]** Which is, like...

**[00:22:55]** One problem is that it shouldn't be that way,

**[00:23:00]** because it reproduces inequalities and isn't entirely fair.

**[00:23:03]** The second problem is that it's not very efficient.

**[00:23:06]** When you select in education not only based on merit,

**[00:23:10]** on their potential, but also based on their background,

**[00:23:12]** you lose a lot of potential talent.

**[00:23:25]** in the part you filter out because

**[00:23:28]** you don't push through in education.

**[00:23:33]** One problem why education is unequal in the Czech Republic,

**[00:23:37]** or why these inequalities exist, is regional.

**[00:23:41]** We have, these two maps show educational failure on the left.

**[00:23:46]** This is dropping out, failing, absenteeism.

**[00:23:50]** This is an index we connect from the three main problems.

**[00:23:54]** And on the right, it shows results from CERMAT testing

**[00:23:58]** and the Czech School Inspectorate.

**[00:24:00]** What literacy levels they have, as shown in these tests,

**[00:24:05]** as shown in these tests,

**[00:24:09]** as shown in these tests,

**[00:24:13]** as shown in these tests,

**[00:24:17]** as shown in these tests,

**[00:24:21]** as shown in these tests,

**[00:24:25]** as shown in these tests,

**[00:24:29]** as shown in these tests,

**[00:24:33]** as shown in these tests,

**[00:24:37]** as shown in these tests,

**[00:24:41]** as shown in these tests,

**[00:24:45]** as shown in these tests,

**[00:24:49]** as shown in these tests,

**[00:24:53]** as shown in these tests,

**[00:24:57]** as shown in these tests,

**[00:25:01]** as shown in these tests,

**[00:25:05]** as shown in these tests,

**[00:25:09]** as shown in these tests,

**[00:25:13]** as shown in these tests,

**[00:25:17]** as shown in these tests,

**[00:25:21]** as shown in these tests,

**[00:25:25]** as shown in these tests,

**[00:25:29]** as shown in these tests,

**[00:25:33]** as shown in these tests,

**[00:25:37]** as shown in these tests,

**[00:25:41]** as shown in these tests,

**[00:25:45]** as shown in these tests,

**[00:25:49]** as shown in these tests,

**[00:25:53]** as shown in these tests,

**[00:25:57]** as shown in these tests,

**[00:26:01]** as shown in these tests,

**[00:26:05]** when they appear in those tests,

**[00:26:09]** when they appear in those tests,

**[00:26:13]** when they appear in those tests,

**[00:26:17]** when they appear in those tests,

**[00:26:21]** when they appear in those tests,

**[00:26:25]** when they appear in those tests,

**[00:26:29]** when they appear in those tests,

**[00:26:33]** when they appear in those tests,

**[00:26:37]** when they appear in those tests,

**[00:26:41]** when they appear in those tests,

**[00:26:45]** when they appear in those tests,

**[00:26:49]** when they appear in those tests,

**[00:26:53]** when they appear in those tests,

**[00:26:57]** when they appear in those tests,

**[00:27:01]** when they appear in those tests,

**[00:27:05]** when they appear in those tests,

**[00:27:09]** when they appear in those tests,

**[00:27:13]** when they appear in those tests,

**[00:27:17]** when they appear in those tests,

**[00:27:21]** when they appear in those tests,

**[00:27:25]** when they appear in those tests,

**[00:27:29]** when they appear in those tests,

**[00:27:33]** when they appear in those tests,

**[00:27:37]** when they appear in those tests,

**[00:27:41]** when they appear in those tests,

**[00:27:45]** when they appear in those tests,

**[00:27:49]** when they appear in those tests,

**[00:27:53]** when they appear in those tests,

**[00:27:57]** when they appear in those tests,

**[00:28:01]** when they appear in those tests,

**[00:28:05]** when they appear in those tests,

**[00:28:09]** when they appear in those tests,

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**[00:28:17]** when they appear in those tests,

**[00:28:21]** when they appear in those tests,

**[00:28:25]** when they appear in those tests,

**[00:28:29]** when they appear in those tests,

**[00:28:33]** when they appear in those tests,

**[00:28:37]** when they appear in those tests,

**[00:28:41]** when they appear in those tests,

**[00:28:45]** when they appear in those tests,

**[00:28:49]** when they appear in those tests,

**[00:28:53]** when they appear in those tests,

**[00:28:57]** when they appear in those tests,

**[00:29:01]** when they appear in those tests,

**[00:29:05]** when they appear in those tests,

**[00:29:09]** when they appear in those tests,

**[00:29:13]** when they appear in those tests,

**[00:29:17]** when they appear in those tests,

**[00:29:21]** when they appear in those tests,

**[00:29:25]** when they appear in those tests,

**[00:29:29]** when they appear in those tests,

**[00:29:33]** when they appear in those tests,

**[00:29:37]** when they appear in those tests,

**[00:29:41]** when they appear in those tests,

**[00:29:45]** when they appear in those tests,

**[00:29:49]** when they appear in those tests,

**[00:29:53]** when they appear in those tests,

**[00:29:57]** when they appear in those tests.

**[00:30:00]** they have lower failure rates, even under the same conditions.

**[00:30:03]** This shows that

**[00:30:05]** we have

**[00:30:07]** about a third of Czech schools

**[00:30:09]** with up to 100 students.

**[00:30:11]** And a fifth of schools have up to 50 students.

**[00:30:13]** A fifth of schools have up to 50 students.

**[00:30:15]** I don't know where you're from,

**[00:30:17]** but it's quite unimaginable,

**[00:30:19]** how many very small schools there are.

**[00:30:21]** And when education is this fragmented,

**[00:30:23]** it's simply much harder to manage.

**[00:30:25]** And it's much harder to manage the division

**[00:30:27]** of those schools into social services

**[00:30:29]** and similar functions.

**[00:30:31]** And this relates to higher failure rates in small schools.

**[00:30:33]** So these are the factors.

**[00:30:35]** And it is clear that

**[00:30:37]** it's not just about poverty.

**[00:30:39]** Equally poor regions,

**[00:30:41]** if you look at our education map,

**[00:30:43]** This is from www.mapavzdelavani.cz,

**[00:30:45]** from our online application,

**[00:30:47]** so you can see that

**[00:30:51]** the regions differ significantly in

**[00:30:53]** how well they can fight that disadvantage.

**[00:30:55]** And in equally poor regions,

**[00:30:57]** the failure rate, like children not finishing

**[00:30:59]** primary school, can range

**[00:31:01]** between 3 and 15%.

**[00:31:03]** There are examples of regions with high

**[00:31:05]** social disadvantage

**[00:31:07]** and very low failure rates.

**[00:31:09]** One is Krnov, if you know that positive example

**[00:31:11]** of Krnov, which fights that disadvantage.

**[00:31:13]** But also Kadaň,

**[00:31:15]** which does things that reduce

**[00:31:17]** poverty. Litvínov is also managing

**[00:31:19]** to work on it somehow.

**[00:31:21]** These are regions with above-average poverty,

**[00:31:23]** but not completely

**[00:31:25]** tragic, like

**[00:31:27]** the outskirts of Plzeňský kraj, for example.

**[00:31:29]** And yet they have

**[00:31:31]** huge failure rates for some reason.

**[00:31:33]** So, the problem is,

**[00:31:35]** that educational capacities are also very

**[00:31:37]** unequal regionally.

**[00:31:39]** This map shows on the left

**[00:31:41]** how many children aged 3 to 5 attend school.

**[00:31:43]** And on the right, how many

**[00:31:45]** schools

**[00:31:47]** are

**[00:31:49]** without a school psychologist

**[00:31:51]** and also without

**[00:31:53]** a special education teacher.

**[00:31:55]** So you see, the left side varies a lot,

**[00:31:57]** ranging roughly from 75 to 100%

**[00:31:59]** attendance in kindergarten.

**[00:32:01]** Some regions really have

**[00:32:05]** 98% of children aged 3 to 5

**[00:32:07]** attend kindergarten.

**[00:32:09]** There are regions where it's only about 75%.

**[00:32:11]** It's a lot in the Ústí region, but you can see those white

**[00:32:13]** spots even outside the Ústí region.

**[00:32:15]** Yeah, it's interesting.

**[00:32:17]** The worst,

**[00:32:19]** the highest attendance is

**[00:32:21]** in regions like the Zlín Region and similar.

**[00:32:23]** But if you take

**[00:32:25]** the worst ORP, the worst

**[00:32:27]** region among the good ones,

**[00:32:29]** attendance in kindergarten there

**[00:32:31]** is still significantly worse than in the best

**[00:32:33]** region of the Ústí Region.

**[00:32:35]** So it's not just about two regions,

**[00:32:37]** but about how the municipalities behave,

**[00:32:39]** how they strengthen the preschool

**[00:32:41]** capacity of kindergartens, how they try

**[00:32:43]** to get disadvantaged children there,

**[00:32:45]** who often don't attend.

**[00:32:47]** And we have big

**[00:32:49]** micro-regional inequalities in this.

**[00:32:51]** For example, in kindergartens,

**[00:32:53]** we did a decomposition,

**[00:32:55]** how many

**[00:32:57]** differences in attendance in kindergartens

**[00:32:59]** are explained by differences between regions,

**[00:33:01]** and how many are differences within a region.

**[00:33:03]** And now you find that in Czech education,

**[00:33:05]** many things, like kindergartens,

**[00:33:07]** about two-thirds of the differences

**[00:33:09]** are within regions and only one-third

**[00:33:11]** are between regions.

**[00:33:13]** So we have very large micro-regional inequalities.

**[00:33:15]** Schools without a psychologist

**[00:33:17]** and special educator,

**[00:33:19]** you see in red, those are schools

**[00:33:21]** where maybe none have one,

**[00:33:23]** or 90 to 100% of schools don't have one,

**[00:33:25]** not a single one of those professions.

**[00:33:27]** So you see, these are also, for example,

**[00:33:29]** the outskirts of Plzeň and its Czech region,

**[00:33:31]** and similar areas. They differ greatly in that.

**[00:33:33]** On the other hand,

**[00:33:35]** urban areas like Prague, Brno,

**[00:33:37]** and some others,

**[00:33:39]** basically don't have schools

**[00:33:41]** without at least one of those professions.

**[00:33:43]** Or they have very few.

**[00:33:45]** So Czech education varies greatly

**[00:33:47]** in outcomes and regionally

**[00:33:49]** also in capacities.

**[00:33:51]** One problem is,

**[00:33:53]** let me go back,

**[00:33:55]** if I showed

**[00:33:57]** about school funding,

**[00:33:59]** it wouldn't differ much.

**[00:34:01]** It's quite similar.

**[00:34:03]** Which shows one thing,

**[00:34:05]** there is a so-called zero correlation

**[00:34:07]** between funding

**[00:34:09]** and social disadvantage

**[00:34:11]** of those regions and schools.

**[00:34:13]** When the funds are there,

**[00:34:15]** as I showed in the regression,

**[00:34:17]** it helps reduce failure rates.

**[00:34:21]** But the problem is,

**[00:34:23]** that Czech funding

**[00:34:25]** barely takes into account

**[00:34:27]** social disadvantage.

**[00:34:29]** And in those poor schools,

**[00:34:31]** where there is a lot of social disadvantage,

**[00:34:33]** where they don't have enough resources to

**[00:34:35]** also fight this in education.

**[00:34:37]** So we simply don't provide

**[00:34:39]** enough resources to

**[00:34:41]** bring supportive professions to those areas,

**[00:34:43]** to keep solid teachers there, and so on.

**[00:34:47]** Which is reflected in the fact that failure rates vary greatly by region.

**[00:34:49]** So these regional inequalities,

**[00:34:51]** as I showed,

**[00:34:53]** are already very micro-regional,

**[00:34:55]** and are one of the sources

**[00:34:57]** of inequalities in Czech education.

**[00:34:59]** And one of the problems is,

**[00:35:01]** that it is very hard to change in a system

**[00:35:03]** where you have two and a half thousand school founders.

**[00:35:05]** On average, 90% of school founders

**[00:35:07]** found only one school.

**[00:35:09]** So they have just one school, the municipality.

**[00:35:11]** In good education systems,

**[00:35:13]** the founder,

**[00:35:15]** the municipality,

**[00:35:17]** often covers wider regions,

**[00:35:19]** founding five to fifty schools.

**[00:35:21]** About twenty is recommended.

**[00:35:23]** Because that is a system

**[00:35:25]** where you can manage it

**[00:35:27]** and shift capacities,

**[00:35:29]** you can arrange for the school psychologist

**[00:35:31]** to serve four or five schools in your region.

**[00:35:33]** When you have such a fragmented system,

**[00:35:35]** it's hard to share capacities,

**[00:35:37]** and it's hard

**[00:35:39]** for everyone,

**[00:35:41]** who listens to this administration,

**[00:35:43]** everyone does the same tasks,

**[00:35:45]** management and so on.

**[00:35:47]** So that's one problem, the regional one.

**[00:35:49]** The second problem is the structure

**[00:35:51]** of the education system.

**[00:35:53]** I was,

**[00:35:55]** a co-author of the strategy

**[00:35:57]** Education 2030,

**[00:35:59]** and the idea of some kind of

**[00:36:01]** ideal education system looks roughly like this.

**[00:36:07]** It can be a bit examined, of course

**[00:36:09]** there is some idea of what the goal of the

**[00:36:11]** system is, but it is

**[00:36:13]** very high participation

**[00:36:15]** in kindergartens

**[00:36:17]** up to around five years old, because those kindergartens

**[00:36:19]** really help overcome,

**[00:36:21]** level out the differences

**[00:36:23]** at the start of education.

**[00:36:25]** Then some system of elementary schools,

**[00:36:27]** where all have

**[00:36:29]** some standard quality.

**[00:36:31]** There is no extreme difference in quality,

**[00:36:33]** all elementary schools maintain certain standards.

**[00:36:35]** The beginning of high schools

**[00:36:37]** in many countries

**[00:36:39]** has more commonality at the start

**[00:36:41]** of high school education.

**[00:36:43]** For example, you might know from America,

**[00:36:45]** there you go at least in Ohio,

**[00:36:47]** you go to high school and the first year you have

**[00:36:49]** high school and trade school, which is

**[00:36:51]** the vocational school.

**[00:36:53]** They still teach together

**[00:36:55]** and the kids choose whether

**[00:36:57]** to go for general education

**[00:36:59]** or

**[00:37:01]** vocational, and after a year it splits,

**[00:37:03]** but they might still be in the same building.

**[00:37:05]** A similar system exists in Germany,

**[00:37:07]** and some other countries,

**[00:37:09]** or they have a system where schools are separated

**[00:37:11]** and there are easy transitions between them.

**[00:37:13]** Then, of course, it is necessary to separate,

**[00:37:17]** when they want and can go to university,

**[00:37:19]** but the educational system should

**[00:37:21]** build a sufficiently strong foundation

**[00:37:23]** so that

**[00:37:25]** there can be pressure for some excellence at universities.

**[00:37:29]** To have a relatively large base

**[00:37:31]** of people from whom

**[00:37:33]** universities can select and push

**[00:37:35]** for some elite results

**[00:37:37]** where it's needed, which is

**[00:37:39]** higher education or part of

**[00:37:42]** science and research, and so on.

**[00:37:44]** So the education system

**[00:37:46]** should work like

**[00:37:48]** a funnel, trying for a long time

**[00:37:50]** to move as many people as possible

**[00:37:54]** to their maximum potential,

**[00:37:56]** and then simply select from them

**[00:37:58]** and start pushing for some efficiency.

**[00:38:00]** The Czech education system works roughly like this,

**[00:38:02]** with big gaps

**[00:38:04]** in participation in kindergarten

**[00:38:06]** at ages 3 to 5,

**[00:38:08]** especially in the regions

**[00:38:10]** I showed earlier.

**[00:38:12]** You have a very fragmented

**[00:38:14]** system of elementary schools,

**[00:38:16]** there are way too many,

**[00:38:18]** too many administrators.

**[00:38:20]** There are at least 3 streams,

**[00:38:22]** meaning flourishing gymnasiums,

**[00:38:24]** quality and low quality,

**[00:38:26]** so-called leftover elementary schools.

**[00:38:28]** It's simplified, but there is a large

**[00:38:30]** inequality in school quality

**[00:38:32]** and it's fragmented in management.

**[00:38:34]** Then you have the system

**[00:38:36]** of secondary schools, which is divided

**[00:38:40]** with basically no

**[00:38:42]** effective transitions between them.

**[00:38:44]** If you choose wrong at age 14,

**[00:38:46]** in most cases it won't change.

**[00:38:48]** And at the secondary education level,

**[00:38:50]** there are 240 fields of study.

**[00:38:52]** I also taught at secondary school gymnasium.

**[00:38:54]** There are fields like saleswoman,

**[00:38:56]** simply, well, salesperson.

**[00:38:58]** There are fields that are completely

**[00:39:00]** unpromising, dependent on training,

**[00:39:02]** disappearing. There are fields where students go

**[00:39:05]** and yet we still maintain them.

**[00:39:07]** We have 240 fields of secondary education.

**[00:39:09]** So extremely specialized

**[00:39:11]** secondary education.

**[00:39:13]** And when you look at the data on what people do,

**[00:39:15]** who graduated from those specialized secondary schools,

**[00:39:17]** about half of those who had

**[00:39:19]** that specialized school don't work

**[00:39:21]** in a field related to their education.

**[00:39:23]** So it doesn't respond to the changes

**[00:39:25]** in the economy, which is changing a lot.

**[00:39:27]** And the system is

**[00:39:29]** hugely overspecialized,

**[00:39:31]** and because there are no transitions between them,

**[00:39:33]** it also demands a lot from you,

**[00:39:35]** that you have to choose at the age of 14,

**[00:39:37]** and you still choose based on your parents,

**[00:39:39]** who understand it and some aspirations,

**[00:39:41]** which is one of the drivers

**[00:39:43]** of that selection.

**[00:39:45]** It would be better to have a larger

**[00:39:47]** general education system,

**[00:39:49]** and I don't just mean gameplay, but also technical lyceums

**[00:39:51]** and

**[00:39:53]** more concentrated learning into broader

**[00:39:55]** fields.

**[00:39:57]** Mainly, you see, we have the...

**[00:40:00]** When we have those 240 secondary school fields,

**[00:40:02]** very few students attend those vocational schools in each field.

**[00:40:06]** And we have underfunded kindergartens.

**[00:40:09]** Primary schools, when compared to OECD,

**[00:40:12]** have roughly normal funding,

**[00:40:14]** but it is very inefficiently used,

**[00:40:16]** because we have many small schools,

**[00:40:18]** which have two to three times higher funding per student

**[00:40:23]** due to that small size.

**[00:40:25]** So there is huge inefficiency in managing that system.

**[00:40:27]** That's billions of crowns lost due to the size

**[00:40:31]** and fragmentation of the founders.

**[00:40:33]** But the funding itself is okay.

**[00:40:35]** And surprisingly, we have relatively high funding per student

**[00:40:39]** in secondary schools, which is drained by the fact

**[00:40:41]** that we have many fields of study and sometimes only three students attend,

**[00:40:44]** which is demanding.

**[00:40:45]** We have a high student-to-teacher ratio in secondary education.

**[00:40:49]** So the system in this regard at least...

**[00:40:51]** Kindergartens are underfunded,

**[00:40:53]** primary schools are adequately funded,

**[00:40:56]** but the money is allocated inefficiently.

**[00:40:58]** Secondary schools are very inefficient in terms of funding,

**[00:41:03]** fragmentation, and preparation.

**[00:41:09]** How does it end?

**[00:41:11]** It ends with children or students

**[00:41:14]** going to universities or scientific schools.

**[00:41:17]** And at those scientific schools, we have above-average failure rates,

**[00:41:21]** above-average repetition or dropout rates,

**[00:41:27]** specifically at universities.

**[00:41:29]** According to older data,

**[00:41:31]** which is about ten years old now,

**[00:41:32]** when it was studied,

**[00:41:33]** there is a big difference among them,

**[00:41:35]** among other things, based on preparation at secondary school.

**[00:41:38]** So students from vocational schools have higher failure rates,

**[00:41:43]** which may be because they simply have worse prerequisites,

**[00:41:46]** but also because they have poorer education in general subjects,

**[00:41:49]** like mathematics.

**[00:41:51]** And the system at universities,

**[00:41:53]** which are also underfunded,

**[00:41:54]** does not push enough for excellence,

**[00:41:56]** because the funding does not correspond to that,

**[00:41:58]** and the internal management of those schools

**[00:42:00]** is not set up for it.

**[00:42:01]** And at the same time,

**[00:42:02]** I like to excuse it,

**[00:42:03]** there is a weak base of those children,

**[00:42:06]** where you can, or students,

**[00:42:08]** where you can afford

**[00:42:11]** to choose, push for some excellence, and so on.

**[00:42:14]** So we have a system that instead of

**[00:42:16]** being open at the start

**[00:42:17]** and then closing off

**[00:42:20]** and creating some elite group of things and so on,

**[00:42:23]** we have a system that sorts it out very early and inefficiently

**[00:42:26]** and then you can't take anything away at all.

**[00:42:29]** So it's something,

**[00:42:31]** I think you want to see for example

**[00:42:33]** in the difference

**[00:42:35]** between Czech and Scandinavian hockey,

**[00:42:37]** where in Scandinavia you get many more people

**[00:42:41]** at the basic levels

**[00:42:42]** and then they can put on

**[00:42:44]** elite competitions for men and so on.

**[00:42:48]** We have it very selective even in sports,

**[00:42:50]** for example sports at the start

**[00:42:53]** and we don't build a base of children who do them.

**[00:42:56]** This kind of permeates Czech education and sports and so on.

**[00:43:01]** So it's a system that, in my opinion,

**[00:43:03]** is not effective even if we said the goal

**[00:43:06]** is not fairness, but equal opportunities

**[00:43:08]** and that the goal is simply

**[00:43:12]** to create

**[00:43:14]** an educated society and transform the economy.

**[00:43:18]** And now, I said, the solutions exist,

**[00:43:20]** so to get to those solutions.

**[00:43:21]** The solutions, in my opinion,

**[00:43:24]** or according to us and what is already in strategy 2030,

**[00:43:28]** and what we advise and

**[00:43:31]** help design for ministries,

**[00:43:32]** because we focus a lot on designing those changes,

**[00:43:36]** so they are,

**[00:43:37]** in education they have three levels.

**[00:43:39]** I call them systemic verticals,

**[00:43:41]** things in management that basically don't work in the Czech Republic and that is

**[00:43:44]** simpler financing, so that principals and schools in poorer regions get money for

**[00:43:49]** support professions, in a way other than applying every year for some grant they might not get.

**[00:43:55]** More stable support professions, so they can build a more stable

**[00:43:59]** team there.

**[00:44:01]** Programs like free lunches

**[00:44:03]** and absence reduction programs, made simpler through administration

**[00:44:08]** where the region signs up, the school signs up, the parents sign up,

**[00:44:11]** this is how it works in the Czech Republic, so very few people sign up.

**[00:44:15]** So the simpler programs that actually work to reduce absences

**[00:44:19]** and then the reform of teacher education, so they get more practice, especially in

**[00:44:23]** working with diverse types of students, which is missing in the Czech Republic.

**[00:44:26]** These are the verticals we don't work on.

**[00:44:28]** Then there's work on capacity and school structure.

**[00:44:31]** More kindergartens and childcare groups.

**[00:44:35]** This is a tragedy, because almost everyone is struggling with this now,

**[00:44:40]** and we have 7 billion in the national recovery plan for childcare groups,

**[00:44:44]** which might not be fully used because it's so poorly written that no one applies.

**[00:44:48]** Limiting the extreme number of small schools, we have 20% of schools with fewer than 50 students.

**[00:44:53]** Reducing fragmentation of the system.

**[00:44:56]** And more general secondary schools, limiting those 280 fields of study.

**[00:45:00]** This is basically a reconstruction of capacity in education and then a change in management.

**[00:45:06]** It would really help if we had larger school authorities,

**[00:45:09]** who have some responsibility and capacity to have expertise in managing those schools.

**[00:45:15]** It would help if the selection of principals was done by someone knowledgeable

**[00:45:20]** and not tied to a personal connection with the mayor,

**[00:45:24]** which can sometimes be positive but often is negative.

**[00:45:27]** That's why in Czech schools, when there's a principal selection, on average about 1.5 people apply.

**[00:45:32]** Often it's just the current principal applying again and again.

**[00:45:36]** Because if it's based on a connection with the mayor, no one else wants to apply.

**[00:45:41]** This limits the promotion of better teachers into principal positions

**[00:45:46]** and the improvement of schools.

**[00:45:48]** And generally, the management of counseling and services around schools is difficult.

**[00:45:53]** All of this can be done.

**[00:45:55]** It can be done within a few years with a big impact on education.

**[00:46:00]** Some things are planned, some things are ignored.

**[00:46:03]** So about 40% of these things are somehow planned by the ministry and we help with that.

**[00:46:11]** So yes, it's a long-term effort, but it will have very positive effects and consequences,

**[00:46:16]** if we manage to change the main systemic problems in education.

**[00:46:21]** That was the left side, why social inequality in education reproduces itself.

**[00:46:27]** And now the right side about the tax, benefit, and enforcement system.

**[00:46:30]** I've already mentioned some of it, but now I'll focus on the part that is perhaps least obvious,

**[00:46:36]** how the team agrees, and that is taxes.

**[00:46:40]** How Czech structural taxes work.

**[00:46:42]** Hundreds of billions of crowns circulate annually through taxes and contributions.

**[00:46:49]** Very often, when we talk about regional development or social support for the poor,

**[00:46:54]** it depends either on subsidies to those regions or on benefits.

**[00:46:58]** But that's a tool that often just puts out fires, and at the same time, much smaller funds go into it,

**[00:47:04]** and the efficiency is, of course, often lower.

**[00:47:07]** So we have to go back to

**[00:47:11]** what the actual structure is of what we take from people at the start.

**[00:47:15]** And that's the tax mix.

**[00:47:17]** And in the Czech Republic, it has major flaws.

**[00:47:20]** One flaw is,

**[00:47:22]** though it's unpleasant to hear,

**[00:47:25]** that since 2020, through a combination of efforts by the ANO movement

**[00:47:31]** and also liberal democratic parties,

**[00:47:35]** they managed to reduce revenue by about 150 billion.

**[00:47:39]** Now some of it is coming back,

**[00:47:42]** but the real income,

**[00:47:46]** when compared to GDP,

**[00:47:48]** has declined since 2020.

**[00:47:50]** Tax collection has dropped by roughly 1% of GDP.

**[00:47:54]** And there was no plan on how to compensate for that in spending,

**[00:47:58]** and our tax collection is about 2% of GDP

**[00:48:02]** below comparable countries,

**[00:48:04]** like Poland, Slovakia, and Hungary.

**[00:48:07]** On average,

**[00:48:09]** tax and contribution collection

**[00:48:11]** is simply lower than what we expect to pay for it.

**[00:48:13]** We just have to admit that.

**[00:48:15]** But I don't want to focus on that now.

**[00:48:17]** I want to focus on

**[00:48:19]** from whom and how we collect those taxes.

**[00:48:21]** And now one problem is,

**[00:48:23]** that we tax labor heavily,

**[00:48:25]** and contributions come from labor.

**[00:48:27]** There are sub-problems in that.

**[00:48:29]** You see that the first column

**[00:48:31]** or row is divided,

**[00:48:33]** that we collect a lot from social

**[00:48:35]** and health insurance.

**[00:48:39]** Which is a type of contribution

**[00:48:41]** that you don't get any discount on,

**[00:48:43]** as a poor person.

**[00:48:45]** It's the same percentage for all workers,

**[00:48:47]** for all employees, that is.

**[00:48:49]** You don't get any discount.

**[00:48:51]** On the contrary, there are minimums in health insurance,

**[00:48:53]** so some people who have a very small part-time job,

**[00:48:57]** which...

**[00:48:59]** When you have large social and health contributions,

**[00:49:01]** we have almost the highest in Europe,

**[00:49:03]** and our income tax is almost one of the lowest,

**[00:49:05]** so you collect a lot

**[00:49:07]** by burdening low-income people,

**[00:49:09]** because you collect a lot

**[00:49:11]** where there are no tax discounts,

**[00:49:13]** with those flat,

**[00:49:15]** percentage flat contributions.

**[00:49:17]** There is another sub-problem,

**[00:49:19]** that in the Czech Republic there is a huge difference

**[00:49:21]** between taxation of employees

**[00:49:23]** and the self-employed.

**[00:49:25]** We have a lot...

**[00:49:27]** We have some of the highest...

**[00:49:29]** With Poland and about two other countries,

**[00:49:31]** we have the most self-employed in Europe,

**[00:49:33]** because there is a huge difference

**[00:49:35]** in the taxation of employees and the self-employed.

**[00:49:37]** The self-employed are included in those taxes

**[00:49:39]** from work, that is, combined in this graph.

**[00:49:41]** So if you excluded them

**[00:49:43]** in those countries, the difference would grow even more

**[00:49:45]** compared to Europe, how much we collect

**[00:49:47]** from employees. We simply collect enormously

**[00:49:49]** from Czech employees' work.

**[00:49:51]** That has its disadvantages,

**[00:49:53]** because it slows down

**[00:49:55]** employment as an activity,

**[00:49:57]** and business creation.

**[00:50:00]** It serves the working poor, as I said, and so on.

**[00:50:04]** On the other hand, we collect very little from real estate and other types of assets.

**[00:50:09]** These are mainly real estate.

**[00:50:12]** We collect one percent tax there in the UVMix, the OECD average is 6%,

**[00:50:18]** but countries like Poland and others collect many times more than we do on that property.

**[00:50:25]** The UVMix is balanced in that it taxes activity, not passive assets,

**[00:50:30]** which has major downsides.

**[00:50:34]** It has other problems, for example taxing consumption and the like,

**[00:50:39]** but in consumption taxes there are big gaps in taxing alcohol,

**[00:50:44]** quiet wine, it does not index consumption taxes, so consumption taxes

**[00:50:48]** in the Czech Republic are set by some political decision,

**[00:50:52]** and if you plot their real value curve, it declines,

**[00:50:57]** the real value of those consumption taxes, and conversely labor taxation,

**[00:51:01]** there is a taxpayer allowance, for example, which is also not indexed,

**[00:51:04]** so when wages rise and the allowances stay the same,

**[00:51:07]** for example, the allowance for the first child has been about 15,000 CZK for 10 years,

**[00:51:12]** so effective labor taxation increases.

**[00:51:15]** So the system of non-indexation in consumption taxes and allowances

**[00:51:19]** leads to increased labor taxation,

**[00:51:22]** especially increasing taxation on low-wage earners,

**[00:51:26]** and decreasing taxation through consumption taxes,

**[00:51:30]** so this problem is basically automatic.

**[00:51:34]** So what does what I said about heavily taxing social and health contributions lead to?

**[00:51:40]** And on which there are no tax allowances?

**[00:51:43]** It leads to a curve showing how much the bottom 20%,

**[00:51:46]** the poorest employees, pay from labor costs, the second, third, fourth 20%.

**[00:51:50]** So you see the black curve is how it worked in 2020,

**[00:51:53]** before the super-gross wage reform.

**[00:51:56]** There the richest 20% paid from labor costs,

**[00:52:00]** from the super-gross wage, 44%, and the poorest 20% paid 37%.

**[00:52:03]** This is already one of the lowest levels of progressivity.

**[00:52:06]** It is some progressivity, driven by tax allowances

**[00:52:11]** and a slightly higher rate.

**[00:52:15]** But it is one of the lowest levels of progressivity,

**[00:52:18]** which can result in the 37% labor cost burden being high

**[00:52:21]** for low-wage earners.

**[00:52:25]** As I said, this is the example with the minimum wage.

**[00:52:30]** This is after all allowances, simulated on real taxpayers,

**[00:52:41]** So after accounting for all tax discounts and similar,

**[00:52:44]** the poorest fifth of employees,

**[00:52:47]** paid 37% in taxes and contributions.

**[00:52:50]** Then those tax changes came into effect.

**[00:52:53]** The gray line shows what happened after that super-good wage.

**[00:52:57]** You see, I don't know if you can see it well on the graph,

**[00:53:00]** but it dropped a lot on the right,

**[00:53:03]** or rather from the second fifth to the fifth fifth it dropped relatively strongly,

**[00:53:08]** but the taxation of the poorest fifth of employees dropped very little.

**[00:53:12]** Because unfortunately, these employees often don't pay any income tax anymore,

**[00:53:16]** but they pay high social and health insurance contributions.

**[00:53:19]** So if you lower income tax, you don't help them.

**[00:53:22]** You have to do something about social and health insurance contributions.

**[00:53:25]** So we reduced progressivity and with those tax changes,

**[00:53:29]** we helped the poorest employees very little.

**[00:53:32]** And now the blue line, what happened under Petr Fiala's government,

**[00:53:36]** it basically added the same for everyone.

**[00:53:38]** So there is a series of measures that are basically neutral.

**[00:53:41]** But the result is that between 2020 and 2024,

**[00:53:46]** the middle and high earners benefited quite well from employee taxes.

**[00:53:50]** Almost none of it went to the low earners,

**[00:53:53]** the poorest fifth.

**[00:53:55]** That's one problem.

**[00:53:57]** The second problem is, these are graphs on the left showing,

**[00:54:01]** how much social contributions are paid by self-employed persons.

**[00:54:05]** There you see that if the curve was slightly descending,

**[00:54:10]** here it is descending.

**[00:54:15]** On the X-axis of the left graph is the gross income of the self-employed,

**[00:54:16]** and on the Y-axis are social contributions,

**[00:54:21]** which are calculated from the real net profit of the self-employed.

**[00:54:24]** And the two lines depend on whether the self-employed have high costs

**[00:54:29]** or low costs.

**[00:54:31]** And what the graph says is that in the Czech Republic,

**[00:54:34]** low-income self-employed on the left side of the graph,

**[00:54:36]** actually pay a high percentage in social contributions.

**[00:54:38]** This is because

**[00:54:40]** you have a low percentage of those social contributions,

**[00:54:48]** that's from some kind of reduced base,

**[00:54:51]** we can discuss the details later,

**[00:54:53]** but you have relatively high minimum social contributions there.

**[00:54:55]** That means all self-employed with

**[00:54:57]** an income of about 550 thousand gross,

**[00:54:59]** which is in those lump-sum expenses,

**[00:55:01]** simply pay those minimums.

**[00:55:03]** And for a person who is in prison,

**[00:55:05]** has low sales, low gross income,

**[00:55:08]** they pay on social contributions

**[00:55:10]** a relatively large percentage of their profit,

**[00:55:12]** especially if they have high actual expenses.

**[00:55:16]** If they have relatively low average income

**[00:55:18]** and high actual expenses,

**[00:55:20]** they pay a lot on social contributions,

**[00:55:22]** the same goes for health contributions.

**[00:55:24]** And the higher your income,

**[00:55:27]** the smaller percentage you pay on social contributions,

**[00:55:30]** and then from a certain point it pays off to switch

**[00:55:32]** to the lump-sum tax, so-called,

**[00:55:34]** where you pay a fixed amount

**[00:55:36]** regardless of your income,

**[00:55:38]** and there was another regression there.

**[00:55:40]** So a person with 1.5 million in sales

**[00:55:44]** can be in that bracket,

**[00:55:46]** the first lump-sum tax bracket,

**[00:55:48]** paying on social contributions

**[00:55:50]** it used to be about half a thousand crowns,

**[00:55:52]** so 1.15 times the minimum contributions,

**[00:55:54]** now it's around 4 thousand,

**[00:55:56]** paying basically the same

**[00:55:58]** as a low-income self-employed person

**[00:56:00]** who earns 400 thousand annually.

**[00:56:04]** So there is huge regressivity

**[00:56:06]** in how the system works with self-employed people.

**[00:56:10]** So when there's that conflict

**[00:56:12]** between self-employed and employees,

**[00:56:14]** there is still a big inequality

**[00:56:16]** among the self-employed themselves.

**[00:56:18]** That they are not a single group of self-employed.

**[00:56:20]** With low, middle, and direct

**[00:56:22]** and real costs somewhere in the villages

**[00:56:24]** and then a group of sole proprietors

**[00:56:26]** with a flat tax, who have

**[00:56:28]** in office professions realistically minimal costs.

**[00:56:31]** And they are doing very well in that system.

**[00:56:33]** So there is a big inequality.

**[00:56:35]** And the graph on the right shows another thing.

**[00:56:37]** It shows how much households pay in property tax,

**[00:56:39]** also according to their income.

**[00:56:42]** And it shows that in property tax

**[00:56:44]** low-income people in Czechia pay a much larger part of their income

**[00:56:46]** than others.

**[00:56:48]** Why property tax is not linked

**[00:56:50]** to the price of the property,

**[00:56:52]** but to its size

**[00:56:54]** and some types of areas,

**[00:56:56]** but very loosely.

**[00:56:58]** And because it is not linked

**[00:57:00]** to the price, low-income people pay

**[00:57:02]** relatively a lot on property tax.

**[00:57:04]** Even those villagers,

**[00:57:06]** with a house of low value

**[00:57:08]** that they might rent out or so.

**[00:57:10]** And a negligible amount

**[00:57:12]** is paid by high-income people

**[00:57:14]** with expensive properties.

**[00:57:16]** So I just want to say

**[00:57:18]** that we have very little progressivity

**[00:57:20]** in employee income taxes,

**[00:57:22]** where we tax low-income employees a lot,

**[00:57:24]** as I showed before.

**[00:57:26]** And at the same time, in other systems,

**[00:57:28]** we have a regressive system,

**[00:57:30]** where we collect a higher percentage

**[00:57:32]** from the poor.

**[00:57:34]** This logically applies more to me,

**[00:57:36]** at least according to your expectations,

**[00:57:38]** in excise taxes.

**[00:57:42]** Alcohol, because that's

**[00:57:44]** from a liter of that drink and so on,

**[00:57:46]** the low-income earners pay more.

**[00:57:48]** So we have a system

**[00:57:50]** where we don't treat poor people

**[00:57:52]** fairly in employee income tax,

**[00:57:54]** and on top of that, we harm them

**[00:57:56]** in many other systems.

**[00:57:58]** This creates the working poor

**[00:58:00]** I was talking about,

**[00:58:02]** this causes us to

**[00:58:04]** drain money from poor regions,

**[00:58:06]** where it could go to developing services.

**[00:58:08]** If we didn't have to,

**[00:58:10]** if we had a smarter tax mix.

**[00:58:12]** Regarding what the Czech benefit system is based on,

**[00:58:14]** this is a kind of waterfall chart

**[00:58:16]** that shows,

**[00:58:18]** when you earn a thousand crowns,

**[00:58:20]** here it is,

**[00:58:22]** the labor cost when it increases by a thousand crowns,

**[00:58:24]** when your employer adds

**[00:58:26]** a thousand crowns to your super-gross salary,

**[00:58:28]** then 350 crowns are lost

**[00:58:30]** in taxes and contributions,

**[00:58:32]** from that 35% from poor people.

**[00:58:34]** Labor costs are lost

**[00:58:36]** in taxes and contributions,

**[00:58:38]** and another 491 crowns are lost

**[00:58:40]** because your benefits for living and housing

**[00:58:42]** are reduced,

**[00:58:44]** since they depend on your income,

**[00:58:46]** so you are penalized in benefits.

**[00:58:48]** When a poor person on benefits

**[00:58:50]** has their labor costs increased,

**[00:58:52]** super-gross salary by a thousand crowns,

**[00:58:54]** it actually results in

**[00:58:56]** their net income increasing

**[00:59:02]** by 159 crowns.

**[00:59:04]** So the combination of relatively high taxes

**[00:59:06]** those low-threshold benefits and those allowances

**[00:59:08]** leads to

**[00:59:10]** a huge motivation

**[00:59:12]** to work off the books

**[00:59:14]** and a big demotivation to increase income.

**[00:59:16]** That should change now.

**[00:59:18]** A reform of the benefit system is underway,

**[00:59:20]** which at least

**[00:59:22]** the last two

**[00:59:24]** two parts...

**[00:59:26]** Won't change your taxes,

**[00:59:28]** but will significantly change

**[00:59:30]** how much you keep...

**[00:59:32]** in benefits for your work activity.

**[00:59:34]** So the reform will have many problems,

**[00:59:36]** but it has some positives.

**[00:59:38]** So.

**[00:59:40]** We kind of pasted this

**[00:59:42]** into the presentation, as graphs aren't always

**[00:59:44]** the prettiest,

**[00:59:46]** but the last problem

**[00:59:48]** is executions (debt collections).

**[00:59:50]** I want to point this out.

**[00:59:52]** Look at how the curve grows.

**[00:59:54]** At the bottom is the person's gross wage,

**[00:59:56]** at the top is how their net income changes.

**[00:59:58]** Net income is work

**[01:00:00]** plus benefit income minus execution deductions

**[01:00:04]** or insolvency deductions.

**[01:00:06]** What's interesting about this graph is

**[01:00:09]** how very little it grows

**[01:00:11]** when your gross wage increases from 25 thousand,

**[01:00:14]** which is here at about 50 thousand.

**[01:00:17]** So you increase your gross wage

**[01:00:19]** from 25 thousand to 50 thousand

**[01:00:21]** and you are rewarded

**[01:00:23]** with an increase in net income of about a thousand crowns.

**[01:00:28]** If you are in insolvency

**[01:00:30]** or the so-called priority execution.

**[01:00:32]** What causes this?

**[01:00:34]** It is caused by the fact that we have

**[01:00:36]** in insolvency, which is debt relief,

**[01:00:38]** and in priority execution,

**[01:00:40]** which are executions when you owe VZP,

**[01:00:42]** any state,

**[01:00:44]** state institution or alimony,

**[01:00:46]** most people in the Czech Republic

**[01:00:48]** have some form of this priority execution,

**[01:00:50]** if they are in execution,

**[01:00:52]** two-thirds of the income is taken,

**[01:00:54]** which you earn above some non-seizable minimum.

**[01:00:56]** That is the deduction.

**[01:00:58]** And at the same time,

**[01:01:00]** benefits are calculated,

**[01:01:02]** entitlement to benefits

**[01:01:04]** is calculated from income before those deductions.

**[01:01:06]** So when a person increases

**[01:01:08]** for example from 25 thousand to 50,

**[01:01:10]** they basically

**[01:01:12]** lose eligibility for benefits,

**[01:01:14]** because at 50 thousand you no longer

**[01:01:16]** qualify for benefits,

**[01:01:18]** so they lose all benefits.

**[01:01:20]** And at the same time, if they increase

**[01:01:22]** for example to 24 thousand,

**[01:01:24]** two-thirds of that is taken

**[01:01:26]** by the insolvency deduction. So their net income

**[01:01:28]** is basically the same as if they hadn't increased it.

**[01:01:30]** Because the reduction of benefits and the deduction

**[01:01:32]** combine so that

**[01:01:34]** they have

**[01:01:36]** very little motivation to work.

**[01:01:38]** Sometimes even,

**[01:01:40]** this is an example of a family member,

**[01:01:42]** the deductions depend on the type of family,

**[01:01:44]** sometimes it is even negative,

**[01:01:46]** where your income increases,

**[01:01:48]** you increase your gross wage

**[01:01:50]** when their income is tied up in executions

**[01:01:52]** and insolvencies.

**[01:01:54]** So to sum it up,

**[01:01:56]** we have a tax system

**[01:01:58]** that takes a lot of money from poor employees,

**[01:02:00]** a benefits system

**[01:02:02]** that motivates them not to increase their income,

**[01:02:04]** and if they are in executions and insolvency,

**[01:02:06]** you'd be crazy,

**[01:02:08]** to try

**[01:02:10]** to raise your gross wage by 25 thousand

**[01:02:12]** and end up with just 100 thousand.

**[01:02:14]** Like that.

**[01:02:16]** That's how we want people to want to increase it.

**[01:02:18]** There should be tools

**[01:02:20]** to monitor the grey economy,

**[01:02:22]** but at the same time, the system's foundation

**[01:02:24]** can't have such a huge demotivation built in.

**[01:02:26]** So unfortunately, this creates the grey economy,

**[01:02:28]** the combination of these things,

**[01:02:30]** creates poverty,

**[01:02:32]** dependency on benefits,

**[01:02:34]** which people simply can't escape from,

**[01:02:36]** and they are demotivated

**[01:02:38]** to break free from that system.

**[01:02:40]** Because of this, we destabilize families with children.

**[01:02:42]** Because they get stuck

**[01:02:44]** in such unstable grey economy,

**[01:02:46]** the grey economy is very unstable,

**[01:02:48]** relying on casual work.

**[01:02:50]** And the destabilization of families

**[01:02:52]** with children is connected, as I showed,

**[01:02:54]** this type of poverty is linked to education.

**[01:02:56]** So that's the

**[01:02:58]** micro-level of the impacts.

**[01:03:00]** And the macro-level is that

**[01:03:02]** we drain unnecessary money

**[01:03:04]** from the purchasing power in those regions.

**[01:03:06]** If we left it there taxed

**[01:03:10]** a bit differently, so people

**[01:03:12]** could invest in local services and we could grow

**[01:03:14]** the sector of the economy that is currently most lacking.

**[01:03:16]** Because

**[01:03:18]** it can't be subsidized.

**[01:03:20]** You can't give a 20 billion subsidy

**[01:03:22]** to grow local services.

**[01:03:24]** Services are simply driven by

**[01:03:26]** the purchasing power of the residents.

**[01:03:28]** We are limiting consumption

**[01:03:30]** of households.

**[01:03:32]** It's just

**[01:03:34]** a disaster, when in this rush

**[01:03:36]** since 2022

**[01:03:38]** even Babiš's people

**[01:03:40]** explain,

**[01:03:44]** explain that when you have this

**[01:03:46]** economic crisis, which is

**[01:03:48]** especially now.

**[01:03:50]** It is also a demand crisis.

**[01:03:52]** Domestic demand has dropped

**[01:03:54]** and that is one of the factors, not the only one,

**[01:03:56]** of course, but one of the factors why

**[01:03:58]** the economy is stagnating. Why we are one of the countries that has

**[01:04:00]** GDP at pre-COVID levels.

**[01:04:02]** So one of those factors

**[01:04:04]** is the limitation of domestic demand.

**[01:04:06]** We observe data that

**[01:04:08]** we and the CNB in parallel see that it is limited

**[01:04:10]** by the bottom 40%

**[01:04:12]** of economically active households.

**[01:04:14]** It would be logical

**[01:04:16]** to make a tax reform that helps them.

**[01:04:18]** To index the allowance for the first child

**[01:04:20]** and help

**[01:04:22]** the poorer households.

**[01:04:24]** We didn't do that. We increased

**[01:04:26]** sick pay, we did things that

**[01:04:28]** actually hurt some of those poorer

**[01:04:30]** households even more.

**[01:04:32]** they increased the tax collection.

**[01:04:34]** And by that, we limit...

**[01:04:36]** We got to the point where

**[01:04:38]** a larger share than in other countries

**[01:04:40]** the economy

**[01:04:42]** was slowed down by the decline

**[01:04:44]** in domestic demand, and only now is that changing.

**[01:04:46]** In my opinion, in the second quarter of '24

**[01:04:48]** a change will come, because

**[01:04:50]** we see a big change

**[01:04:52]** at the beginning of the second quarter

**[01:04:54]** in expectations

**[01:04:56]** and people's behavior.

**[01:04:58]** But it will drag on

**[01:05:00]** for a longer time, because

**[01:05:02]** it will take time for the real incomes

**[01:05:04]** of poorer households to return to their original level,

**[01:05:06]** so that will still take time.

**[01:05:08]** So we are not helping

**[01:05:10]** the economy, because we are dampening

**[01:05:12]** domestic demand at a time when

**[01:05:14]** it is that woman, or that dampening

**[01:05:16]** is caused by the reduced demand

**[01:05:18]** of poorer households.

**[01:05:20]** And we have high labor costs,

**[01:05:22]** which obviously limits

**[01:05:24]** business opportunities. I don't know if anyone

**[01:05:26]** has ever started a company,

**[01:05:28]** when you employ people,

**[01:05:30]** the cash flow at the start

**[01:05:32]** is hard to manage.

**[01:05:34]** You can't compete with established

**[01:05:36]** companies, but to start employing,

**[01:05:38]** you can, but you need a good plan,

**[01:05:40]** some backing, some investor.

**[01:05:42]** It's just very complicated,

**[01:05:44]** it slows down the start of business,

**[01:05:46]** the high costs

**[01:05:48]** of employing labor.

**[01:05:50]** And the low social mobility is related

**[01:05:52]** in the data

**[01:05:54]** with significantly greater distrust among those people

**[01:05:56]** from lower classes

**[01:06:00]** in the social system

**[01:06:02]** and in institutions, in courts,

**[01:06:04]** in the post-November development and so on.

**[01:06:06]** Trust in institutions depends heavily

**[01:06:08]** not only on the level of inequalities,

**[01:06:10]** which are still relatively limited in the Czech Republic,

**[01:06:12]** but on mobility,

**[01:06:14]** on opportunities, on the likelihood

**[01:06:16]** that you will overcome your parents' status,

**[01:06:18]** and on the fact that society is

**[01:06:20]** merit-based.

**[01:06:22]** Unfortunately, we somewhat limit that with these systems.

**[01:06:26]** I think I'm at the end,

**[01:06:28]** so it should be accessible,

**[01:06:30]** if you were to pay off your debts at the end.

**[01:06:32]** It should be accessible,

**[01:06:34]** if you were to pay off your debts at the end.

**[01:06:36]** So that's all.

**[01:06:38]** So that's all.

**[01:06:40]** So that's all.

**[01:06:42]** So that's all.

**[01:06:44]** So that's all.

**[01:06:46]** So that's all.

**[01:06:48]** So that's all.

**[01:06:50]** So that's all.

**[01:06:52]** So that's all.

**[01:06:54]** So that's all.

**[01:06:56]** So that's all.

**[01:07:26]** So that's all.

**[01:07:28]** So that's all.

**[01:07:30]** So that's all.

**[01:07:32]** So that's all.

**[01:07:34]** So that's all.

**[01:07:36]** So that's all.

**[01:07:38]** So that's all.

**[01:07:40]** So that's all.

**[01:07:42]** So that's all.

**[01:07:44]** So that's all.

**[01:07:46]** So that's all.

**[01:07:48]** So that's all.

**[01:07:50]** So that's all.

**[01:07:52]** So that's all.

**[01:07:54]** So that's all.

**[01:08:24]** So that's all.

**[01:08:54]** So that's all.

**[01:09:24]** So that's all.

**[01:09:26]** So that's all.

**[01:09:28]** So that's all.

**[01:09:30]** So that's all.

**[01:09:32]** So that's all.

**[01:09:34]** So that's all.

**[01:09:36]** So that's all.

**[01:09:38]** So that's all.

**[01:09:40]** So that's all.

**[01:09:42]** So that's all.

**[01:09:44]** So that's all.

**[01:09:46]** So that's all.

**[01:09:48]** So that's all.

**[01:09:50]** So that's all.

**[01:09:52]** So that's all.

**[01:09:54]** So that's all.

**[01:09:56]** So that's all.

**[01:09:58]** So that's all.

**[01:10:00]** A big part of the issue is that the goal of the tax reform

**[01:10:04]** should be, if possible, to lower taxes for low- and middle-income employees,

**[01:10:09]** to fix the systems so that taxation isn't regressive,

**[01:10:13]** so that, for example, individuals with lower incomes aren't taxed more than the wealthy,

**[01:10:17]** property tax reform should aim to collect more and do it better,

**[01:10:23]** in a way that doesn't burden low-income owners and instead encourages the use of land,

**[01:10:28]** so people don't hold onto empty building plots, but rather build on them.

**[01:10:35]** Then closing loopholes in harmful consumption, which has major social impacts,

**[01:10:41]** like alcohol, where we could collect 10 billion from alcohol consumption,

**[01:10:44]** if the main loopholes were closed and taxes were indexed.

**[01:10:48]** Gambling and other things.

**[01:10:51]** There is potential in these areas with externalities to collect 15-20 billion in total,

**[01:10:57]** which could save on taxing employee labor.

**[01:11:01]** These are well-known solutions, some already fully proposed,

**[01:11:05]** By 2025, we will design the specific form of those reforms.

**[01:11:12]** And what I mean is, it could be a mess.

**[01:11:17]** Everything can change if we try.

**[01:11:19]** And that's how I wanted to end it.

**[01:11:23]** So, thanks.

**[01:11:31]** I'm going to sit with you now.

**[01:11:34]** There were a lot of questions.

**[01:11:36]** Yeah?

**[01:11:37]** Well, yeah, sure.

**[01:11:39]** Actually, listening to all this,

**[01:11:43]** I'll try, and the questions are somewhat directed,

**[01:11:47]** I want to be that golden man.

**[01:11:49]** That means, you are now with those people,

**[01:11:53]** who decide on this,

**[01:11:55]** and you kind of show them,

**[01:11:57]** show them the numbers and data and all that.

**[01:12:00]** So what happens there now?

**[01:12:03]** Or why doesn't anything happen there?

**[01:12:07]** The question is, when you put it like this,

**[01:12:10]** I can look at it from two perspectives.

**[01:12:12]** One perspective is, I am the chosen one,

**[01:12:15]** and I actually don't want to deal with it,

**[01:12:17]** because if you raise my property tax from one percent to six,

**[01:12:20]** then yeah, well...

**[01:12:23]** That's not good.

**[01:12:25]** For many of us, it wouldn't be worth it.

**[01:12:27]** In the short term, it pays off by

**[01:12:29]** supporting this economy and the growth of poor regions.

**[01:12:32]** Then in some ways, it comes back, of course.

**[01:12:34]** And that's exactly what I want to get to.

**[01:12:36]** When I look short-term

**[01:12:39]** at my wallet, it's clear, it's negative,

**[01:12:43]** but when I look at

**[01:12:45]** what it causes secondarily in society,

**[01:12:48]** who gains power and how it can end,

**[01:12:52]** look beyond Slovakia's borders,

**[01:12:55]** for me, it's quite alarming.

**[01:12:59]** I wonder if those people see it or not.

**[01:13:02]** Tell us how it plays out there and what's happening.

**[01:13:05]** One thing is, for example, the nerve,

**[01:13:08]** The design of these advisory bodies is very inefficient in that,

**[01:13:11]** they are these older ones,

**[01:13:15]** I am, for example, the youngest there,

**[01:13:17]** or Dominika is probably younger.

**[01:13:20]** But we have no,

**[01:13:24]** it's unpaid, of course,

**[01:13:26]** but you don't even have an agreement with someone,

**[01:13:29]** who would count it for you or something like that.

**[01:13:32]** So the proposals are very general because of that.

**[01:13:34]** And the nerve has no data from the state,

**[01:13:36]** on which I could base it.

**[01:13:38]** So these are often very general proposals.

**[01:13:40]** And secondly, even if I weren't there,

**[01:13:43]** there were lots of very smart people.

**[01:13:45]** Libor Dušek, Petr Jánský, Dan Menech,

**[01:13:47]** even Mojmil Hampol.

**[01:13:50]** Lots of smart people.

**[01:13:52]** And there simply isn't a single...

**[01:13:56]** It's not like Libor Dušek would have

**[01:13:59]** some idea on how to reduce the number of prisoners

**[01:14:02]** in the Czech Republic, for example.

**[01:14:04]** Which is also a problem I didn't mention.

**[01:14:06]** More marginal, but also important.

**[01:14:08]** And they would sit down and he would present it to them

**[01:14:10]** and explain it.

**[01:14:12]** The nerve just gives some paper,

**[01:14:14]** some proposal, which is not general.

**[01:14:16]** Then it meets with the ministers and the government.

**[01:14:19]** And now the discussion...

**[01:14:21]** For example, 80% of the talking is by the ministers.

**[01:14:24]** And they complain about what doesn't work and what they do.

**[01:14:27]** And that someone doesn't want it and so on.

**[01:14:30]** So they kind of exaggerate it,

**[01:14:33]** pour out their hearts.

**[01:14:35]** And actually, there is no discussion

**[01:14:37]** that would really lead to a solution.

**[01:14:41]** It never is.

**[01:14:43]** If it works out, they take the proposal

**[01:14:45]** and then transfer it to some kind of, for example, the so-called circle five,

**[01:14:50]** so it never succeeded.

**[01:14:52]** So there is no effective discussion about it.

**[01:14:55]** That's a completely bad design

**[01:14:57]** of those advisory bodies, I think.

**[01:14:59]** The second thing is, as you say,

**[01:15:01]** of course, it's not profitable for anyone.

**[01:15:03]** And unfortunately, we are in a situation

**[01:15:05]** where one side is buying pensioners

**[01:15:07]** and the other side is buying voters.

**[01:15:10]** And it got stuck in that kind of pragmatism.

**[01:15:14]** And the third problem is that,

**[01:15:16]** in my opinion...

**[01:15:19]** That's really the root of the problem,

**[01:15:21]** and the blue chance, people don't know

**[01:15:23]** how much they pay for it.

**[01:15:25]** And it's simply a hidden tax.

**[01:15:27]** And there is no party in the Czech Republic

**[01:15:29]** that effectively stands on their side.

**[01:15:31]** Either they exploit it by

**[01:15:33]** inciting against someone,

**[01:15:35]** or they only promise higher spending,

**[01:15:37]** but there is no party that

**[01:15:39]** has this in their program, I think.

**[01:15:41]** Such reforms that benefit

**[01:15:43]** the poor regions and so on.

**[01:15:45]** I think there aren't any.

**[01:15:47]** Maybe there were in the past in the Czech Republic,

**[01:15:49]** but now they are marginalized.

**[01:15:51]** So there is no competition

**[01:15:53]** of political programs.

**[01:15:55]** And you have to describe it together.

**[01:15:57]** Because only as a whole does it make sense.

**[01:15:59]** If you make marginal changes,

**[01:16:01]** they always come at someone's expense

**[01:16:03]** and then they don't get done.

**[01:16:05]** Because you can't just do something

**[01:16:07]** that comes at the expense, I don't know,

**[01:16:09]** of raising property tax.

**[01:16:11]** I think it includes labor tax.

**[01:16:13]** You have to do the overall reform,

**[01:16:15]** not just those marginal parts.

**[01:16:17]** That's why it doesn't get implemented.

**[01:16:19]** And then there's another thing.

**[01:16:21]** When something falls through,

**[01:16:25]** it's often about taxes.

**[01:16:27]** There are these blocks.

**[01:16:29]** Then, for example, they wanted to change the benefits.

**[01:16:31]** Now they managed to change it,

**[01:16:33]** and we consulted on

**[01:16:35]** the benefits reform.

**[01:16:37]** And there's also the labor research institute,

**[01:16:39]** and together, I think, it's significantly improving.

**[01:16:41]** Compared to the proposal from September.

**[01:16:43]** And this should work,

**[01:16:45]** that there are some analytical teams,

**[01:16:47]** attached to the ministry,

**[01:16:49]** and there's much stronger analytical support,

**[01:16:51]** because it has the effect that it succeeds.

**[01:16:53]** So that's one thing.

**[01:16:55]** There are still mistakes,

**[01:16:57]** but it works,

**[01:16:59]** when there's some analysis of impacts and so on.

**[01:17:01]** And the third thing is,

**[01:17:03]** somewhere, especially with executions,

**[01:17:05]** something is proposed,

**[01:17:07]** there are good department heads

**[01:17:09]** in justice,

**[01:17:11]** who understand it,

**[01:17:13]** but then there's a strong lobby

**[01:17:15]** through some deputies

**[01:17:17]** to not do it,

**[01:17:19]** because it involves huge money

**[01:17:21]** for certain target groups.

**[01:17:23]** So it's a power game

**[01:17:25]** more than, say,

**[01:17:27]** a political-competence issue.

**[01:17:29]** So these are

**[01:17:31]** various barriers,

**[01:17:33]** and the main barrier is that

**[01:17:35]** we have a weak government office.

**[01:17:37]** I would imagine,

**[01:17:39]** that the government office has some priorities.

**[01:17:41]** For example, it says the program for the governing government

**[01:17:43]** is to build ten thousand apartments annually.

**[01:17:45]** Simply, they are not being built.

**[01:17:47]** And it should have some priorities,

**[01:17:49]** some program, and quarterly it should want

**[01:17:51]** the government office,

**[01:17:53]** to report on how you are fulfilling it from the ministries

**[01:17:55]** and push them.

**[01:17:57]** And that doesn't happen, which is why it depends

**[01:17:59]** on the ministers, how much they do it.

**[01:18:01]** So, for example, I think Marian Ruječka

**[01:18:03]** and the Ministry of Labor and Social Affairs

**[01:18:05]** are trying to do something.

**[01:18:07]** Although they do it imperfectly, some pension reform

**[01:18:09]** and benefits reform will happen.

**[01:18:11]** But other things

**[01:18:13]** are not happening at all in the construction

**[01:18:15]** of those apartments.

**[01:18:17]** So there is a lack of

**[01:18:19]** some management

**[01:18:21]** and accountability, responsibility

**[01:18:23]** in fulfilling the program.

**[01:18:25]** That's probably why nothing is happening.

**[01:18:27]** A little bit is happening,

**[01:18:29]** but I think it would be useful.

**[01:18:31]** To have some pressure.

**[01:18:33]** Actually, a bit, when

**[01:18:35]** you talk, it seems to me

**[01:18:37]** that in December Tomáš Šebek was here

**[01:18:39]** with the Minister of Health

**[01:18:41]** and he was showing again

**[01:18:43]** where we pour money

**[01:18:45]** into solving something that could be addressed

**[01:18:47]** through some kind of prevention.

**[01:18:49]** And in my opinion, it's quite similar,

**[01:18:51]** only I understand that here it is more tangled

**[01:18:53]** with political preferences

**[01:18:55]** and so on, that this is just

**[01:18:57]** one ministry, but basically also said,

**[01:18:59]** look, we have no data, no one wants to give it to us.

**[01:19:01]** We could work with that.

**[01:19:03]** Tomáš, that is...

**[01:19:07]** These are not all the problems of the Czech Republic.

**[01:19:09]** One problem of the Czech Republic is that healthcare spending is rising enormously.

**[01:19:11]** Right now it's at 9.5% of GDP,

**[01:19:13]** and a few years ago it was 7.5% of GDP.

**[01:19:15]** And it's because,

**[01:19:17]** as Tomáš says,

**[01:19:19]** we have terribly neglected prevention,

**[01:19:21]** and about 70% of that spending

**[01:19:23]** goes to treating chronic diseases.

**[01:19:25]** We have the highest alcoholism

**[01:19:27]** in the Czech Republic, in Europe,

**[01:19:29]** or the highest alcohol consumption, to put it correctly,

**[01:19:31]** and above-average obesity,

**[01:19:33]** underfunded mental health,

**[01:19:37]** which then spills over

**[01:19:39]** into other health problems.

**[01:19:41]** So prevention is terribly underfunded

**[01:19:43]** and unmanaged.

**[01:19:45]** Those, I don't know what Tomáš said,

**[01:19:47]** prevention programs run by insurance companies,

**[01:19:49]** are basically just small bribes

**[01:19:51]** to insured people,

**[01:19:53]** excise taxes are leaky.

**[01:19:55]** That's a big problem.

**[01:19:57]** And that's a bigger mystery. There shouldn't even be resistance there. Everyone should agree on that.

**[01:20:00]** So I'll move on to your questions to push this forward a bit.

**[01:20:07]** The first, most highlighted one, maybe it was already asked, but what do our governments do,

**[01:20:14]** whether current or previous, if everything is known, why do you think they don't address it,

**[01:20:20]** do you see any progress for the better? At least to conclude, progress for the better.

**[01:20:26]** I see progress in that there is broad agreement.

**[01:20:31]** If I let the nerve vote on it, it probably wouldn't be unanimous.

**[01:20:37]** Let's say there are people who wouldn't agree with everything, but there is broad agreement

**[01:20:41]** among a large part of the experts. I think more sides are starting to realize this

**[01:20:47]** and it's trickling into programs. I hope it's more in the public space,

**[01:20:53]** which I personally try to promote. That maybe the next elections, that's our goal,

**[01:21:05]** even if we design things that won't be popular, so that the next elections aren't about,

**[01:21:11]** two main parties promising lower taxes and basically higher spending.

**[01:21:16]** One promises higher spending on pensions, the other on defense and education,

**[01:21:20]** and they have to cover 250 billion somehow. When elections are like this,

**[01:21:24]** the parties aren't coordinated. When the media allow elections to be like this,

**[01:21:28]** they aren't coordinated to form rational programs.

**[01:21:32]** I would say one of the main drivers of change is that the public space

**[01:21:38]** and media don't allow such populist framing of campaigns. And I don't just mean that,

**[01:21:44]** I also blame the realistic program activities in 2021.

**[01:21:49]** I think that's changing. And in some areas, it's changing even in the reforms

**[01:21:53]** that have passed. The debt relief reform that MPs have to hide.

**[01:21:57]** The benefits system is changing. The pension system was reformed in bits,

**[01:22:01]** but they stabilized it somewhat with parameters. If I have time, I can share

**[01:22:07]** anecdotes about how it works and on what data. You'll be surprised.

**[01:22:11]** So there are improvements. There are many enthusiastic officials

**[01:22:15]** and analysts at ministries who want to change things but hit the barriers

**[01:22:19]** I often talk about.

**[01:22:21]** I'll skip Marková's question because I'll get to it at the end.

**[01:22:26]** There is good practice abroad; what causes the failure of its implementation here?

**[01:22:30]** Is it still the same? Or are we at least looking somewhere?

**[01:22:34]** You probably know, right?

**[01:22:36]** Yes, the benefits system—when we consulted on the change with the Ministry of Labor,

**[01:22:40]** we started by researching how it works abroad.

**[01:22:44]** And it wasn't even from a foreign ministry.

**[01:22:48]** You see, for example, Estonia—when you start working,

**[01:22:52]** for the first two months, your income doesn't reduce your benefits at all.

**[01:22:55]** They stay the same, and only after that do they start to decrease.

**[01:22:58]** So there's no demotivation to start working.

**[01:23:01]** Other countries do it differently, counting part of the income and so on.

**[01:23:10]** So there's a so-called work bonus that rewards working while on benefits.

**[01:23:14]** So these practices exist in education.

**[01:23:18]** We did a study on how local education management works

**[01:23:22]** in Estonia, the Netherlands, Ontario.

**[01:23:26]** Ontario is a good example. In Canada and Finland.

**[01:23:30]** How large the authorities should be to manage areas effectively, and so on.

**[01:23:34]** No country does everything well.

**[01:23:38]** No country does everything well, but each does some things well,

**[01:23:42]** and I think adopting those from abroad is important.

**[01:23:46]** Here, as I ask, many described problems

**[01:23:50]** clearly stem from the huge fragmentation of the country.

**[01:23:54]** I'm actually thinking that when...

**[01:23:58]** Well, just try to say something about it.

**[01:24:02]** If I mention some problems that are behind these issues and are structural in the Czech Republic,

**[01:24:06]** it's that we have about six thousand municipalities,

**[01:24:10]** and maybe half a thousand of them actually have self-governing roles,

**[01:24:14]** so it's one of the biggest fragmentations of self-government,

**[01:24:18]** which also... And now these municipalities, we have a huge deficit

**[01:24:22]** in the state budget, while municipalities have over 400 billion crowns in their accounts.

**[01:24:26]** Last year they spent 70 billion, so it's absurd.

**[01:24:30]** And unfortunately, it's also because

**[01:24:34]** they are creating so-called infrastructure debt.

**[01:24:38]** They could simply spread it over two years.

**[01:24:42]** They could build more municipal housing so we wouldn't have to give so much money in housing benefits.

**[01:24:46]** But unfortunately, the system is fragmented, so many municipalities have little money,

**[01:24:50]** and if they joined forces in the ORP, they could build two or three kindergartens

**[01:24:54]** for the entire ORP. But when it's divided among 40 municipalities in that ORP,

**[01:24:58]** none of them will build even one. And they all wait for subsidies,

**[01:25:02]** to co-finance the subsidy with the money they've saved.

**[01:25:06]** That's how it works. And 400 billion crowns lie there

**[01:25:10]** at best in term deposits.

**[01:25:14]** So hundreds of billions are unused that could be invested,

**[01:25:18]** if self-government wasn't so fragmented.

**[01:25:22]** And if the municipalities, some are good, some are worse, also bore

**[01:25:26]** the costs of not solving these issues. Because unfortunately, the system works so that

**[01:25:30]** if a municipality doesn't build a school and parents have to keep their child at home until 3.5 or 4 years,

**[01:25:34]** the state covers that through parental leave.

**[01:25:40]** If they don't build municipal housing, the state covers it by giving housing benefits for commercial housing.

**[01:25:44]** And in many areas,

**[01:25:48]** municipalities don't bear the costs of not solving problems. If they did,

**[01:25:52]** if they had a real guarantee of a kindergarten spot at age 3,

**[01:25:56]** and if they didn't provide it, they had to pay the parent's parental leave,

**[01:26:00]** they would be motivated to build or invest in general.

**[01:26:04]** They would be motivated to borrow, for example. They hardly borrow now.

**[01:26:08]** So these are some solutions. And the third solution is hinted at in the nerve.

**[01:26:12]** Unfortunately, it's too much of a dream. But of course, it would be possible to do

**[01:26:16]** municipal financing so that part is paid directly and part is in some fund,

**[01:26:20]** and it can be drawn in advance with some interest.

**[01:26:24]** And better allocated over time. So a municipality that needs to build a kindergarten

**[01:26:28]** can draw financing two years ahead. It has some 2%,

**[01:26:32]** 3% interest so it doesn't get overburdened. And that way you spread it over time.

**[01:26:36]** the money much better.

**[01:26:40]** I have a question here from Matěj Štěpánek. I also like

**[01:26:44]** the idea of introducing a basic unconditional income. Wouldn't that be a solution?

**[01:26:48]** What do you think about it?

**[01:26:52]** When I show how complex the system is, of course, that complexity itself is a problem.

**[01:26:56]** And the basic unconditional income has some simplicity.

**[01:27:00]** On the other hand, it clearly exists in the sense that

**[01:27:04]** you have a taxpayer discount or a pension. Most people have some form

**[01:27:08]** of that basic unconditional income in that discount

**[01:27:12]** or in some basic pension. And secondly, the analyses

**[01:27:16]** from abroad show that the basic unconditional income

**[01:27:20]** would have to replace something in the system. It would have to replace part of those benefits

**[01:27:24]** or a large part of those benefits, or there would be private healthcare,

**[01:27:28]** which you would pay for. And now the analyses show that either you have to make it so massive

**[01:27:32]** that it is very expensive, you have to completely change the tax system,

**[01:27:36]** significantly with ecological taxes, completely like a significant increase

**[01:27:40]** in tax collection to finance it. Or, if you make it

**[01:27:44]** limited, it will harm the poorer people even more than the current state.

**[01:27:48]** I think there is no sweet spot,

**[01:27:52]** where you can do it so that it helps simplify things

**[01:27:56]** and is high enough to benefit

**[01:28:00]** for example, most of the poorer third.

**[01:28:04]** I'm afraid it's more of a

**[01:28:08]** distraction, or how should I put it.

**[01:28:12]** We should rather design the basic things better,

**[01:28:16]** which we know are flawed. Maybe in the future it will be a topic.

**[01:28:20]** Mark's question comes now.

**[01:28:24]** What can I do as an individual? How can I contribute to change?

**[01:28:28]** What can you actually contribute?

**[01:28:32]** In the locality, in communication for sure.

**[01:28:36]** There, if the actors are active, they can move

**[01:28:40]** the fragmented system. More active actors can

**[01:28:44]** initiate change there.

**[01:28:48]** Otherwise, it's just kind of...

**[01:28:52]** So there are areas where it can be done individually. There are areas with things like,

**[01:28:56]** you can help a person in distress to solve social problems

**[01:29:00]** like executions and similar. And then it's very much about,

**[01:29:04]** how should I say, what we don't like in Czechia, and that is engagement,

**[01:29:08]** political, civic engagement.

**[01:29:12]** I don't know how old Mark is,

**[01:29:16]** I just expect that students will have discussions and student

**[01:29:20]** clubs about this, so it grows like an underground network.

**[01:29:24]** The discussion about these changes, like the grassroots of a more educated society.

**[01:29:28]** I think that's the main change, to talk about it a lot.

**[01:29:32]** And so...

**[01:29:36]** There are definitely things where individual engagement helps more than what I mentioned.

**[01:29:40]** Well, I definitely want to thank you.

**[01:29:44]** Not only for today's Brain and Breakfast, but generally for

**[01:29:48]** how you actually popularize this topic here, because I think this is important.

**[01:29:52]** I hope that a few people

**[01:29:56]** especially in libraries or schools watching Brain and Breakfast,

**[01:30:00]** will get something out of it. We would definitely appreciate it if you take your phone and vote for us about

**[01:30:11]** how you liked the breakfast. If you add a single keyword

**[01:30:17]** that came to mind during this talk, we would be very grateful. Thanks in advance for that.

**[01:30:25]** I'll try to skip quickly because what's important is the discussion.

**[01:30:32]** We decided eleven years ago that we want to create little squares,

**[01:30:37]** where people meet and discuss these things. So it's not about

**[01:30:41]** just studying it and looking at it alone, but really talking about these things.

**[01:30:46]** So if you're watching this at a company, definitely don't hesitate to go through these things with your colleagues.

**[01:30:51]** We also have a basic form

**[01:30:56]** that you can download on the pages for those watching Red Button EDU.

**[01:31:00]** It mainly contains aha moments and some realizations. So I highly recommend

**[01:31:05]** going through these things this way. We also provide this space,

**[01:31:12]** so on April 4th, after Easter, if you'd like to talk with us about this

**[01:31:18]** in more depth, with Dan and other guests, we definitely

**[01:31:22]** offer this discussion, so register, sign up,

**[01:31:26]** we'll be very happy. Take today's talk as a kickoff.

**[01:31:31]** And because Brain and Breakfast is part of a bigger whole,

**[01:31:38]** which, as I said, is called Red Button, I also remind you

**[01:31:42]** that it's good to read something sometimes and our project,

**[01:31:46]** Arby, book of the month, which definitely included blind spots,

**[01:31:51]** so you can. The Treatment with Schopenhauer is current now.

**[01:31:56]** Definitely follow many things happening in our communities

**[01:32:01]** at redbutton.edu and important innovation, sustainability, and more,

**[01:32:04]** where you can easily get involved. And the most important thing

**[01:32:09]** at the end is, of course, that the breakfasts will continue

**[01:32:14]** next month as well, so if you make time and feel like it,

**[01:32:18]** the April breakfasts have been focused for years on Earth Day

**[01:32:22]** and we talk about related topics there.

**[01:32:26]** I'm very happy and I hope they don't eat it somewhere.

**[01:32:30]** some natives, because he's now somewhere in the jungle

**[01:32:34]** and he said he would get back on March 25th, so I hope

**[01:32:38]** everything will turn out well and the guest will be Ladislav Miko

**[01:32:41]** and the topic is very interesting, about how

**[01:32:45]** Ladislav talks about soil, I think you'll enjoy it.

**[01:32:49]** It will be called The Universe Beneath Our Feet.

**[01:32:52]** So on April 18th from 8:30, you can look forward to another Brain & Breakfast.

**[01:32:56]** Thank you very much, thank you for watching,

**[01:32:59]** thanks to everyone who came, and Dane, thanks again to you,

**[01:33:03]** take care, goodbye and hi.

**[01:33:11]** www.hradeckesluzby.cz