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Is CEE equal to the task?

Czech sociologist and author Daniel Prokop says a new discourse on social mobility can increase Central and Eastern Europe’s competitiveness

Your recent book is called Slepé skvrny (Blind Spots). What is behind the title?

The book is based on my essays and analysis over the past five years. They have one thing in common: that in the Czech Republic, and other places in Central Europe, there is the discourse that there is little poverty and low inequality. But that view is based on misinterpreted data.

I will give you a few examples. Relative income poverty is very low in the Czech Republic – the lowest in Europe. But the actual poverty line is based on national income. In the Czech Republic, it is two times lower than it is in Germany and in the Netherlands. If you recount based on European incomes in purchasing power standard, the picture is very different. The Dutch “poor” have the living standards of a Czech middle income household.

We say that Czech education is equal because no one pays for it, but we don’t take into account the vast differences between quality of education between regions, schools and the huge effect of the socioeconomic status of the families on education results. If we take these into account, it is actually one of the most unequal systems in the OECD.

During a period of economic growth, the reality was hidden behind positive, but too simplistic numbers.

You also describe poverty of a different kind.

We conducted a class survey, which was partly inspired by the Great British Class Survey in the UK. It had its critics, some of whom were right, but the core idea – that inequalities are not just about incomes – I think is right.

What we found is that many things, such as trust in institutions and the feeling that you can participate in society, are more dependent on ‘soft’ capitals, such as social and cultural capital, rather than economic capital. There are a lot of Czechs that are currently okay in an economic sense but lack the other forms of capital and the skills and knowledge needed to be successful over the next 10 years.

You mentioned education equality. What has been the impact of the pandemic?

What we see in our research is that about 10% of the children in the Czech Republic had limited access to remote schooling because of the internet connection, lack of access to computers or limited space at home. Moreover, these children also have less educated parents who are unable to help support them. There are very clear differences between schools in how well they coped with online education.

The European Recovery Fund is about to be invested, but less than 10% of it is planned to be invested in education.

That is why I always say to government: don't put everything into concrete. The European Recovery Fund is about to be invested, but less than 10% of it is planned to be invested in education – and it is not focused on problems that I am talking about. We have to put more of these funds towards education. It is important to recognise the big impact it could have on the competitiveness of the country and region over the next 10 years.

You also talk about the need for wider policy reform. In which areas in particular?

We have good quality public services in the Czech Republic, such as healthcare and a pension system, which is helping to reduce poverty among pensioners. But the burden on low-income workers remains significant. You pay 37% of labour costs on taxes, social security and health insurance, even if you have minimum wage. Many poor people then work in unstable and precarious positions.

One of the main criticisms we hear during the pandemic is that when you are on sick leave, only 60% of your wage is covered. Having a limited part of the wage covered for first two weeks demotivates people to get tested and report contacts for tracing. An average of only 0.8 contacts are reported, partly as a result of people not wanting to tell their co-workers because they will have to self-isolate and lose their income.

You can write a better social policy book that takes chapters from each country.

But there are policy lessons and inspiration that we can take from elsewhere in the region – Poland’s better system of personal taxes, for example, or the minimum living income in Slovakia. Sometimes, it is public housing, like in parts of Austria. You can write a better social policy book that takes chapters from each country.

What part does financial literacy play in solving these issues?

I definitely think education should teach us how to use basic maths for real-life problems – our education is sometimes too formal. But there are studies that show that if you increase financial literacy, it has quite a diminishing effect over time – great over two weeks, but in one year it has very limited effect. I don't think it is just about helping children calculate interest rates; I think it is also an issue of legal literacy. It is about not being able to read and understand a contract that is printed in a small type over many pages.

Research from Harvard shows that your measured IQ can change by 13 points if you become poorer. You have to count on the fact that if people get into financial problems, their financial literacy weakens.

We also have to look at the underlying causes. Even with more responsible lending practices, the issue of debt in Czech society and of unpaid consumer loans is huge: about 9% of the adult population faces debt collection.

We also have to look at the underlying causes. Even with more responsible lending practices starting around 2015, the issue of debt in Czech society and of unpaid consumer loans is huge: about 8-9% of the adult population faces debt collection. More than half of old debts from unregulated times can hardly be paid, but almost nobody files for personal bankruptcy, which has stricter rules than Western Europe. So, people live from some untaxed, unofficial incomes.

What can be done to improve dialogue between policymakers and citizens?

When you measure trust in institutions and democracy and the level of social trust, it is lower in Central Europe and in the post-Communist countries. There is one school of thought that says it is a result of growing up in Communism. Which might be true, but it is not much different among younger people who did not have experience with Communism.

I think this cycle of distrust can renew itself years after the Communist era. To break it, you have to change the discourse first. You have to follow that with policy change. Some of the policies, and at least the discourse, is starting to change. That is my hope.

We see more involvement from business, investments in foundations that address education inequality, and support for NGO programmes like People in Need. Some businesses understand that addressing inequalities can support social mobility and general trust in our society, which is connected to trust in the financial and political system in which they operate.