Young Ukrainians will not save the Czech pension account. The problem is the children of Husák

Incoming Ukrainian children will not be spared from the pension system, but it is time for real pension reform. So think analysts reacting to Education Minister Petr Gazdík’s (STAN) statement that if incoming Ukrainian children stay in the Czech Republic, the generation of Husák’s children will see their retirement income solved. However, economists warn that it will certainly not be that simple, and there are still a large number of variables that are unclear. Instead, there is no more room to postpone the pension reform promised by the new government of Petr Fiala (ODS).

Education Minister Petr Gazdík said spending on education is still the best recipe for the country’s economic future. He will therefore persuade his government colleague, Finance Minister Zbyněk Stanjur (ODS), to focus on investing in education. “Ukrainian children are a huge advantage for the Czech Republic. If they stay here, my generation of children from Husák has a pension system in place. If the children stay here, Czech companies will not ask desperately if they will find a suitable graduate in the labor market. This is positive news for the Czech economy in the coming years, if I take it cynically,” Petr Gazdík said in an interview with LN.

However, the positive news has several questions. One of them is that there is not even the exact number of children who have come from Ukraine to the Czech Republic since the beginning of the war. So far, Czechia has issued more than 263,000 special visas since the Russian invasion. However, the actual number of refugees is expected to be much higher. According to Prime Minister Fiala, there could be up to 300,000, almost half of whom are children.

It is not yet clear whether all the children will grow up in the Czech Republic or return to their home country. “The statement was made in the mood of euphoria that prevailed in the first weeks of welcoming refugees. I do not think it is clearly economically justified, although I do not want to reduce the importance of immigration in maintaining national public finances and the pension system,” Lukáš Kovanda, chief economist at Trinity Bank, told Echo24.

According to him, there are still a lot of variables in the air that need to be answered before such a statement can be made by politicians. “The question is whether the Ukrainian children will stay. We also don’t know what the qualifications of the Ukrainians are and how they fit into the Czech labor market. And also whether the conditions for them can be adequate and that they could develop further. This applies in particular to qualifying. It’s premature because we don’t have any big data. Of course, if young people come, stay here and qualify, that would definitely help,” Kovanda said.

However, the problem of Husák’s retirement persists. It was a very strong generation, which is still in a productive era. This group also speaks loud and clear about the need for pension reform. “We are all terrified when the strongest age groups retire and no longer pay pensions, but will receive pensions from the weaker generation. That is why there is a need for pension reform” , Štěpán Křeček, Prime Minister and Chief Economist of the BHS, told Echo24.

According to him, a great impact will come to the system as strong years replace weaker ones. This is a problem that weighs not only on the pension system. “Because suddenly the generation will always be short of places in maternity wards, nurseries, schools, universities and the labor market. Ideally the grades are about the same size. That definitely causes problems and this does not It’s not just the pension system,” added Křeček.

Instead, pension reform is finally coming. Minister of Labor and Social Affairs Marian Jurečka (KDU-ČSL) will try to do this in the government of Petr Fiala. A team of experts is being set up to prepare the reform. The group includes representatives of the coalition parties as well as ministries. The proposal should be ready by the end of next year.

Pension commissions

Earlier, an expert group of former Labor Minister Jana Maláčová (ČSSD) called for a pension reform. Until now, the last group was led by economist Danuše Nerudová. One of the first committees was a temporary parliamentary group headed by Bohuslav Sobotka (CSSD) twenty years ago. After two years, however, it ended without a clear result. The next two commissions, headed by Vladimír Bezděk, had more notable results. Its first committee agreed on the need to raise the retirement age or make it easier to work after reaching it. The committee’s conclusion then pointed out that the current system without changes would result in a cumulative deficit of around 110% of GDP in 2065.

Bezděk’s second commission started functioning under the “official” government of Jan Fischer in 2010. The result of its work was the implementation of the second pension pillar introduced by the next Nečas government. The Bezděk Commission also presented proposals for two fundamental changes. Both options provided for a reduction in social security contributions and a reduction in the ceiling for payment of insurance premiums. In addition, a uniform VAT rate of nineteen percent would be introduced. At the same time, the role of individual savings, supported by the State, should be reinforced.

Another commission was created under Sobotka’s government and the group was headed by Martin Potůček. In addition to the abolition of the second pillar, the commission was to present other proposals. At the end of her mandate, she introduced the convergence of self-employed contributions with those of employees and employers, or compulsory company savings for early retirement for workers in demanding professions. But it did not impose anything concrete.

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