The Czech Republic is leading the way in Europe on poverty reduction

The Czech Republic is leading the way in Europe on poverty reduction

26. 05. 2022 – Lomond

Earlier this week, the European Commission published a very long, detailed report on the progress that EU member states had made towards the 17 Sustainable Development Goals (SDGs) that were adopted by the UN in 2015.

The first SDG is to end poverty “in all forms and dimensions” by 2030, and in this area, the Czech Republic comes out well ahead of the rest of the EU. In fact, the Commission assessed the Czech Republic as being 69.5% ahead of the EU average in this category, 16.5% ahead of any other member state.

One of the core metrics is the most straightforward: the percentage of people in society that are at risk of poverty or social exclusion. 11.5% of Czechs fell into this category in 2020, the lowest level in Europe and very nearly half the EU average:

This isn’t a new phenomenon: the data goes back to 2015, when the SDGs were adopted, and the Czech Republic has had the lowest rate within the EU every year since then.

Is it possible to explain why Czech poverty rates are so low? There will be a wide range of interconnecting factors, but the data presented in the SDG progress report provides some clues. It indicates three areas that are playing a role:

1. Not only are most Czechs in work, the vast majority are in financially stable employment

We have written previously about the record low unemployment rate in the Czech Republic. It’s not just that most Czechs are in work, though, it’s also that the volume of work and remuneration are sufficient to keep them out of poverty. Only 4.4% of Czechs are living in households with very low work intensity (the EU average is 8.2%) and that figure has been reduced more quickly than the EU as a whole over the last five years. Partly as a result, the percentage of Czechs who are in work but still at risk of poverty is the second lowest in the EU, behind only Finland:

2. The Czech Republic has made particularly strong progress at reducing the number of people in severe material and social deprivation over the last five years

Based on that, you would expect the rate of Czechs in the ‘severe material and social deprivation’ category to be low, and it is – 1.9%, only bettered in the EU by Luxembourg (1.7%) and Finland (1.8%). In 2015, the figure was higher, 4.5%, and of the nine member states with a rate below 5% back then, the Czech Republic made the most significant progress to reduce it even further over the subsequent five years:

3. By European standards, Czech society is very equal

The tenth SDG is ‘Reduced Inequalities’ and it is another category in which the Czech Republic comes out comfortably top of the EU rankings. Inequality and poverty are closely interrelated, and one important measure on poverty is the inequality of income distribution. The Commission calculates the ratio of the total income received by the 20% of the population with the highest income (the top quintile) to that received by the 20% of the population with the lowest income (the bottom quintile). The lower the ratio, the more equal the country in terms of income distribution, and the Czech Republic has the third lowest ratio in the EU, a position it has held going back at least to 2010:

Most of the data used to compile the report comes from 2020, so it doesn’t factor in the impact of the pandemic, but with so much focus on the economic headwinds caused by the war in Ukraine and inflationary pressure on the cost of living, the European Commission’s SDG report is a reminder of some of the underlying strengths of the Czech economy.