A practical guide to the upcoming Czech welfare reforms

Instead of awarding housing contributions, housing supplements, per-child contributions and subsistence contributions, there will be just one state social aid benefit, and the eligibility rules for it will be roughly similar to the rules for aid to those in material distress today. For households which have never needed aid to those in material distress, the change in eligibility requirements could be an unpleasant surprise.

However, the genuinely impoverished will likely be able to improve their lot as long as aid organizations “keep an eye” on the legislative process to make sure people at risk of poverty will not be harmed by the new legislation, which has yet to be published, but will instead be assisted by it. What do we know about the plans so far?

Comparable rules for all those making up to four times the minimum cost of living

One adult household member will apply for the state social aid benefit on behalf of everybody in that household. The application will include the names of everyone who resides together and contributes to childcare, food and housing costs.

The benefit will be awarded for any three months in the year, not per quarter as it is now, and eligibility for it will be more or less automatically extended. It should be automatic for families whose income exceeds more than 1.43 times the minimum cost of living, with the condition of regularly visiting the Labor Office for poorer people, but even for them it would be possible to consider modernization such that the documentation, for example, of their actual costs for energy could be sent electronically, and some “interviews” with officials could be performed online.

The application for the benefit will be available online to persons with electronic identities and to everybody else in paper form, and will require household income and asset declarations with fewer documentation requirements (or even none). Instead of confirmation of one’s income from employment, it should be enough to list the employer’s identification number and the Labor Office will ascertain the applicant’s salary on its own.

For minor household members age 15 and over there will no longer be a need to provide confirmation of study because the Labor Office will also ascertain that themselves. This is important to the establishment of a minor’s subsistence minimum, which is higher for those who are studying.

The application will also ask for all of the adult household members’ bank accounts and the amount of their savings. Impoverished people do not have to fear there will be income testing – on the contrary, they will have a rather generous opportunity to maintain savings in the bank or at home.

The Labor Office will also be interested in how many cars a family owns (one car per adult will likely be possible) and in whether a family owns any other residential real estate in addition to the apartment or house in which they live. It is important not to conceal anything, because the Labor Office will be able to verify all of the data with banks, car registries and the cadastral registry.

Income from work will be more of an advantage than it is today, but that advantage will gradually decline for richer applicants, and eligibility for benefits will expire once a family makes four times the subsistence minimum. For eligibility for benefits, just 60 % of net income will count, improving the situation for poorer families for whom 40 % of their salaries will not be counted toward their eligibility.

Currently, for aid to those in material distress, just 30 % of salaries are not counted toward eligibility, and for drawing the housing contribution or per-child contribution, one’s entire salary counts. An incentive that is similar is currently also available to people paying off their debts in the debt relief process.

Only those who work at least 20 hours a month in community service or elsewhere for at least the minimum hourly wage, or who are registered as job seekers, or who fall into a category exempt from having to prove employment or job-seeking will be eligible for the benefit. Such a condition will probably most affect recipients of the per-child contribution and housing contribution, because so far they have not had to meet this criterion.

Given how many senior citizens and singles are only able to pay their rents thanks to the housing contribution, it would be appropriate to relax these strict terms for “working off welfare”. Otherwise, parents of children under the age of three (who otherwise would not have to register as unemployed because their health insurance is paid for by the state) or seniors not yet eligible for an old-age pension will find themselves in a situation that will be difficult to resolve (before their 69th birthday, in the case of senior citizens).

“Activation” must mean an opportunity to extricate oneself from poverty, not the risk that one’s benefits will be reduced

The “bogeyman” of this benefits revision is the so-called “activation” of benefit recipients, which is just supposed to concern poorer households, specifically, those with an income up to 1.43 times the family’s subsistence minimum. After six months of drawing welfare, the Labor Office will conclude a so-called “activation plan” with the adult family members legally considered able to work, and the fulfillment of that plan will be rewarded by increasing the amount provided for their subsistence.

If the applicant is a job seeker, it is likely that the benefits department of the Labor Office will contact the employment department and that their officials will jointly coordinate job offers for the applicants. However, it is already the case that failure to fulfill the individual action plan is sanctioned by the removal of the applicant from the unemployment rolls and thereby the loss of the applicant’s eligibility for the subsistence contribution for three months.

That de-listed person can then not be counted as a household member, although that person’s (previous) income is still counted toward the calculation of the benefits, so the family will get into difficulties with covering their housing costs. Currently this applies to those with incomes equal to the amount of the subsistence minimum, but the threshold for “activation” will now be shifted to those whose incomes are 1.43 times the household subsistence minimum.

What has already probably been avoided during the design of the new benefits is that the calculation would consist of a base in the amount of the subsistence minimum (CZK 3,130 [EUR 125] per person per month) until the person makes a living wage, as is the case so far with aid to those in material distress. After warnings from experts about the dysfunctionality of the existing system, the ministry has retreated from this repressive approach, and what is now being called this “activity bonus” should really be a reward above and beyond the subsistence minimum for an “activated” person.

This is no longer just about taking job offers or requalifying (which the long-term unemployed have no opportunity to refuse today anyway). More expectations are being raised by the ministry’s plan to involve Labor Office staff who have been laid off thanks to administrative budget cuts in welfare recipient case work, consisting of offers to take advantage of social services, of contact points for housing, or of debt counseling centers.

If such an offer is on the horizon, the “activation” will not be effective. The “activity bonus” could aid many people, though.

Welfare reform must not threaten children at risk of dropout even more

A painful point in the planned reforms remains the punishment of children for not being sent to school by their parents by reducing childcare contributions for three months, for example. Besides the Civic Democratic Party (ODS), the Christian Democrats (KDU-ČSL) are the most vocal promoters of this unfair approach toward children who have the bad luck of being born to such parents.

This is a disappointment, because when the principle of “Three Strikes and You’re Out” was being advocated by the KDU-ČSL and the ODS as heads of the Senate’s Committee on Social Welfare, arguments against this idea won the day. That committee rejected the law, although senators from “Mayors and Independents” (STAN) subsequently played an anti-social role and passed the law to strip people of aid to those in material distress for children’s poor school attendance, and we are now in our third year of waiting for the Constitutional Court to rule on the issue.

The main argument against depriving families of welfare because of their children’s poor school attendance remains valid: Under the Act on Education, such truancy is already a misdemeanor offense that can be fined (up to CZK 5,000 [EUR 200]) and handled by the local social welfare department in collaboration with the school itself and social workers. In severe cases, this is even a felony.

Does a child need to experience even greater poverty in addition to all that? This is not about what is necessary for children to attend school, but about whether multiple punishments yield that result.

The minister has repeated his mantra about arranging for proper child-raising by depriving people of aid less often recently, but he does not absolutely reject the idea. If the ministry really wants to “educate” parents by stripping them of their childcare contribution, then it should at least send the money to organizations collaborating with the schools, or to the schools themselves, to use on after-school programs or tutoring for the child at issue, not just for three months, but the whole school year – that’s the kind of support that might actually aid such a child.

We don’t yet know the housing contribution amounts, the ministry’s models cannot be verified

For the time being, the new amounts of aid with covering the cost of housing remain a big unknown. We do at least know that the state social aid will be available to people irrespective of their housing status, whether they are in temporary accommodation, renting, subletting, or owners, including owners of cooperative housing shares.

We also know the ministry is considering taking advantage of what is called the “energy flat rate”, a pre-established customary amount for energy consumption for certain kinds of buildings per person in the household, probably including the category of five or more persons. “Energy flat rates” should also newly include those using district heating systems.

Households with an income up to 1.43 times the subsistence minimum would have to document their energy costs, but the ceiling for their reimbursement would be 1.2 times the “energy flat rates”. Not knowing the parameters of these rates, it is difficult to assess whether this will be enough to cover costs.

The latest negotiations with the ministry revealed that the new housing norms, which include services associated with housing (costs of running elevators, hallway lighting, waste disposal, water and sewerage, etc.) should be set at the mean value of the current norms, with the proviso that municipalities could request they be reduced by up to 40 %. Of course, that would be a catastrophe, because using the mean value or an even lower one would mean half of the current recipients of the housing contributions and housing supplements would remain absolutely (or partially) without the only housing benefit there is.

However, respecting the price maps which should take regional specificities into account is also being discussed once more. The Labor Ministry’s models calculating the new amounts available for covering housing costs lead us to believe less money is meant to go to this item.

If the housing amount available turns out to be better than it has to date, it will only do so for those able to work and take advantage of the incentives for such income. That is no cause for complacency, and the ministry should show its cards soon (maybe by the end of February) and inform us which flat rates the housing aid will be using.

In order to keep the peace in society, it is essential that the transition of the current housing contribution and housing supplement recipients to the new amounts available from state social aid does not involve any kind of sudden decline, but rather a fluid transition into support comparable to what they are now relying on to remain housed. Impoverished people have high housing costs through no fault of their own, and they do not deserve to end up on the street because of some reform.