Middle class in Czech Republic faces growing financial strain, expert warns

The middle class in the Czech Republic is increasingly struggling financially, despite the country maintaining low unemployment and rising wages. This paradox was highlighted by the latest Social Exclusion Index, an analysis conducted by the Agency for Social Inclusion. According to Lucie Trlifajová, an expert at the agency, the systems designed to protect the most vulnerable citizens are failing, leading to greater economic pressure on middle-income households.

The Social Exclusion Index, which has been compiled since 2016, examines indicators such as reliance on living allowances and housing benefits, foreclosure rates, long-term unemployment, and educational outcomes. The findings reveal that financial hardship is intensifying even in areas typically associated with economic stability.

Trlifajová pointed out that the decline in middle-class stability is not linked to rising unemployment, as might be expected, but to a significant fall in real wages. The Czech Republic, while boasting the lowest unemployment rate in the European Union, has experienced one of the steepest declines in real wages. This has contributed to an uptick in the number of people receiving housing benefits, with the most pronounced increases occurring in areas around Prague and other major cities.

Debt is another area of growing concern. According to Barbora Halířová, a debt expert at the agency, foreclosure rates have surged in the Central Bohemian Region. Halířová noted that counseling centers are now seeing more individuals from the lower middle class, including those with higher education, seeking financial guidance—an indicator of the broader economic strain affecting previously stable households.

High inflation, soaring energy costs, and changes to social support rules have further exacerbated the situation. Adjustments to housing benefit eligibility criteria and increased income thresholds have expanded the pool of beneficiaries. However, while the number of recipients of housing and child benefits has grown, there has been no corresponding rise in the number of people receiving benefits for material distress, suggesting that the most disadvantaged are not being adequately supported.

The minimum subsistence level, a key benchmark for determining eligibility for various social benefits, currently stands at CZK 4,860 per individual. This amount was last increased in January 2023 by 5.2%, but inflation has significantly eroded its real value. Trlifajová argued that the minimum subsistence level should have been CZK 7,082 last year to keep pace with inflation. She emphasized that the erosion of this benchmark undermines its ability to provide basic survival support and compromises the effectiveness of social safety nets.

The Social Exclusion Index also highlights a growing disparity among municipalities. In 2023, 241 municipalities were classified with the highest levels of social exclusion, compared to 191 the previous year. Simultaneously, the number of municipalities with minimal exclusion has declined, further reflecting the widening economic divide.

Trlifajová stressed that the middle class’s growing vulnerability signals deeper systemic issues. “If the middle class is struggling, the situation for the poorest must be deteriorating as well,” she said. Without significant policy interventions, the Czech Republic risks exacerbating social inequalities and increasing economic instability, with consequences that will ripple across all levels of society.

Source: CTK