Less bureaucracy, more foreign talent: Could these reforms save the Czech economy?

The Czech government’s advisory body, NERV, has announced 37 recommended sweeping measures to help rejuvenate the economy and its industry, which should contribute to much-needed GDP growth. These include removing obstacles for foreigners coming to Czechia for work, enticing more foreign students to study in Czechia (and retaining them), and reducing the country’s level of bureaucracy.

The proposals can broadly be divided into labor market changes, education, public administration, and investments. The government coalition will soon meet with the advisory group and decide which measures to adopt. The advisory body estimates that the changes will add "tens of billions" of crowns to the state coffers annually, should most of them be adopted.

Czech media outlet Seznam Zprávy has outlined some of the most significant recommendations. Foreign workers are earmarked as potential contributors to alleviating the persistent labor market shortages, NERV's report says. The plan advocates for a smartly regulated supply of labor from abroad, emphasizing the removal of administrative obstacles for cross-border workers. 

According to the advisory team, companies should also participate more in the involvement of foreigners in the labor market. They should be jointly responsible for ensuring that their employees from abroad receive a language education and do not end up in segregated housing. 

Recommendations include facilitating attestation processes (proof of certificates) for doctors and simplifying diploma recognition, thereby streamlining the integration of foreign talent into the Czech workforce.

A cornerstone of the revitalization plan is the modernization of the Labor Code. NERV advocates for greater flexibility in recruitment, working hours, and dismissal procedures. The proposed changes aim to strike a balance between safeguarding employee rights and empowering employers with greater decision-making freedom. 

NERV also mentions the possibility of dismissing an employee without giving a reason, but within a reasonable period of time and with severance pay included. The expert group says that the current Labor Code favors the employee over the employer. Changing this will lead to greater business productivity, the advisory committee says.

Furthermore, the plan addresses the influx of foreign students, proposing streamlined visa processes to attract and retain international talent. At present, around 18 percent of all students in Czechia are from abroad.

NERV says that, as with foreign workers, the administrative obstacles and requirements for foreign students should be lessened in order to tempt more people to study in Czechia.

The objective is also not merely to bolster the workforce but also to reverse the current trend of intellectual capital opting for neighboring countries due to bureaucratic hurdles. 

NERV outlines that many sections of society – including prisoners, those claiming welfare benefits, and children in orphanages – represent an “untapped reservoir of labor.” 

The expert group believes that penal rates and sentencing principles need to be adjusted – for example, in the area of ​​drug policy, a legal, regulated cannabis market and decriminalization of selected crimes would ease the number of prisoners nationwide, directing them instead to work.

The advisory committee also says that the Czech welfare system needs to be shaken up – it suggests that poorer households should only minimally lose their benefits while increasing their income from work.

This would motivate them more to find jobs. Children in orphanages also need much more support and education before they become adults, NERV says – this too would increase the likelihood of them finding work.

The Czech Republic also underutilizes the potential of women, NERV says. Several sectors are enormously dominated by men – particularly in leadership positions. According to the group, the government must first focus on public-sector gender-related job inequality, which will ultimately benefit the Czech economy (and society).

The expert group pinpoints a severe lack of spots in Czech kindergartens, which will hurt the country in 15 to 20 years if the current situation stays the same.

More priority must be given to increasing school spots, NERV says, and this can be done via massively increased governmental investment. 

NERV also notes that in Czechia the “share of those who do not complete their education has been increasing in recent years.” An outdated educational framework and curricula are to blame, which recommends an overhaul of the Czech teaching system.

A sprawling state administrative system and excessive bureaucracy cost the nation billions every year. NERV cites the overwhelming number of municipalities with populations of under 1,000 that have state administrative offices. Removing some municipal offices and merging areas’ state administrations could be a solution, the expert group recommends. 

NERV also acknowledges the pressing need for health improvements in the Czech Republic. The proposed remedies include incentivizing regular health check-ups and imposing higher taxes on vices, coupled with an enhancement in the availability of healthcare treatments.