Minimum and average net wages in relation to productivity in OECD countries

Minimum and average net wages in relation to productivity in OECD countries Martin Pernica, Institute of Finance, Faculty of Business and Management, Brno University of Technology, Brno, Czech Republic, pernica@fbm.vutbr.cz František Janáč, Procurement research specialist, Czech Republic, f.janac@seznam.cz Abstract Rewarding work in the Czech Republic has been discussed for a long time. According to data from the Organization for Economic Cooperation and Development, the Czech Republic has significantly lower wages compared to developed Western European economies. There is lower purchasing power from the net average wage in the Czech Republic than in the OECD countries of Mexico, Hungary, Slovak Republic, Turkey and Poland. The importance of the contribution of this paper is to assess interrelationships of the minimum wage, average net wage and labor productivity in the Czech Republic versus the European comparison. To complete this paper there have been used methods of analysis, comparison, induction and deduction. Data sources include the Czech Statistical Office, the European Statistical Office, Ministry of Labour and Social Affairs of the Czech Republic and the Organisation for Economic Co-operation and Development. The comparison of OECD countries concerning the level of average net wages and data on labor productivity in terms of GDP per hour and per person revealed differences, in average annual net wage expressed in purchasing power parity in OECD countries, with the Czech Republic adjacent match about differences in labor productivity in terms of GDP per hour and per person in D. The theory that the differences in average net annual wage expressed in purchasing power parity matches the level of labour productivity per hour and person (also expressed in purchasing power parity) is not true. For example, in the case of Luxembourg, the Netherlands, Norway or Switzerland. These countries have much higher minimum wage levels, both when comparing absolute values, and when expressed in purchasing power parity. A higher minimum wage leads to an increase in other wage levels, which affects the amount of the average gross wage. Higher wages bring higher levies on premiums and taxes. Raising the minimum wage can be seen as a way of fostering economic growth and the path to raising living standards. Keywords Minimum wage, living wage, efficency, code of labour Introduction In the early nineties of the twentieth century the leaders of our country presented optimistic targets that Czechoslovakia, and later the Czech Republic, would reach within a few years, the economic level of developed European countries. The former chairman of the State Property Fund and member of the Czech National Council, Tomas Jezek in August 1992 said: "I'll put head on the block that just as in the fifties and sixties, spoke about the German, and in five years - and maybe sooner - begins to speak on Czech economic miracle. Not so much because of the genius of the creators of economic reforms, because we have done nothing else than the fact that we apply textbook knowledge, but thanks to hard work, diligence and skill of Czech people. "(Skutečnosti, 2015) Unfortunately, these assumptions have not so far been met. To compare the performance of individual countries is a most commonly used indicator of gross domestic product, GDP per one

capita, GDP per capita (Novotny, 2010). Giovannini GDP is even referred to as the most important variable used in the national accounts. (Giovanni, 2008) GDP is based on the idea of measuring economic output produced on the economic territory by resident and non-resident units. Regardless of the nationality of the factors of production (labor, land, capital) in the production process. (Hronová, 2009) comparing the volume index of GDP per capita in purchasing power parity (PPP) of all European Union countries, the Czech Republic is in the second half. The volume index of GDP per capita at purchasing power parity achieved in 2014 above 84. In 2004, at a time ten years ago, the value indicator was 79. For example: in Austria the comparable amount of volume index of GDP per capita in PPS 128. See table below. Table 1 GDP per capita in PPS (Source: Author according ČZSO,2015) Country / Year 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 EU (28 countries) 100 100 100 100 100 100 100 100 100 100 100 100 EU (27 countries) 100 100 100 100 100 100 100 100 100 100 100 100 Eurozone (19 countries) 109 108 108 Eurozone (18 110 109 109 countries) Eurozone (17 111 109 109 countries) Belgium 123 121 119 108 108 108 108 108 108 107 107 107 109 109 109 108 109 108 108 107 107 109 109 109 109 109 109 108 107 107 117 115 115 117 120 120 120 119 119 Bulgaria 33 34 36 37 40 43 44 43 44 45 45 45 Czech republic 77 79 80 81 84 82 83 81 83 82 82 84 Denmark 124 125 123 124 122 123 123 126 126 125 124 124 German 116 116 116 115 116 116 115 119 122 123 122 124 Estonia 52 55 60 64 69 68 62 63 68 71 73 73 Irleand 141 143 145 146 147 132 128 129 130 130 130 132 Greece 93 95 91 93 91 93 94 87 77 74 73 72 Spain 100 100 101 103 103 102 101 98 95 94 94 93 France 111 110 110 108 107 106 108 108 108 107 107 107 Croatia 56 57 58 58 61 64 62 59 60 61 61 59 Italy 112 108 107 106 105 106 105 104 103 101 99 97 Cyprus 94 97 99 99 100 105 105 102 96 94 89 85 Latvia 45 48 51 55 60 60 53 53 57 60 64 64 Litvenia 48 50 53 56 61 63 57 60 65 69 73 74 Luxembourg 240 246 242 257 254 256 247 254 265 264 258 263 (p) Hungary 62 62 62 62 61 63 64 65 65 65 66 68 Mortar 82 81 81 79 78 81 84 86 84 85 86 85 Holland 133 133 133 135 136 139 137 135 135 133 131 130 Austria 127 128 125 125 123 124 126 126 128 129 128 128 Poland 48 49 50 50 53 55 59 62 64 66 67 68 Portugese 78 77 80 80 79 79 81 81 78 76 78 78 Romania 31 34 35 38 42 48 49 50 51 53 54 54 Slovinia 83 86 86 86 87 89 85 83 83 82 82 83 Slovenia 55 57 60 63 67 71 71 73 73 74 75 76 Finland 114 117 116 115 118 120 116 115 117 116 113 110 Sweden 127 129 124 125 128 127 123 126 127 126 127 124 United Kingdom 123 125 125 123 118 114 112 108 106 107 109 108 Island 126 132 130 123 123 125 123 117 115 117 119 121 Norway 154 163 175 182 179 189 174 177 182 190 186 179 Swiss 143 142 140 144 148 152 154 154 158 161 162 161 (p) Montenegro : : 30 35 39 41 40 40 41 39 40 39 (p) Macedonia 27 27 30 31 31 33 35 35 34 34 36 36 (p) Albania : : 22 23 24 26 29 28 28 28 28 29 (p) Serbia : : 32 33 33 36 37 36 36 37 37 35 Turkey 35 39 41 43 44 46 45 49 51 52 53 53

Bosnia and : : 24 24 25 27 27 27 28 28 29 28 Hercegovina United States 157 158 160 154 151 146 145 146 144 148 150 151 Japan 111 111 110 106 105 101 99 102 100 102 103 101 The volume index of GDP per capita expressed in purchasing power standards in relation to the EU average of 28, which is equal to 100. If the index for a country is higher than 100, it means that GDP per capita of the country is higher than the EU average and 28 vice versa. Data are expressed in purchasing power standard - a common currency, which blurs the differences in price levels between countries, allowing comparisons of GDP between countries rather than in time. (CZSO, 2015) Factors that affect the living standards of the Czech population are numerous. For example, investment in infrastructure, investment in education, investment in new information and communication technologies and others. (Novotná, Kříž, 2012) We will dedicate one of the most talked - remuneration of labour in the Czech Republic, Institute of minimum wages and labour productivity interrelated. Importance of the contribution of this paper is to assess interrelationships of the minimum wage, average net wages and labor productivity in the Czech Republic in the European comparison. Evaluation work in the Czech Republic ( in comparison with selected OECD countries ) According to data from the Organization for Economic Cooperation and Development, the Czech Republic has significantly lower wages compared to developed Western European economies. Among these include, for example, Germany, France, Belgium, the Netherlands and Great Britain. The average net wage in PPP takes into account the prices of goods and services in individual OECD member countries. The table below shows a comparison of the average net wage in purchasing power parity in OECD countries over the past fifteen years. Table 2 Net income after taxes - dollars PPP exchange rates (Source: Author according OECD,2015) Indicator Family type Net income after taxes in dollars using PPP exchange rates Single person at 100% of average earnings, no child ayear 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Country Unit Australia 23151,941 24904,514 25922,809 26866,827 27992,013 28695,486 29788,623 30662,154 31587,336 34323,575 34463,526 35957,442 37233,831 39171,41 40731,844 Austria 22811,396 22658,097 23645,753 24856,347 25174,052 25703,576 27326,854 27633,841 28729,933 30121,759 30624,294 31570,816 32069,918 32610,823 32943,838 Belgium 20251,703 21334,342 22752,813 22909,137 23141,704 23647,556 24794,125 25256,439 26794,711 28341,603 29120,596 30386,161 31197,793 31298,97 31845,939 Canada 21989,763 22451,367 22637,599 23172,508 23691,328 24773,669 25388,178 26469,89 26633,961 27375,9 28228 28406,096 29151,887 29619,41 30260,98 Chile 8994,75 9294,009 9494,689 9573,288 9417,711 9637,988 10377,439 10998,213 11441,558 11796,916 14335,425 15510,187 16509,845 17306,261 17735,852 Czech Republic Denmark 8780,383 9492,582 10060,724 10729,024 11159,879 11623,376 12918,534 13864,029 14598,134 15760,992 15967,461 16949,037 17368,814 17411,601 17722,564 18708,177 19551,808 20984,209 21049,978 22215,18 22028,519 23464,158 24767,469 26502,357 28339,151 29919,035 31314,478 31428,043 31684,093 32303,472 Estonia 6744,129 7271,759 7969,954 8553,25 9204,746 10072,559 11654,427 13098,697 15032,43 14738,943 14925,909 15881,065 16348,212 17156,151 18105,702 Finland 17528,736 18308,078 19521,612 20107,296 21810,124 22640,218 24523,403 26307,95 28362,429 30109,51 30522,617 31311,661 31867,101 31721,043 32012,381 France i 20161,129 21251,299 22287,984 22010,931 22489,551 23512,135 25132,999 26222,775 27486,584 28607,769 29213,169 30298,165 30501,255 30884,628 31470,002 Germany 20216,887 21368,5 22159,805 22994,377 24538,819 25797,358 26888,678 27925,951 29374,096 29501,187 31858,052 33268,835 33963,326 34108,701 34841,426 Greece 18057,004 18495,062 20439,112 21637,95 23373,85 23077,774 25178,328 24672,728 25471,28 26538,597 26420,798 24399,518 23738,712 23971,879 24380,616 Hungary 6474,584 7016,683 7875,304 8666,77 8807,45 9369,306 10012,116 10046,93 11143,59 12077,926 13737,834 13756,452 14400,117 14862,883 15152,314 Iceland 23995,644 24896,047 25041,747 25785,199 27500,87 30018,935 30972,891 32839,474 33754,442 29954,998 28862,819 29913,164 31937,791 34242,17 35760,023 Ireland 18235,916 20154,747 20929,912 21949,859 23384,911 24298,119 25958,02 28027,23 29437,989 29715,337 31480,301 31856,342 32020,21 32183,562 33371,462 Israel 20498,549 22508,317 22208,012 21167,907 22779,812 21840,677 22228,323 23952,276 24888,835 24921,119 25407,473 26370,741 27034,628 26856,197 27442,244 Italy 18722,02 19653,524 19048,583 19490,201 19438,008 20310,036 21591,778 22367,691 23981,09 24726,487 25254,423 26004,544 26620,7 27159,971 27648,271 Japan 26721,111 27968,431 27690,101 28690,223 29986,803 31322,441 32177,406 33110,943 34020,582 33423,244 33936,3 35432,899 36787,424 36457,238 36691,307

Korea 24198,138 25100,442 27449,593 29040,523 30616,568 32943,874 35299,431 36947,803 37635,004 36844,455 38533,591 37702,51 39240,75 39685,962 40420,717 Luxembourg 27242,768 29008,882 31274,742 31747,668 32980,717 32717,441 34982,394 35401,134 37690,558 39184,666 39212,288 40557,3 41572,684 41189,866 42178,206 Mexico 7621,24 8255,778 8466,042 8634,75 8647,005 9286,536 9681,35 9869,637 10325,097 10782,675 10747,184 10768,505 10825,113 11046,389 11130,642 Netherlands 23736,515 25961,409 27066,489 27232,834 28130,311 29144,712 31745,543 33078,99 34400,895 36002,393 36377,441 38074,698 38718,863 40171,108 40677,905 New Zealand Norway 19550,291 19075,97 19747,028 19896,199 20535,668 20608,808 21893,754 22488,607 23739,762 26005,952 26679,992 27966,948 28957,073 30129,995 30805,81 22664,027 24422,815 26129,932 27127,188 28492,333 30196,788 32472,05 33795,327 35684,367 36026,713 37015,119 38586,492 40108,954 40337,665 42243,061 Poland 9047,435 9639,527 10018,438 10381,361 10435,644 10686,697 11322,005 12653,094 13611,393 14144,863 15134,803 15976,236 16512,491 17204,202 17601,599 Portugal 12111,209 12875,104 14534,126 14676,376 14825,331 16048,934 18137,59 18277,541 18726,673 19363,919 20361,595 20071,287 22183,343 21736,647 21680,726 Slovak Republic Slovenia 7708,453 7891,595 8177,929 8224,208 8653,181 9477,368 10411,668 11384,998 12781,382 13906,572 14319,957 14281,31 14592,11 15056,657 15858,176 10785,052 11280,308 11808,424 12241,25 13120,749 13856,574 14678,05 15606,888 16642,188 16732,273 17592,02 18351,659 19029,989 19447,713 19879,613 Spain 18919,223 19352,046 20171,643 20683,682 21107,885 21483,094 22894,559 23971,083 26058,336 27319,314 27043,094 28256,414 29016,086 29500,012 30061,187 Sweden 19132,051 20127,555 21258,342 21669,387 23002,81 23148,592 24714,412 27448,236 29360,575 30316,927 30794,592 31943,953 33020,22 33863,499 35070,924 Switzerland 32379,331 33453,884 35487,61 36033,057 37078,695 37686,6 40227,2 42836,711 44461,258 45752,941 46562,001 49705,18 52944,822 53817,721 54943,623 Turkey 13980,622 12515,391 12047,184 11491,809 11958,501 13166,646 12864,775 13878,875 15497,536 14959,878 15064,514 15575,333 16215,577 17118,457 17457,986 United Kingdom United States OECD - Average 29073,241 30785,407 31806,163 32084,689 33921,03 34879,123 36675,594 37568,095 38167,703 38061,264 37020,329 36501,01 37764,152 38184,605 38805,956 24876,685 25557,931 26389,041 27272,807 27784,896 28501,721 29764,953 31614,788 33234,625 33965,844 34807,006 36188,694 36837,81 36737,343 37637,128 18384,415 19231,859 20073,631 20548,496 21394,063 22123,625 23474,753 24560,191 25801,726 26463,108 27104,222 27914,563 28756,46 29233,377 29908,044 The lower purchasing power of the net average wage compare to the Czech Republic is within OECD countries only in Mexico, Hungary, Slovak Republic, Turkey and Poland. This situation has not change for several years. The table above shows a comparison of the average net wage expressed in purchasing power parity individually in the years 2000-2014. A fifteen-year period is a sufficiently long period to make it possible to compare the development of individual countries and further explore the reasons behind these Czech Republic unflattering results. Institute a minimum wage in the Czech Republic The minimum wage is regarded as socio-economic category. (Měchura, 1994) The minimum wage provides protection in labour relations and that both employees and employers. Employees ensures a certain level of social protection. It is also a means of limiting wage undercutting on the part of employees. Thus helping to reduce tensions on the labor market. The minimum wage creates the preconditions for income motivate people to search, adoption and execution of work, ie. Through their working income to favor the employee to only those with a social reception. The minimum wage for the employees regardless of the performance criteria and the quality of work and regardless of the type of work performed. (Galvas, 2015) For employers, the lowest level for salaries of their employees. It is obvious that the function of the minimum wage and the associated interests of employees and employers can not be the same. Achieve a balanced solution when modifying the minimum wage is therefore not a simple matter. (MPSV, 2015) From a macroeconomic perspective, the minimum wage affects particularly demand - the amount of goods and services that they can afford to salaried workers the minimum wage to purchase, which is reflected in the increase macroeconomic output. In terms of public finances, a higher minimum wage brings higher state payments - mainly on social and health insurance. Institute a minimum wage in the Czech Republic is enacted. As each utility regulation is the subject of political debate not only in the Czech Republic and other European countries. The right-wing political parties in the Czech Republic often emphasize the negative impact of minimum wages on employment. Assume that the idea of the classic respectively. neoclassical school of economic thought. According to this criticism is deformed labor market on both the supply and the demand side. Too high a minimum wage leads to a reduction in demand for labor, but also promotes the growth of the labor supply by the applicants. The minimum wage in this view, will ensure better labor conditions, but for a smaller number of employees. (Neumark, 2009). Leftist political parties in the Czech Republic, on the contrary, emphasize the function of social protection and promote equal conditions of wage competition among employers. The basis of these propositions is Keynesian, respectively. New Keynesian school of economic thought. Keynesians have based their claims on

time delays between supply and demand for labor. The labor market is influenced by many factors. Employment contracts are concluded for a longer period of time, not immediately terminate. Labor market affects the rigidity of wages. Due to the delay in the relationship between supply and demand on the labor market there is involuntary unemployment. Institut minimum wage is in this sense is understood as a means of stability that allows to reduce poverty and improve the living conditions of workers. This view is supported eg. The study by Paul Krugman that. (AEI, Krugman, 2015). In the Czech Republic clearly outweighs the neoliberal beliefs about the harmful effects of the minimum wage. From 1989 to the present they were in power at all times, except for two election periods, political parties of the right wing of the political spectrum. Contemporary coalition can be designated as a center. The minimum wage was regularly valorized especially in the period of leftist governments, especially in the years (1998-2006). The nominal value of wages during this period increased more than doubled. While there was a decline rates of major taxes. Especially for taxes on personal income and the basic VAT rate. In the years 2007-2013, when with the Government of the Czech Republic turns right-wing coalition, the minimum wage remained unchanged at 8,000 CZK per month. During this period, significantly increased the VAT rate from 19% to 21% and the reduced rate of VAT, which is a whole range of socially sensitive items (eg. Food) has increased from 5% to 15%. At the same time, some taxes were added, eg. Environmental, increased excise taxes, particularly on fuel and was deregulated rents. Table 3 Trends in the minimum wage in the Czech Republic since its introduction in 1991 (Source : Author according MPSV, 2014) Party/prime minister Period adjustments of The minimum wage minimum wage CZK/month CZK/hour Center/Petr Pithart (6.2.1990-2.7.1992) 1991 February 2 000 10,80 Rigt wings/václav Klaus (2.7.1992-2.1.1998) 1992 January 2 200 12,00 1996 January 2 500 13,60 Josef Tošovský (17.12.1997 22.7. 1998) 1998 January 2 650 14,80 Left wings/miloš Zeman (17.7.1998-15.7.2002) 1999 January 3 250 18,00 1999 July 3 600 20,00 2000 January 4 000 22,30 2000 July 4 500 25,00 2001 January 5 000 30,00 2002 January 5 700 33,90 Left wings /Vladimír Špidla (12.7.2002-4.8.2004) 2003 January 6 200 36,90 2004 January 6 700 39,60 Left wings /Stanislav Gross (26.7.2004-25.4.2005) 2005 January 7 185 42,50 Left wings /Jiří Paroubek (25.4.2005-4.9.2006) 2006 January 7 570 44,70 2006 July 7 955 48,10 Right wings/mirek Topolánek (16.8.2006-8.5.2009, Jan 2007 January 8 000 48,10 Fischer (9.4.2009-13.7.2010), Petr Nečas (28.6.2010-10.7.2013) Jiří Rusnok (25.6.2013-29.1.2014) 2013 August 8 500 50,60 Center /Bohuslav Sobotka (17.1.2014-) 2015 January 9 200 55,00

The minimum wage in the Czech Republic and GDP Result appreciable increase in the cost of living in the stagnation of the minimum wage in the years 2007-2013 also deepen impact of the global economic crisis in the Czech Republic. The table below summarizes data on the performance of Czechoslovakia and the Czech economy since 1990. Table 3 Development of gross domestic product since 1990 (Source: Author according CZSO,2014) Measuring 1990 1991 1992 1993 1994 1995 1996 unit Gross domestic product, not CZK mil. 672 776 868 228 974 694 1 195 1 364 1 580 1 812 seasonally adjusted current prices 811 823 115 622 GDP growth (constant prices ) %. -9,7-2,3 1,0 2,4 6,2 4,3 Gross domestic product, not seasonally adjusted Measuring unit 1997 1998 1999 2000 2001 2002 2003 GDP growth (constant prices ) CZK mil. 1 953 2 142 2 237 2 372 2 562 2 674 2 801 current prices 311 587 300 630 679 634 163 % -0,7-0,3 1,4 4,3 3,1 1,6 3,6 Gross domestic product, not seasonally adjusted Measuring unit 2004 2005 2006 2007 2008 2009 2010 GDP growth (constant prices ) CZK mil. 3 057 3 257 3 507 3 831 4 015 3 921 3 953 current prices 660 972 131 819 346 827 651 % 4,9 6,4 6,9 5,5 2,7-4,8 2,3 Gross domestic product, not seasonally adjusted Measuring unit 2011 2012 2013 2014 GDP growth (constant prices ) CZK mil. 4 022 4 047 3 883 4 261 current prices 410 675 720 % 2,0-0,8-0,9 2,0 In the summer of 2013 there was an increase in the minimum wage from 8000, - CZK per month on the amount of 8500, - CZK per month. From 1 January 2015, the amount of the minimum wage increased to 9200, - CZK. GDP growth for 2014 was 2.0%. At this time, the amount of the minimum wage has been increased for 8500 at CZK. If we compare the evolution of the volume index of GDP per capita in purchasing power standards (PPS ) increased significantly between 2003 to 2007 from the value of 77 to 84. From 2008 to 2013 the amount was flat at 82, in 2014 he returned to the level of 84, thus, a value of 2007.

The minimum wage in PPS - comparing the EU and the Proper adjustment of the minimum wage can also be assessed in terms of its purchasing power. In the table below are expressed in euro minimum wage per month in purchasing power parity in the case of major European countries and the in time comparison is always at 1.1. in 2008, 2014, and 2015. Table 4 Minimum wages expressed in euros per month in purchasing power parity in EU and (Source: Author according EUROSTAT, 2015) Minimum wages per month in purchasing power standards* in the EU 1st January 2008 1 st January 2014 1st January 2015 Belgium 1185 1374 1374 Bulgaria 228 359 380 Czech Republic 415 464 502 Denmark - - - Germany 2 - - 1441 Estonia 362 445 488 Ireland 1126 1238 1238 Greece 865 764 764 Spain 735 794 798 France 2 1155 1325 1337 Croatia 512** 582 584 Italy - - - Cyprus - - - Latvia 303 450 507 Lithuania 351 448 464 Luxembourg 1338 1559 1561 Hungary 395 573 593 Malta2 797 903 906 Netherlands 1281 1349 1363 Austria - - - Poland 462 708 738 Portugal 565 658 685 Romania 215 335 384 Slovenia 650 947 949 Slovakia 371 497 536 Finland - - - Sweden - - - United Kingdom 2 1110 1082 1114 United States 2 841 1019 1019 * PPS for 2014 and 2015 are estimated ** 1 July 2008 not applicable The Czech Republic, Croatia, Latvia, Hungary, Poland and Slovakia moved from the lower group (less than 500 per month) to the medium group (500 PPS to 1,000 PPS per month) When price level differences are eliminated. Above the base rate of the minimum wage in 2014 was 8,500 CZK and the average monthly wage reached CZK 25 686 the same year. Portion of minimum and average wages in 2014 amounted to 33.1%. In 2015, this proportion would have under current forecasts of the average wage increased by

1.5 percentage points to 34.6 %. It would thus slightly exceeded the proportion of minimum and average wages reached in 2009. The level of minimum wages relative to average gross monthly earnings In 2013, the gross minimum wage in the Member States ranged from nearly 33 % to slightly above 50% of average monthly gross earnings of persons employed in industry, construction and services. The amount of minimum wage relative to the average value of the average (mean ) of monthly gross earnings was the highest in Slovenia ( 51.4 % ), Greece ( 50.1 %, 2011) and Turkey ( 50.0 %, 2010). At the lower end of the range reported A, Czech Republic, Spain and Estonia minimum wage is less than 35 % of average gross monthly earnings. (Eurostat, 02/2015 ) Work productivity When comparing the average net wage expressed in purchasing power parity in D in OECD countries, as shown in the second table we conclude that Germany was above the average annual net earnings (data for 2014), expressed in PPS approximately doubled in comparison with the Czech Republic (Germany - Net annual income after taxes 34 841, - D PPP exchange rate versus Net annual income after taxes 17 723, - D PPP exchange rate in the Czech Republic). Similarly, even in comparison with Austria (Austria - Net annual income after taxes 32 944, - D PPP exchange rate). Above the annual average net wage expressed in purchasing power parity in D in the Czech Republic is comparable to that of neighboring countries, only Poland (Poland - Net annual income after taxes 17602 - D PPP exchange rate) and Slovakia (Slovakia - Net annual income after taxes 15858 - D PPP exchange rate). Poland has a population four times more in comparison with the Czech Republic, Slovakia has about half the population compared to the Czech Republic. Czech Republic can be from neighboring countries compare well with Austria, which has approximately the same population. Czech Republic and Austria has a long history lasting approximately four hundred years. During the existence of Austria-Hungary, the Czech lands were among the most advanced part with a strong focus on manufacturing and engineering. This compared more or less correspond to the dates of labor productivity in terms of GDP per hour per person. As is apparent from OECD statistics (OECD, 02/2015) productivity work in the Czech Republic in 2014, defined as GDP per hour worked, expressed in dollars in PPS is 34, -D. In Germany it is about double the 62.3, -D in Austria, 55.6, -D, which is about 40% more in comparison with the Czech Republic, the Slovak Republic 38.1, -D and Poland 29.7, -D, which is about 12% less in comparison with the Czech Republic. Diameter EU28 represents 50, -D. From the above it can be concluded that differences in average annual net wage expressed in purchasing power parity in OECD countries with countries with which the Czech Republic bordering correspond approximately to differences in labor productivity in terms of GDP per hour per person in D. We emphasize that this is a comparison of the average net wage (after tax ) expressed in purchasing power parity with the level of labor productivity per hour and person as well as in terms of purchasing power. When a simple comparison of the differences in average gross wages without relating them to the purchasing power parity in OECD countries would come to completely different conclusions. E.g. the average gross monthly wage in Germany in 2013 reached the amount of 3,449 ( Gola, 2015), while in the Czech Republic it was 25078, -D equivalent to the amount of 929 at the exchange rate of 1 = 27, -EUR. ( Finance, 2015) DISCSION On the example of other European Union countries, the differences in average annual net wage expressed in purchasing power parity no longer match the productivity of labor in terms of GDP per hour per person in D. An example of such a country can be Luxembourg. The average annual net wage expressed in purchasing power parity in 2014 amounted to 42 178 D in Luxembourg,, the Czech Republic, it was 17,723, -D, approximately 2.3 times less. Labour productivity measured in GDP per hour per person in D amounted in 2014 in Luxembourg 58.2, -D (less than in Germany, which reached 62.3, - D), the Czech Republic, it was 34, -D in the same period, an

increase of 42% compared with Luxembourg. The thesis that the average annual net wage expressed in purchasing power parity equivalent to the amount of labor productivity per hour and person as well as in terms of purchasing power therefore does not apply in the case of Luxembourg. Similar evaluation can be done in the case of other countries, the Netherlands, Norway or Switzerland. Luxembourg is a country where the minimum wage is the highest in Europe and also in purchasing power parity (PPP), which represents a value of 1561, -. In second place is Germany, which introduced the minimum wage from 1.1. 2015. The minimum wage in PPS is in Germany 1551 -, with a certain distance by 1363, - or Great Britain 1114, -. All figures are for January 1, 2015. Above the volume index of GDP per capita in PPS was in 2014 in Luxembourg 263, Germany 124, the Netherlands 130 Belgium 119 and 108. In the UK, the Czech Republic amounted volume index of GDP per capita of only 84, the same as in 2007. Otherwise told, Czech Republic over the past 7 years in this respect not moved anywhere. In 2003, the above volume index of GDP per capita in PPS 77. Germany despite the effects of the global economic crisis over the last 7 years increased from 116 to 124, Belgium from 115 to 119, Austria from 123 to 128, etc. EU represents 28 100. Czech Republic while after years of economic decline recorded for 2014 economic growth of 2.0%. CONCLION The minimum wage in the Czech Republic is nearly six times lower in comparison with Luxembourg. When compared with other European Union countries, where the minimum wage is set, the actual amount of 9200, - CZK in the Czech Republic, which corresponds to approximately the amount of 336 the as fourth lowest. Even if there was a one time increase in the amount 1000 CZK per month as promote by unions, it would still be the sixth lowest when compared with twenty-two EU member states that use the institute. The minimum wage is not enacted in Finland, Sweden, Denmark, Austria, Cyprus and Italy. Germany introduced it from 1.1.2015. The final comparison is not much better even when expressing minimum wage in purchasing power parity. When comparing the current level of minimum wage in terms of purchasing power in the Czech Republic, we get a value 502 PPS - fifth lowest value in the European Union. Increasing the minimum wage may be perceived as a way of fostering economic growth. Higher minimum wage leads to an increase in other wage levels, which affects the amount of the average gross wage. Higher wages bring higher levies on premiums and taxes. These are in all of the developed countries (Germany, Netherlands, Belgium, Great Britain) higher in comparison with the Czech Republic. Funds thus obtained allow to stabilize public finances and invest for example in education, science and research, health and social care, which in their turn influence economic growth and productivity. Acknowledgements The paper represents an output of the specific research project Selected Problems of Enterprise Financial Management in International Environment of the Internal Grant Agency of the Technical University of Brno, registration number FP-S-15-2877. References AEI. Paul Krugman on the minimum wage: 1998 vs. 2015 [online]. 2015 [cit. 2015-08-01]. Dostupné z WWW: < https://www.aei.org/publication/paul-krugman-on-the-minimum-wage-1998-vs-2015>. ČZSO. HDP na obyvatele v PPS (standard kupní síly) [online]. 2015 [cit. 2015-08-05]. Dostupné z WWW: < http://apl.czso.cz/pll/eutab/html.h?ptabkod=tec00114>. ČZSO. Vývoj Hrubého domácího produktu od roku 1990. CSU.cz [online]. Český statistický úřad, publikováno 16.5.2014 [cit. 2015-08-05]. Dostupné z WWW: http://www.czso.cz/csu/2014edicniplan.nsf/p/320181-14 EUROSTAT. Statistika minimálních mezd [online] 02/2015 [cit. 2015-08-05]. Dostupné z WWW: < http://ec.europa.eu/eurostat/statistics-explained/index.php/minimum_wage_statistics/cs> EUROSTAT. National minimum wages in the EU [online] 2015 [cit. 2015-08-05]. Dostupné z WWW: < http://ec.europa.eu/eurostat/documents/2995521/6652357/3-26022015-ap- EN.pdf/42097ff5-231b-4116-b0cf-8a28ca316f84>

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