Jan Macháček


Výsledky hledání

Czech Business Weekly

Why all the uproar about the Labor Code?

10. 10. 2005
Prime Minister Jiří Paroubek’s cooperation with the Communists (KSČM) on a new Labor Code ignited a bomb on the Czech political scene.

The Civic Democrats (ODS) screamed red putsch, the coalition stood on the verge of collapse and columnists wrote about the coming new era of communists in government and what it could all mean.

The prime minister seemed determined to deal with the commies because a new union-friendly Labor Code is a matter of principle for the Social Democrats.

What a surprise, then, to learn that Paroubek told managers and industrialists at a recent Brno trade fair that the country would have a new civil code in a year and a half. It will absorb the Labor Code; thus, the Labor Code will cease to exist.

This isn’t bad. In fact, it’s a trend in developed countries. But the prime minister is merely repeating now what the opposition Civic Democrats (ODS) have said for years. It’s increasingly likely that the Labor Code will become simplified as a part of the civil code, focused only on important and transparent principles.

The controversial union-friendly Labor Code is supposed to come into force in January 2007, the same time frame given by Paroubek to start the Cabinet talking about a brand new civil code. So what’s all the fuss about? Is Paroubek really dancing with the Communists and Civic Democrats at the same time?


Location, location, location

Hyundai is seriously considering a Kč 46 billion (€ 1.55 billion) greenfield investment in the Czech Republic – in particular, in north Moravia. Some fear that after all the investment incentives and tax breaks expire, Hyundai will move further east. So in 10 years the north will become a wasteland, while a new army of unemployed will have the skills for only one specific job on an assembly line.

But let’s look instead at one advantage we have in Central Europe: our central location. A central location is a strategic one, facilitating easier, less expensive distribution. Hyundai is seeking a location in central Europe. If price were the most important factor, all cars today would come from China. But with transportation costs rising globally, location will grow in importance.

Second, incentives like tax breaks are linked to investments. If a company is here it will keep investing. Škoda Auto keeps investing – and keeps getting incentives. On the other hand, a company may stay for only 10 years. The gap between long-term strategic investments and short-term investments is narrowing. The world is getting faster, more flexible and less sentimental. That’s globalization.


Paroubek the spendthrift

The country’s Gross Domestic Product (GDP) is doing surprisingly well these days, as is its fiscal income. Paroubek announced a budgetary surplus of some Kč 26 billion. But the government isn’t saving the money for the inevitable bad times. Instead it’s spending it on pre-electoral gifts. We have a paradox; the economy is improving and growing rapidly, unemployment is falling, but social expenditures are rising both in real terms and as a percentage of the budget. This is insane, perverted, and nonsensical.

And trouble is looming on the horizon as conservatives in America are doing the same thing as Paroubek’s socialists. America produced all the mainstream economic textbooks. And the textbooks say, in good times, save for a rainy day. Clinton followed the textbooks; Bush and Paroubek don’t.

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