TECHNOLOGY VERSUS HUMANS: EFFECT OF THE MINIMUM WAGE ON THE LONG TERM UNEMPLOYED IN THE CZECH REPUBLIC

Purpose of the article The article deals with the institute of the minimum wage. The goal is to assess current technological developments and their effect on low skilled labour with earnings that fall in the lowest decile of earnings in the Czech economy in the period 1998 - 2013. Methodology/methods The cliometric method is used and it is based on time series analysis and on the statistical significance of the long term and short term relationships between various variables using the bivariate vector error correction procedure. Scientific aim The process of technological change in the Czech Republic in the analyzed period was characterized by a massive inflow of foreign direct investment, new technologies and the introduction of market innovations. New technologies changed the structure of the economy and led to the structural unemployment and introduction of the institute of minimum wage. This paper tries to find connections between long term unemployment and the minimum wage. Findings The detailed investigation into the rate of unemployment among groups at risk of being substituted by technology and the ratio of the minimum wage to decile wage, that the influence of the minimum wage fully manifested itself. Over the examined period, for every percentage point increase in the ratio of the minimum wage to the decile wage, the rate of unemployment amongst women and long-term unemployed men and women increased substantially. Conclusions Employing new technologies can be cheaper and results suggest that they already are cheaper than labour costs for the minimum wage low qualified worker. The risk of being unemployed is going to be due to artificial intelligence even higher; however, more links have to be found between the unskilled labour and new technologies.