Social problems and policies in the Czech Republic after 1989: transitions costs and social structure

This paper compares the standard economic and a complementary socio-economic approach to the transition. While the economic approach looks at social problems from the outside and views them as costs of transition, the socio-economic approach looks at these problems from the inside and views them as a part of the social change taking place. Both approaches are here used to analyze four frictions. The first friction concerns the PAYG pension system which emphasizes intergenerational dependence and turns pensioners into a socially needy population. The second friction concerns the relation between low market wages and a higher welfare provision which creates a poverty trap and leads to a culture of dependency. The third friction concerns the insufficient incentives for middle class expansion which contrasts with the key role this class should play in the future prosperity of society. The fourth friction involves tensions between various sections of the middle class.

Keywords: social policy, socio-economics, distributional conflict, middle class