In the context of the Czech Republic, the wage landscape experienced a steady decline in real wages for nine consecutive quarters as a result of the economic repercussions induced by the pandemic and the rising inflation rate. This phenomenon was identified by Cyrrus chief economist, Vít Hradil, as the most impoverished period since 2017. Although wages are expected to rise, pre-pandemic levels will not be reached until 2026 at the earliest.
During the last quarter of 2023, there was an increase in the average gross monthly wage of 6.3% compared to the previous year, to CZK 46,013, equivalent to an increase of CZK 2,734. Despite this, inflation caused real wages to fall by 1.2%. According to Petr Dufek, chief economist at Creditas Bank, real wages contracted by 11% over the two years. In detail, workers in the information and communication sector earned the highest average wages, at almost CZK 79,200, followed by those in the financial and insurance sectors. In contrast, the lowest wages were found in the accommodation and catering sector and in the agricultural sector, with average wages of approximately CZK 26,700.
Analysing regional dynamics, wages showed nominal growth of between 5.4 % and 7.5 %, although they contracted in real terms. The Ústí region showed the most significant increase in nominal wages, by 7.5%, with a slight decrease of 0.1% in real terms. This was followed by the Karlovy Vary region, with a nominal increase of 7.4% and a real decrease of 0.2%. In contrast, Prague presented the most modest increase in nominal wages, by 5.4%, with a real decrease of 2%.
Over the whole of 2023, the average wage stood at CZK 43,314, marking an annual increase of 7.5% but, at the same time, a real decrease of 2.9% against an inflation rate of 10.7%. This situation has therefore eroded the actual value of wages. There was also a gender-based wage disparity, with men earning an average of CZK 42,340 and women CZK 36,842.
According to Martin Gürtler, an analyst at Komerční banka, ‘The persistent labour shortage, the compensation of the previous deep decline in household purchasing power and the favourable financial position of companies will, in our opinion, help support higher nominal wage growth’. Indeed, nominal wages are estimated to increase by 6% and real wages by 3.5%, marking the most significant improvement since 2019. However, Andrea Linhartová Palánová, an expert at PwC, pointed out the possibility that companies might moderate nominal wage growth. In addition, Dufek pointed out that changes in health insurance and the lowering of the threshold for higher tax rates will affect net income to a lesser extent than suggested by gross wages.
In conclusion, the Czech labour market environment is characterised by marked complexity, where nominal wage gains are tempered by inflationary challenges and fiscal policies. Nevertheless, there is a cautious but positive expectation of a recovery in real wages in the medium term, supported by favourable market dynamics.
Source: https://www.ceskenoviny.cz/
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