Wages Up Over 7% – Unemployment Lowest in EU

Prague, Dec 1 (CTK) – Average wage in the Czech Republic increased by over 7 percent in the third quarter of this year, a growth pace similar to the second quarter, and average real wage added around 5 percent, according to estimates of most analysts addressed by CTK.


The growth was pulled mainly by the good economic performance and lack of employees which exerts pressure for wage growth.


Average wage in the Czech Republic has been rising constantly since the beginning of the year 2014.


In the second quarter of this year, average gross monthly wage rose by 7.6 percent to Kc29,346. After indexation, it went up by 5.3 percent.


It is valid in general that two thirds of employees have a lower wage than the average figure.


“In our estimate, real wages, including inflation, increased by 5.4 percent in the third quarter. This is the fastest growth pace in real wages since the first quarter of 2007. Wage growth in the Czech Republic is now one of the fastest in the whole of the EU,” said Cyrrus company chief economist Lukas Kovanda.


He sees low unemployment as the main reason for the growth. Unemployment in the Czech Republic is the lowest in the EU.


“The tense situation on the labour market creates constant wage pressures. The public sector is also under this pressure, it is raising wages of state servants continuously as well,” said Komercni banka economist Viktor Zeisel.


“Nevertheless, wage growth was slowed down by weaker economic activity and calendar effects in the third quarter which this year had one working day less,” he added.


This is why he expects a 7.5 percent growth in average wage in the third quarter. Real wages thus increased by 4.8 percent, Zeisel noted.


ING chief economist Jakub Seidler also expects a growth in real wages below 5 percent.


“The year-on-year growth in average nominal wage should in our estimates remain at 7.6 percent. With respect to the moderately higher inflation, the growth dynamics of real wages will moderately slow down to slightly below 5 percent,” he said.


“It will still be one of the fastest growths in real wages in the last ten years,” Seidler remarked.


Like some other economists, he pointed at the fact that the wage growth is to a large extent caused by the lack of suitable labour force due to the record-low unemployment and favourable economic development.


UniCredit Bank chief economist Pavel Sobisek has lowered his growth estimate for average wages to 6.8 percent and for real wages to 4.1 percent based on today’s GDP data.


“The slower yr/yr growth in wages against the previous quarter was probably caused by transitory technical factors, in particular a lower number of hours worked due to the different timing of weekends and holidays,” he explained.


In the third quarter of last year, average wage increased by Kc1,170 yr/yr to Kc27,220, that is by 4.5 percent. Real wage rose by 4 percent.