Economists: Raising minimum wage would be economic suicide

The head of the Czech Confederation of Trade Unions, Josef Středula, has threatened a general strike or even a blockade of the capital if his demands to increase the minimum wage and the frozen salaries of civil servants are not met. But economists warn that raising wages at this time could trigger another vicious spiral of inflation.

Czech trade unions have re-elected potential presidential hopeful Josef Středula to be their chairman for another four years. Immediately after his re-election, he said he wouldn’t rule out a general strike or a blockade of Prague in the event that the minimum wage for workers is not increased, Czech news site Echo24 reported. He argued that employees should not be made to bear the brunt of the economic impact from inflation and rising prices.

However, economists such as Eva Zamrazilová, Chairwoman of the National Budget Council, thinks it would be economic suicide to pursue such a policy, warning that raising the minimum wage could cause another inflation spiral.

"Raising the minimum wage would currently be an extremely irresponsible step cementing inflation. It would not only be reflected in further wage growth without any link to labour productivity, but it could also lead to a significant increase in unemployment."

Josef Středula | Photo: Roman Vondrouš,  ČTK

Chief Economist at BH Securities, Štěpán Křeček, believes that Mr. Středula’s threat of strikes and blockades was an attempt on his part to garner support for his possible future presidential candidacy, which was supported by current president Miloš Zeman and former leader of the KDU-ČSL and TOP 09 political parties, Miroslav Kalousek, at a union congress at the end of April.

“Most likely it’s an attempt to increase the visibility of Josef Středula, who is evidently going to run for president. Squares filled with protestors led by the leader of the trade unions would serve as an excellent election campaign.”

Mr. Křeček says that the minimum wage will have to increase due to rising inflation, but the increase of 2000 CZK a month that the trade unions are asking for would be irresponsible.

“Given the parameters of our economy, that is an unrealistic plan which could cause significant economic damage.”

However, despite the warnings of economists, Prime Minister Petr Fiala has agreed to a meeting with union leaders and Labour Minister Marian Jurečká to discuss increasing the minimum wage, due to take place on May 25.