Expiring textile industry raises unemployment rate

Of the country's population of ten million, 541,675 were out of work in December 2004. In the last month of the year, the unemployment rate shot up to 9.5 percent from 8.9 percent in November. But while this development has made front page headlines, economists say there is no cause for concern and expect the rate to continue to rise and peak in February. Seasonal factors - the lack of seasonal jobs in agriculture or construction for example - cause unemployment to increase every winter. But, as the chief economist at Next Finance, Marketa Sichtarova, tells Dita Asiedu, the Czech Republic needs to beware of another important development:

"Next to these usual and traditional reasons, there is also one more factor this winter, which contributes to the higher unemployment rate. The textile industry is under big pressure because of the competition from Asia. This leads to a number of unemployed people that is higher than usual. I'm very much afraid that the textile industry will diminish even more than is the case in the Czech Republic now. The point is that the Czech Republic cannot compete with Asia in the labour force but it can and must compete in the area of quality."

Now, the unemployment rate has been hovering around eight, nine, ten percent...why has it been so difficult to bring it down?

"Companies went through massive restructuring and they were unable to create new jobs because companies, in past years, employed too many persons leading to a very low productivity of the labour force. These companies had to reduce the number of people unemployed."

Photo: European Commission

What were the government's plans to reduce the unemployment rate and why have they not born fruit?

"I'm afraid the government had no plans on how to reduce the unemployment rate. There is only one country in Europe, which proceeded really well. Slovakia has introduced very good reforms of the labour market and I think the Czech Republic should copy this reform plan."

What about the regions that are most affected by high unemployment such as northern Bohemia and northern Moravia, which are mainly the former industrial or coal mining towns. What measures are being taken there?

"The companies which are based in these regions will have to continue with the restructuring process and will have to continue to reduce employment. I'm afraid that the only thing that can be done is to support skills and the movement of the labour force. The government, for example, could support more buses and trains - infrastructure - to enable the labour force to move and find jobs in distant regions. This is the only thing that can be done in the regions of northern Bohemia and northern Moravia."