Czechs looking to 2019 with optimism

2018 has been a good year for the Czech economy. Unemployment is the lowest in the European Union, wages have grown both in the public and private sector. But statistical data are one thing, personal experience and perception can be quite different.

Illustrative photo: Pixabay, CC0

The parking lot is nearly full and very busy. I am standing in front of one of the many hypermarkets and supermarkets in the Czech Republic. We still have to wait for the final figures, but Czech retail chains are already reporting robust growth in double digits compared to last year. Veronika Cempírková’s husband works for a local branch of Cooper Standard – a US global supplier of systems and components for the car industry. As a young mother of two, Veronika feels financially safe and secure:

“I think I can see it because of the kids. Everything is easier, now. We can afford things we were not able to afford a few years back. My husband works for Cooper Standard and they give them pay rises every year. So we have felt this positive change for a few years now, ever since he started working for Cooper.”

And there are many other factories like that. Manufacturing and engineering have always been a mainstay of the Czech economy. Del is a company in the central part of Czechia that designs and delivers mainly automated technological units. Its CEO Jiří Kabelka only complains about one thing: a lack of workers.

“I can only say that we would gladly welcome some 30 to 40 more employees. We have had about 310 employees in the past few years, and we would have work for 10 – 15 percent more. Recruitment is not easy, though. We are trying to cultivate our future workforce from school-age. We cooperate with the local vocational technical secondary school as well as technical universities. We are an engineering company so about 70 percent of our staff has a technical education and training. Those are the qualifications we need.”

Since 2014 both nominal and more importantly real wages have been growing in the Czech Republic. Teachers and public servants saw their salaries increase by more than 12 percent in the past year alone. And this puts pressure on the private sector, too. Says CEO Kabelka:

Illustrative photo: Klára Stejskalová

“Our employees very often point out what they hear and read about salaries in the media. But it is harder to give such pay raises in a private company such as ours. We cannot do it by a simple administrative decision as does the government. We have to be sure that the company‘s efficiency and its output justify such a raise. So even though our economy is doing very well, we are definitely not planning a blanket wage increase of 10 or 12 percent. The pressure to do so, however, is very high. In the past 2 or 3 years, we have been increasing wages by some 6 to 8 percent every year, of course, depending on qualifications. So, there are professions where the yearly increase has been around 10 percent.”

But try and ask a Czech retiree, how they are doing. There is a good chance you will get a much less optimistic answer. One unhappy senior spoke to me on condition of anonymity:

“It’s not good, here in Czechoslovakia. Not good at all. It is such a mess. It has never been so bad before. I can only buy everyday needs. We retirees don’t have money for anything else. The people in government have pay increases and they give nothing to us poor people. If they gave us 5,000 crowns a month more we would be glad. But they won’t do it. Of course, I have to survive with what I have and I can make do with it. But I cannot afford any luxuries. I can’t even go out to have a beer, it is getting more and more expensive. They give us a bit more in pensions, but they take it right away because they increase prices.”

This impression, however common, is simply not right, according to Zdeněk Pernes Chairman of the Council of Senior Citizens, an advisory body to the government:

“The average income of pensioners has risen by 4 percent this year. I have just checked the data on the Internet and inflation has risen by some 2 percentage points. So pensions have been rising twice as fast as inflation growth.”

Jiří Rusnok, photo: Filip Jandourek, ČRo

Czech National Bank Governor Jiří Rusnok understands that not every Czech feels the current economic prosperity. Yet he argues that, strictly statistically speaking, the Czechs have never had it so good.

“Macroeconomic data confirm this, no matter whether you look at the job market, wages, retail prices etc. However, we are talking only about aggregate level data and that can be misleading. They do not tell us much about individual people or families. Personal perceptions of prosperity and well-being are important and can be quite different. But generally speaking, it is true, all the macroeconomic and macrosocial data confirm that.”

By and large, the Czechs are looking to the approaching New Year with optimism. Safe some unexpected crisis or a disaster, they can hope to be a little more prosperous again when they start shopping for Christmas and New Year’s Eve parties some twelve months from now.