Rise in unemployment especially problematic for graduates and unemployed persons over 50

More than 500,000 Czechs are currently out of work, with the rate of unemployment growing from 8 percent in November of last year to 8.6 percent in December. While a jump in unemployment figures is not unusual for this season, experts warn that the growing number of persons aged 50 and over who find themselves out of a job and with little chance of getting hired poses a serious long-term problem for the economy. Former finance minister and Raiffeisenbank’s chief economist Pavel Mertlík speaks about expected labor market developments for 2012.

At the employment office

“First of all, there always is a jump in the level of official registered unemployment, because a lot of companies are ending contracts with employees around this time. So it is normal that there is a big jump, and this year it was from 8 percent in November to 8.6 percent in December. Secondly, this jump was higher than what the market expected, which shows that the situation in the economy is not very good. We expect a further increase in unemployment in the upcoming period. The third point which is important, however, is that if we look at the figures, we don’t see any big layoffs, the bigger problem is that there is no appropriate creation of new jobs.”

If we look at the specific age group of those aged 50 and above, how is the unemployment developing there and what effect will this have on the Czech economy?

Pavel Mertlík

“Here, the unemployment rate is higher. But the biggest problem, and it is a long-term problem in the Czech economy, is that there are no appropriate government-supported programs for this group of people. Many of them are not an attractive hire for private employers especially due to the strong competition from younger applicants. And at the same time, the age at which retire is usually between 60 and 65, depending on the particular situation, so usually those aged around 55 have little chances on the labor market. And the earliest possible entrance age into retirement schemes is 58, so they can have quite significant income problems.”

And how do you think the government will approach this issue, especially if the retirement age is raised?

“There was some vague agreement that there will be a pre-retirement scheme for specific groups of employees. But for the time being, this is only a government declaration and no details are clear yet. From a longer-term perspective, this is not a new problem. We’ve had it since at least the mid-nineties, and the government has so far failed to address it.”

And lastly, overall, how will unemployment develop in 2012, which many European leaders have dubbed a crisis year?

Photo: European Commission

“For sure, unemployment levels will be rising. We expect that the average unemployment rate in 2012 will be 9 percent, as compared to an average of 8.5 percent in the previous year. It is not a big difference. We don’t expect a principal worsening of the employment situation, nothing like what happened from 2008 to 2009. But still, it will be a relatively high level of unemployment. And I would emphasize that those who are entering the labor market and those who are unemployed will be affected by this the most. We don’t expect big layoffs but we also don’t expect a significant number of new jobs being created.”