Wage growth expected to slow down in 2020, trade unions warn consumer-driven economy could be hurt

Solid economic growth and record-low unemployment has driven a growth in salaries for five years in succession. This year economists have a bleaker outlook, saying wage increases are likely to be significantly lower, due to the slowdown in economic growth.

Photo: Gerd Altmann, Pixabay, CC0 1.0 DEED

Due to the healthy state of the economy and the shortage of workers on the labour market Czechs have come to take the annual wage increases for granted. According to labour market analyst Tomas Ervin Dombrovsky, 20 percent of employees have changed jobs in the last twelve months with companies offering salary hikes and additional perks in the tug-of-war for skilled workers. Solid economic growth has also enabled firms to raise salaries and improve conditions in order to keep staff happy.

This year the economic slowdown is likely to make them more cautious. The Confederation of Industry and Transport predicts a wage growth of around 4 percent.

However, trade unions, will demand 6 to 7 percent wage hikes, saying that given the present state of the economy employers will still have enough to raise salaries. The chairman of the Czech-Moravian Confederation of Trade Unions Josef Středula says that despite the huge outflows of profit to mother companies, which inevitably curb wage growth and company investments, letting wages stagnate would only put the consumer-driven economy at risk.

“Czech GDP in real terms has already exceeded 90 percent of the European Union average, prices are at around 66 per cent of the EU level, yet Czech wages are at around 30 percent of the European average in nominal terms, so there is no reason for us to lag behind in terms of wages " Středula said.

Prime Minister Andrej Babiš said in his New Year’s address his government would continue to “invest in people”. Teachers will see a ten percent increase in salaries this year and public sector workers are to receive an additional 1,500 crowns monthly. In the private sector it is likely to be big companies and those short of skilled workers who are likely to invest more in their employees.

The average gross monthly salary in the Czech Republic increased by 6.9 percent in the third quarter of 2019 to CZK 33,697.

The national minimum monthly wage rose by CZK 1,250 (approx. EUR 49) to CZK 14,600 (EUR 572.5), as of January this year, an increase by 9.37%. While trade unions welcomed the decision, employers argued that the economy is slowing down and small Czech firms cannot afford to increase salaries or compete with those offered by foreign companies. They argue that the minimum wage rise did not correspond to factors such as economic growth, inflation and the average salary.