Why does Prague have Europe’s lowest jobless rate?

Foto: Tomáš Adamec, Český rozhlas

The Prague region had the lowest unemployment rate in the entire European Union last year with 2.5 percent, according to freshly published data from Eurostat. It shared top spot on the list with Germany’s Upper Bavaria. But why is the Prague region doing so well in this respect? That’s a question I put to economist Daniel Münich.

Photo: Tomáš Adamec,  Czech Radio
“First, unemployment in the Czech Republic. I think we are the country with the third lowest unemployment rate, behind Germany and Austria.

“So it’s no wonder that the capital city has an extremely low unemployment rate.

“Because that’s usually the case, at least of countries like the Czech Republic, Slovakia and Poland – the capital cities have much more advanced everything: infrastructure, educational structure, labour market, and so on.”

But still the unemployment rate in Prague is much lower than in the rest of the country.

“It is, because if you look at the educational structure of Prague, it’s much above any other location in the Czech Republic.

“Many people from the rest of the country studied there and found jobs there, so there are an extremely high proportion of highly educated people, knowing languages.

“And the headquarters of foreign companies come to Prague first and do business there.

“There are many opportunities. The city is still developing. So I don’t wonder.”

Daniel Münich,  photo: Šárka Ševčíková
What role is played by the structure of employment? I guess a lot of jobs would be in tourism and not so much for example in industry.

“That’s true. Many jobs in industry were destroyed during the last 20 years. People can observe the remains of old manufacturing buildings, if they have not been torn down or renovated.

“People who used to work in manufacturing or industry had trouble finding a job, but we are 25 years after major restructuring, the economic transition, so these people either retired or changed activity.”

Would many of these jobs in Prague be poor jobs? I mean low-paying jobs, again perhaps in tourism.

“One should understand that the price level in Prague is notably above the rest of the country, including in housing, but also in the case of consumer goods.

“So nominal wages seem high, but if you take in to account the high prices real wages are not high at all.

“This is due to high competition among workers, reinforced by foreigners who are trying to find jobs here too.

“It’s a very competitive market and the salaries of regular workers, not those who are very highly educated, are not especially high.”

They say that something like 10 percent of Prague’s population is made up of foreigners. Is that a factor here? Are foreigners less likely to look for unemployment benefits, or are they likely to leave if they can’t find work?

Photo: Štěpánka Budková
“Definitely. The Czech Republic somehow manages to discourage or prevent foreigners from touching unemployment benefits, if you look at international comparisons.

“Foreigners either move out of the country or out of Prague and try to find some job in rural areas. Or they establish self-employment businesses so that they are no longer required to fulfil employment conditions.”