The real wage in the Czech Republic decreased by 9.8 percent, falling for three quarters

The real wage in the Czech Republic decreased by 9.8 percent, falling for three quarters
The real wage in the Czech Republic decreased by 9.8 percent, falling for three quarters

Prague – The real wage after including inflation in the Czech Republic has been falling for three quarters in a row. In this year’s second quarter, it decreased year-on-year by 9.8 percent. Compared to the same period of the previous year, the average wage rose by 4.4 percent to 40,086 crowns. In gross terms, employees received an average of 1,696 crowns more than a year ago. This follows from the information published today on the website by the Czech Statistical Office (ČSÚ). Economists predicted a similar drop in real wages, according to them it is the biggest drop in the existing time series. They expect the depreciation of wage growth due to high inflation throughout this year. In general, two-thirds of employees do not reach the average wage.

Compared to the previous quarter, the average wage in the second quarter increased by 1.3 percent after adjusting for seasonal effects. The median, i.e. the middle value of wages, rose by 5.3 percent year-on-year to 34,111 crowns. For men it was 36,925 crowns, for women 31,170 CZK. Eighty percent of employees received wages between 17,854 and 65,383 crowns.

The average wage in the second quarter increased most significantly in accommodation, catering and hospitality by 11.3 percent. In information and communication activities, it grew by 11 percent, in administrative and support activities by 10.3 percent. The average salary in health and social care fell by 20.7 percent, which, according to the CZSO, is caused by extraordinary bonuses paid out last year.

Compared to regions, people in Prague take the most, an average of 49,221 crowns. In the second quarter, the average wage also increased most significantly in the metropolis, by 5.7 percent year-on-year. People in the Karlovy Vary region continue to take home the smallest earnings, on average they receive 34,725 crowns gross. The smallest increase in the average salary of the CZSO was recorded in the Ústí Region by 1.6 percent.

In the first quarter of this year, the average wage increased year-on-year after the revision by 7.3 percent to 37,969 crowns. After including inflation, earnings fell by 3.5 percent in real terms. In the second quarter of last year, the average wage increased by 10.1 percent and by seven percent in real terms. The results were improved by a year-on-year comparison with the period of the first wave of the coronavirus epidemic and the payment of extraordinary bonuses to health workers.

Analysts: Czechs became poorer in the second quarter the most in the country’s history since 1993

Due to high inflation, the Czechs became poorer in the second quarter than in the country’s history since 1993. Employees will buy a tenth less from their salary than a year ago. Analysts contacted by ČTK today agreed on this. Experts expect an increase in real wages only during the next year. According to the Czech Statistical Office, the real wage after including inflation decreased year-on-year by 9.8 percent in the second quarter. Compared to the same period of the previous year, the average wage rose by 4.4 percent to 40,086 crowns.

“Inflation is starting to significantly reduce the standard of living of most households. Wages are indeed growing, but at a significantly slower pace than prices,” Deloitte analyst David Marek told ČTK. The results were influenced by the fluctuating wages in the health sector – while last year the premiums for the pandemic wages in this sector increased significantly, now these premiums have not been repeated and in a year-on-year comparison, wages have fallen by more than twenty percent. “Similarly, at the other end of the ranking is accommodation, catering and hospitality with a growth of 11.3 percent, which probably reflects the low comparative base from last year,” added Cyrrus analyst Vít Hradil.

However, even double-digit growth in some sectors was not enough to cover the devaluation of the purchasing power of wages by inflation, said UniCredit Bank analyst Pavel Sobíšek. “Its increase this year was extremely fast, and the development of wages tends to lag behind inflation in an economy. The current energy crisis, which is extremely raising the costs of many companies, is an additional reason for wage restraint, because many companies would not be able to bear a larger wage adjustment. That is why it will probably last at least until the second quarter of next year, before real wage growth resumes,” he added.

The latest forecast of the Czech Banking Association expects nominal wages to grow by around seven percent for this year and next year, with the fact that, depending on further economic developments, the dynamics of wages next year may surprise as a result of increased pressure from unions and pressure on wage growth in the public sector. According to her, real wages will fall by around eight percent this year, and around 1.5 percent next year.

Due to high inflation, Raiffeisenbank analyst Vratislav Zámiš expects that real wages will continue to fall at a double-digit rate for the rest of this year, and that Czech households will be worse off by around nine percent on average. Next year, due to the gradual retreat of inflation and greater pressure from employees, there could be a turnaround, and nominally according to him, wages will rise on average for the whole year 2023 at a double-digit rate, comparable to the rise in the price level.

According to Andrea Linhartová Palánová, an expert in human resources management at PwC CR, it will be important to monitor how pressure from the public sector, whose employees have received a ten percent increase since September, will affect the salary sphere. “Given that many companies are now under enormous cost pressure due to expensive energy and rising financing costs, it will be very difficult for them to raise wages at a rate that mimics inflation,” she noted.

Average salary in the 2nd quarter of 2022 in the Czech Republic and regions:

Average wage Year-on-year increase in CZK Year-on-year increase in percentage
CR 40.086 1696 4.4
Prague 49.221 2663 5.7
Central Bohemian Region 41,825 2095 5.3
South Bohemian region 36.377 1139 3.2
Pilsen Region 37,827 1025 2.8
Karlovy Vary Region 34,725 1119 3.3
Usti Region 36,866 592 1.6
Liberec region 36,764 1390 3.9
Hradec Kralove region 38,712 1346 3.6
Pardubice region 35.385 1094 3.2
Highlands region 36,698 1295 3.7
South-Moravian region 39.041 1655 4.4
Olomouc region 36.012 1028 2.9
Zlín Region 35,864 1905 5.6
Moravian-Silesian Region 36,211 1211 3.5

Source: CZSO

wage management 2nd quarter-CZSO

The article is in Czech

Tags: real wage Czech Republic decreased percent falling quarters

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