Increase in unemployment tempers wage demands

The level of unemployment in the Czech Republic in 2009 has been considerably affected by the global economic crisis. Unemployment reached 5.3% in December 2008 and the Ministry of Labour and Social Affairs estimated that it would rise to 5.7%–6% in 2009. Some estimates, however, forecast that it would increase to 8.5%, or even higher in certain regions. The automobile industry and the glass industry are particularly affected by the economic downturn.

A higher level of unemployment in the Czech Republic due to the global economic crisis was expected to temper the demands of trade unions in collective bargaining for 2009. Employees were likely to keep their demands low, because it was more advantageous for them to remain in employment even if accepting a pay freeze or a curb in production. The Czech President, Václav Klaus, also called for the preservation of social cohesion in his New Year’s address at the start of 2009. In his speech, he not only emphasised the need for ‘reasonable employees and trade unions’ but also for more active entrepreneurs and managers capable of finding new opportunities and markets_._

Unemployment reached 5.3% in December 2008 and the Ministry of Labour and Social Affairs (Ministerstvo práce a sociálních věcí ČR, MPSV ČR) estimated that it would rise to 5.7%–6% in 2009. Some commentators, however, predicted that the unemployment rate could increase to 8.5%, or even higher in certain regions. The regions expected to be hardest hit are Central Bohemia, the northern Hradec Králové region, South Bohemia and the eastern Moravian-Silesian region. Many businesses particularly affected by the economic crisis are located in these regions, such as companies in the automobile industry and the glass industry.

Social partners adopt cautious approach

Uncertainty about the future has forced companies and trade union representatives to be cautious during the collective bargaining round. A number of businesses were adopting a ‘wait-and-see’ approach with regard to concluding a collective agreement, delaying the signing of any such agreement until the first quarter or first half of 2009. Various trade union organisations have reacted differently to the increasing unemployment.

For instance, trade unions at the Škoda Auto plant in the northern city of Mladá Boleslav took an accommodating attitude in relation to the economic difficulties. Its employees not only accepted several work stoppages but also agreed to a four-day working week for the first six months of 2009, with compensation amounting to 75% of the average wage for the fifth, non-working day. Trade unions also reacted in a cooperative manner at the Precheza chemical plant in the eastern town of Přerov, where they postponed collective bargaining on wages until the middle of 2009. According to the Chair of the local trade union, Bohuslav Malošek, it was expected to be clearer by then whether the economic situation would begin to improve.

Some demands for wage increases

Many other trade unions, however, rejected negotiations on a pay freeze. For instance, the Trade Union of Workers in the Textiles, Clothing and Leather Industry of Bohemia and Moravia (Odborový svaz pracovníků textilního, oděvního a kožedělného průmyslu Čech a Moravy, OSTOK) was satisfied with a 3% pay increase, but was insisting on at least some wage growth. The Chair of OSTOK in North Bohemia, Miloslava Janská, conceded that:

In the current economic situation, negotiating any increase in real wages will be very difficult. Nonetheless, it is not just employers but also employees who are in a tough situation. They also have higher financial obligations for power, water, heating and rent. We neither desire nor could desire zero growth in wages.

In many companies in the construction sector, for example, the trade unions and employer agreed a pay increase of about 6% on average.

Public sector employees were also calling for a pay increase. In the state budget, the Minister of Labour and Social Affairs, Petr Nečas, succeeded in obtaining a further CZK 2.7 billion (€100 million as at 2 January 2009) for the workers’ salaries. The minister had requested this sum to alleviate the impact of the economic crisis. Consequently, nominal wages in the public sector in 2009 were expected to grow by about 6.6% instead of the average 5%. Moreover, inflation was forecast to decrease considerably by around three percentage points from the 6.5% rate in 2008. Thus, an increase not just in nominal wages but also in real wages was anticipated in 2009, despite the difficult economic situation.

Soňa Veverková, Research Institute for Labour and Social Affairs (RILSA)