Employers slam trade unions’ pay demands

Employers are concerned about the trade unions’ pay demands for 2009, which they view as disproportionate. Whereas the Czech Chamber of Commerce is currently approving of a maximum increase in nominal wages of 6%, the trade unions are seeking a nominal wage growth of at least 8% in the private sector next year. The trade unions’ wage growth expectations for state employees in 2009 are also considered to be far removed from the government-approved budget.

Wage demands in private sector

On 7 September 2008, one of the country’s biggest national trade union federations, the Czech-Moravian Confederation of Trade Unions (Českomoravská konfederace odborových svazů, ČMKOS), announced that trade unions would be expecting a wage increase of at least 8% in the private sector in 2009. The statement was made by the Deputy Chair of ČMKOS, Jaroslav Zavadil, in a discussion on Czech television.

Reaction of employers

However, employer representatives have strongly criticised the demands. The President of the Confederation of Industry of the Czech Republic (Svaz průmyslu a dopravy ČR, SP ČR), Jaroslav Míl, highlighted that: ‘At a time of emerging recession in Europe, companies cannot afford to be frivolous with their costs.’ He added that the trade unions’ demands were totally unrealistic and that employee representatives should judge the employers’ situation according to the conditions prevailing in world markets.

The President of the Czech Chamber of Commerce (Hospodářská komora České republiky, HK ČR), Petr Kužel, also rejected the trade unions’ demands. Regarding wage growth higher than the rate of inflation in 2009, Mr Kužel referred to the HK’s estimate on the aforementioned television programme: ‘According to our forecasts, it will be somewhere around 2%.’

Inflation forecast

The Czech National Bank (Česká národní banka, ČNB) is expected to have its estimate for next year’s inflation ready in November 2008. However, according to the Senior Director of ČNB and a member of the banking council, Pavel Řežábek, the inflation rate will be less than 4%. As a result, HK will only approve a nominal wage increase of less than 6%. Mr Řežábek also spoke of concerns about disproportionate wage demands. He insisted that strong wage growth would have a negative impact on inflation, adding that: ‘It’s not rising cost prices I’m worried about: I’m worried about strong bargaining campaigns that are all about wages.’ Mr Řežábek highlighted that, in general, every central bank is most concerned about strong growth in demand.

Wage demands in public sector

The trade unions are demanding an extra CZK 2.6 billion (about €101.5 million as at 20 November 2008) in pay for next year to ensure that state employees’ wage growth is at least equal to inflation. This demand was put forward by the Chair of the Trade Union of State Bodies and Organisations (Odborový svaz státních orgánů a organizací), Alena Vondrová, in a television discussion programme.

According to Ms Vondrová, the trade unions are planning to ask parliamentary deputies to increase the state employees’ wages budget heading when debating the budget.

Details of draft budget

The report on the draft state budget for 2009 states that the average wage in ‘centrally managed organisational components of the state’ and organisations partly funded by the state budget will grow by about 3% to CZK 26,222 (€1,025) a month. This projection includes, for example, the wages of police officers, customs officers and soldiers. At the same time, the average gross wage in the private sector should increase to CZK 23,300 (€911) a month next year, according to a forecast issued by the Ministry of Finance of the Czech Republic (Ministerstvo financí České republiky, MF ČR). The total volume of funds earmarked for state employees will grow year-on-year by almost four billion to CZK 130.4 billion (€5 billion), as set out in the draft budget. However, this figure includes funds intended for preparations for the EU presidency, which the Czech Republic will assume on 1 January 2009, as well as the actual funds from the EU. The wage growth will result from both a 1.5% increase in the volume of funds allocated for pay and also from changes in the qualification structure – resulting in an increase in graduate workers – and in the number of employees handling the EU-related agenda.

Employment levels in state administration

The government has already stated that pay could increase more strongly if about 9,000 jobs were cut in state administration by 2010. In April 2008, the government decided that it would reduce the number of employees in state administration by 3% by 2010. According to Ms Vondrová, however, this reduction in the number of employees would result in a pay increase for the remaining employees of just 0.5% to 0.75%. Moreover, in the justice department and prison service, for example, staff levels cannot be cut.

Jaroslav Hála, Research Institute for Labour and Social Affairs (RILSA)

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