Czech Republic: Trade unions push for wages growth

An expanding economy, low unemployment rate and the need for qualified workers is creating favourable conditions for wages growth in the Czech Republic, with trade unions taking full advantage of the economy’s healthy condition. An increase in the minimum wage is also proposed for 2018. However, employer concerns and forthcoming elections may hamper its implementation.

Expanding economy and falling unemployment

In 2014, the Czech economy recovered from the global financial crisis and continued its upward trend of the pre-crisis period (see Table 1). The growth in the economy also led to a decrease in the unemployment rate, which reached 3.3% in April 2017, and to a significant reduction in the number of long-term unemployed.

Despite this, a high level of unemployment persists among those with a basic level of education (16.2% in Q1 2017) although there has been a significant decrease in unemployment with respect to those with vocational training (4.1 percentage points year-on-year). The unemployment rate for those with secondary school education who have obtained the school leaving certificate stands at 2.5%, while the rate for those with a university education is just 1.5% (Q1 2017).

There has been a rapid increase in the demand for labour with the number of job vacancies reported by the Ministry of Labour and Social Affairs (MPSV) at approximately 159,000 at the end of April 2017, the highest figure since records began. Companies are complaining of a shortage of employees in virtually all sectors, and the number of companies that consider the lack of workers to be a barrier to further growth is on the increase. The most acute shortage of labour is in the healthcare sector where there is a lack of doctors, nurses and auxiliary staff. There is also a shortage of both qualified professionals and unskilled workers in technical professions. The lack of workers is, naturally, exerting pressure on wages growth, and this is being fully exploited by the trade unions.

Table 1: Selected macroeconomic indicators of the Czech economy
Indicators 2013 2014 2015 2016 Q1 2017
GDP growth (%) -0.5 2.7 4.5 2.4 2.9
Rate of unemployment 7.0 6.1 5.0 4.0 3.4
Average gross monthly wage in CZK (€) 25,035 (959( 25,768 (987) 26,467 (1,1014) 27,589 (1,057) 27,889 (1,068)
Growth in average gross monthly wage (%) 0.1 2.4 3.4 4.2 5.3

 

 

 

 

 

 

 

 

 

Notes: Approximate currency conversion as at 13 September 2017.

Growth in gross domestic product (GDP) and average gross monthly wage percentages are year-on-year.

Source: Czech Statistical Office

End of Cheap Labour campaign

During the economic crisis, trade unions adopted a moderate stance, their main aim being to just maintain job positions. The largest Czech trade union association, the Czech-Moravian Confederation of Trade Unions (ČMKOS), even recommended to its members that wages be frozen or even reduced should it be required to do so due to the poor economic situation of employers. However, on 15 June 2015, the ČMKOS council concluded that low wages were becoming a serious problem in the growing Czech economy, and organised a demonstration in Prague on 16 September 2015 under the banner, 'End of cheap labour' (Konec levné práce); a campaign with the same name was extended into 2016 and 2017. The aim of the campaign is to take the Czech economy away from the prevailing economic concept of low wages. According to ČMKOS, the Czech government is now faced with a choice of whether to continue with its cheap labour approach – which consists of a low wages policy, low social standards and low tax rates – or to embark on a path of efficiency increases, rapid growth and competitiveness.

For 2015, ČMKOS recommended that its members would negotiate wage increases of 5% in collective agreements. It was the first time since 2009 that ČMKOS had quantified its wages growth demands. ČMKOS also recommended its members to pursue 5% wages growth in 2016, and 5.0–5.5% growth in 2017.

According to a statement by the ČMKOS council following its meeting of 23 May 2017, the campaign for higher wages has been successful and has provided inspiration for a number of individual trade union organisations. This is confirmed by the fact that in the first quarter of 2017, annual average wages growth stood at 5.3%, with no decrease in any sector – year-on-year nominal increases (according to sector) ranged from 0.7% (mining and quarrying) to 11.8% (hotel and catering).

Furthermore, ČMKOS believes that trade unions have become a force capable of influencing the growth of real wages. Trade unions now intend to focus their attention on ensuring decent working conditions, especially in connection with a proposed amendment to the Labour Code, which should introduce, for example, new regulations on mass redundancies, new conditions for homeworking, and stress and harassment prevention. However, the fate of this amendment is unclear as it has yet to receive parliamentary approval and the results of the forthcoming general election could have a significant impact on its implementation.

Increase in minimum wage

Trade union pressure for wages growth, the overall condition of the Czech economy and the favourable attitude of the government were reflected in a significant increase in the monthly national minimum wage in 2017 (Table 2). While the minimum wage in the Czech Republic is determined administratively by means of government regulation, the government does consult social partners on the amount of the minimum wage through the tripartite council, with the current government tending to accept the recommendations of trade unions.

Table 2: National monthly minimum wage, 2007–2017
Year Minimum wage 
2007 CZK 8,000 (€306)
2013 CZK 8,500 (€326)
2015 CZK 9,200 (€352
2016 CZK 9,900 (€379)
2017 CZK 11,000 (€421)

 

 

 

 

 

 

 

 

 

Note: Minimum wage as at 1 January of each year.

Source: Ministry of Labour and Social Affairs of the Czech Republic

The government is currently proposing a further increase in the minimum wage from 1 January 2018 to CZK 12,200 (€467). However, while trade unions are demanding an increase to CZK 12,500 (€479),  employers want to set this at a maximum of CZK 11,800 (€452). Employers are dissatisfied with the way in which increases to the minimum wage are determined; they are concerned with what they see as the lack of a real process in this respect and also the step-like nature of the increases. They propose that the level of the minimum wage be linked to the average wage in the Czech Republic, where each year the minimum wage should be increased to 40% of the average wage of the previous year. This model of defined increases is also supported by trade unions and the government, and is also part of the Policy statement of the Czech government (PDF). However, no decision has been taken on the further development of the minimum wage and with the forthcoming general election, no change can be expected.

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