Czech Real Wages Expected To Fall By Over 8% In 2023
Cyrrus mention two main reasons for the excess of consumer inflation over wage growth: the Russian-Ukrainian war and the Covid-19 pandemic. Photo KB for Brno Daily
Czech Rep., Dec 2 (BD) – The Czech Republic is currently experiencing the steepest drop in real wages of OECD countries and in its own post-independence history. The average Czech real wage will fall by 8.3% in 2022, says Cyrrus, a licensed stockbroker and one of the largest investment companies in the Czech Republic.
According to the OECD, real impoverishment occurred in the vast majority of counties monitored in the third quarter of 2022, although the drop in wages in the Czech Republic was the fastest (-8.9%). Prices here are rising fastest in stores compared to local paychecks.
In their early December analysis, Cyrrus mention two main reasons for the significant excess of consumer inflation over wage growth. The Russian-Ukrainian war and resulting geopolitical conflict between the West and Russia brought, among other undesired consequences, the restriction of the supply of Russian fossil fuels for the European market, with the consequent dramatic increase in their price.
The second cause was the Covid-19 pandemic, which caused a global reduction in supply. Production capacities were curtailed, and transport capacities were first limited and then working at their maximum to deliver production materials and goods. The Covid-19 crisis also convinced many governments to release more money to their economies, thus increasing inflation.
“The economy contracted due to strict containment measures, but the authorities extended generous support to maintain incomes, employment and liquidity,” said the OECD in the introduction to their latest country report.
The exception to the trend of growing real wages was the period of post-socialist transformation, and the years 1998 (-1.4%), 2012 (-0.8%) and 2013 (-1.5%), say Cyrrus analysts.
In the 2nd quarter of 2022, the Czech consumer prices increased by 15.8%, while the average gross monthly nominal wage rose by 4,4%, so wages fell by 9.8% in real terms, according to data from the Czech Statistical Office. The median salary (CZK 34,111) increased by 5.3% compared to the same period of the previous year, reaching CZK 36,925 for men and CZK 31,170 for women. 80% of employees received wages between CZK 17,854 and CZK 65,383 in Q2 2022.
Due to the inflation and falling real wages, Cyrrus has calculated that the average Czech full-time employee would have needed an extra CZK 40,000 to maintain the same standard of living as in past years, or about CZK 3,300 per month. The real purchasing power for Czech will thus return to levels last seen in 2018.