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Outstanding results of the Czech labour market

22 Jan 2019 10:14|Marcin Lipka

"Unemployment in the Czech Republic is just 1.9% and is one of the lowest in the world. However, the exceptional situation on the labour market is also determined by the huge number of vacancies, very high employment rate of people without higher education, attractive wage distribution and stable immigration trends," writes Marcin Lipka, Conotoxia Senior Analyst.

101 thousand - only this many were unemployed in the Czech Republic according to Eurostat data for November. It is just 1.9% of the economically active population. According to the IMF estimates, at the end of 2018, no democratic country based on the market economy has such a low level of unemployment. In the European Union, the second lowest percentage of job seekers is in Germany, at 3.3 per cent.

Almost three times as many vacancies as the unemployed

Data on the number of job vacancies is even more surprising. According to Eurostat, there were 282,000 vacancies in Q3 2018. Therefore, there are almost three times as many vacancies as people looking for employment. No EU country can boast about having more vacancies than those who are looking for employment. To compare - in Poland there are 157,000 vacancies with 661,000 unemployed.

Czechs, who for years have focused on industry, strong relations with Germany and attracting foreign capital investing, e.g. in the automotive industry, can also be proud of their extremely high employment rates among people without higher education. This is an essential element ensuring social cohesion and a relatively flat distribution of wages in the economy.

Over 80 per cent of the population aged 15-64 with education below the tertiary level has a job. This result oscillates around European leaders (Switzerland, Denmark, Germany). In Poland, it amounts to 68.6%. To reach the result above the Czech one, over 1.5 million people would have to find employment in Poland.

Without higher education, you can still earn money

Data from the Czech Statistical Office (CSO) for Q3 shows that gross wages in the enterprise sector amounted to 31500 CZK (5250 PLN). In the same period, according to the Polish Central Statistical Office (GUS), the average salary in Poland was over 600 PLN lower - 4580 PLN.

The average wage difference does not seem to be dramatic, and given the prices, the purchasing power of national wages in both countries is similar. However, this is only half the truth, as the distribution of wages in the Czech Republic is more favourable than in Poland. According to CSO data, the median of wages (half receive above this level and half below) amounts to 86% of the average in the Czech Republic (for Q3 it would be about 4515 PLN), while in Poland only 80% (3664 PLN).

Work pays off

A high level of employment is good not only for households but also for businesses or the state budget. The Czech Republic's debt to GDP is one of the lowest in the EU and amounts to only 33.9%.

The ease and will of Czechs to find a job also support the lowest risk of relative poverty in the EU (threshold of 60% of the median equivalent disposable income after social transfers). Only 8.1% of the population is at risk of relative poverty, while in Poland it is almost twice as high (15.9%).

A high percentage of employees translates into more funds for research and development. Czech companies, universities and the public sector spent 1.8 per cent of GDP in 2017, while in Poland it barely exceeded 1 per cent.

EU countries reaching for the Czech Republic

Over the last few years, hundreds of thousands of immigrants from Ukraine have come to Poland. A record-high number of vacancies and extremely low unemployment results in the inflow of workers also to the Czech Republic. Between 2015 and 2017 the employment of foreigners increased by more than 150,000, to 560,000 according to CSO data. Taking into account the number of the country's citizens (about 10.6 million), it was a very large increase.

To the Czech Republic, workers come mainly from EU countries: Bulgaria, Hungary, Poland, Romania and Slovakia. In total, the increase in employment of EU citizens in the Czech Republic went up by 90,000 people in two years. The inflow from Ukraine was also visible, but it amounted to only about 40,000 people.

The distribution of immigration to the Czech Republic seems to be more beneficial than in Poland. It is based on immigrants from many countries, and in Poland, these are practically only workers from Ukraine. If the economic situation in Czech improves or other EU countries start to compete with a greater commitment for employment of foreigners from outside the EU, then Poland will lose much more than the Czech Republic.

22 Jan 2019 10:14|Marcin Lipka

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