“Unemployment in the Czech Republic is at the lowest in the entire European Union, and the average monthly salary is higher than in Poland. This is a signal that the local labor market may also be attractive for Polish citizens,” writes Bartosz Grejner, Conotoxia Analyst.
The good economic situation throughout the European Union is a significant contributor to the economic situation improvement in many EU countries. The Polish Central Statistical Office data indicates that, for example, salaries have risen at a quick pace in Poland, GDP has increased, employment has improved and unemployment has decreased. And although in some indicators Poles have reached historical records, they still remain behind their southern neighbors.
Once at the top, once in fourth place
The average unemployment rate in the EU was 7.3% in January (Eurostat, European Statistical Office data). Although it is generally a low indicator, it is still nearly three times higher than in the Czech Republic, where 2.4% was registered - the lowest level in the entire EU and 2.1% lower than in Poland, which in this respect was also in the top of the EU, taking sixth place.
When there is a shortage of labour, salaries increase
The very low unemployment rate combined with high employment rates make it harder for Czech employers to find employees. To prevent this, they have to significantly increase salaries.
According to Eurostat, salaries in Poland in the second quarter of the previous year grew at a rate of 8.7% annually, and in the third quarter by 5.1%. This significantly exceeded the EU average, 2.7% and 2.5% respectively. An even higher rate was observed in the Czech Republic, where salaries increased at the rate of 11.1% and 6.6% in the indicated periods. Moreover, it was not just an exception but longer trend fragments.
The national statistical office’s data show that in the period from October to December the average salaries in Poland amounted to 4,517 PLN gross. Assuming the current exchange rate (1 czech koruna costs about 0.16 PLN), the average salary in the Czech Republic was 5,248 PLN, about 16% more.
A shortage of labour in the Czech Republic prompted Czech employers to look for employees elsewhere, including in Poland. Czech companies tempt Poles not only with the prospect of a slightly higher salary, but also free accommodation or paid commuting. With what effect? Two years ago, the Czech Republic made its debut on the list of countries Polish workers emigrate to. The CBOS survey shows that in 2016, most Poles went to Germany - 41% and to the United Kingdom - 23%. 5% of Poles working abroad chose to go to the Czech Republic.
The data for 2017 will probably show that Poles’ interest in working in the Czech Republic has increased. Employers from the Czech Republic publish job offers in Polish newspapers and portals. They probably realize that the high demand for employees, combined with short distances, cultural similarities and a linguistic barrier that is easily broken, may cause inhabitants from border towns to look for jobs beyond the southern border. However, the differences in earnings today are not significant enough to make the offers profitable for employees from other regions of Poland.
Why the Czech Republic?
The Czech economy is mostly created by the services sector, which accounts for 60% of the gross domestic product. In turn, 37.5% GDP is from the Czech industry sector and 2.5% from agriculture.
In the last quarter, it was the Czech industry, driven by increased vehicle production and computer electronics, which significantly contributed to the 5.2% GDP growth rate. Poland should be proud of its 4.3% GDP growth in this area (Eurostat data seasonally adjusted).
Economic revival throughout the European Union generally favours countries that have so far been economic community outsiders and let them catch up with leaders at a faster pace. The development potential of the richest countries in Europe is simply much smaller.
The effect called convergence is clearly visible through the the Czech Republic example and the largest economy in Europe, namely Germany. Germany's economic growth in the last quarter was 2.8% on an annual basis. It was almost half the pace of the Czech Republic at the same time. The wage growth rate was also four times higher in the Czech Republic, although the average salary still remained about three times lower than in Germany.
Poland’s southern neighbor should attract
According to the latest European Commission forecasts, wage growth is likely to remain at a high level at least in the next two years, although the raise pace may slightly weaken.
Still, we should see a significant demand for foreign employees and relatively attractive salaries in the Czech Republic. This is primarily illustrated by the record high employment rate and historically low unemployment level, which indicate serious shortages in labor supply in the southern neighbors of Poland. These, in turn, are likely to be developed by Poles.