Czechia faces EU’s steepest wage decline as inflation erodes earnings

High inflation and limited workforce mobility have caused Czech salaries to drop 10 percent in real terms over the past five years.

Thomas Smith ČTK

Written by Thomas SmithČTK Published on 05.02.2025 10:27:00 (updated on 05.02.2025) Reading time: 2 minutes

Czechia has experienced the steepest decline in real wages among EU member states in recent years, with purchasing power dropping 10 percent since the end of 2019, despite nominal wages surging by over one-quarter.

High inflation has outpaced earnings growth, preventing wages from recovering to pre-pandemic levels, according to an analysis presented Tuesday by XTB Chief Economist Pavel Peterka. 

Since 2019, consumer prices in Czechia have risen by 41 percent, trailing only Poland (42 percent) and Hungary (52 percent) within the EU. However, Poland and Hungary experienced faster nominal wage growth, mitigating the effects of inflation more effectively than in the Czech Republic.

Italy has seen the second-largest drop in real wages, with salaries 5 percent lower than in 2019. In contrast, the eurozone average declined by just 1 percent, while Bulgaria recorded the highest increase, with real wages rising 36 percent over the same period.

Peterka's analysis also highlighted that wage growth has been restrained by weak consumer demand in recent years, leading businesses to exercise caution in hiring and salary adjustments. With economic recovery on the horizon, he expects this trend to reverse.

Despite projected real wage growth of around 5 percent in 2025, earnings are expected to remain below pre-pandemic levels until at least 2026. "It has been empirically proven that it is easier to achieve a wage increase by changing jobs than by negotiating with your current employer," Peterka added, citing low labor productivity and limited workforce mobility as key obstacles to faster wage growth.

Peterka said another danger to wage growth is the economic stagnation of major trading partners, led by Germany, or the risk of trade wars.

The Ministry of Finance forecasts that the average salary in the Czech Republic will approach CZK 50,000 per month next year. Czechia’s average salary nationwide is currently CZK 45,412. The average gross monthly salary in Prague is CZK 55,850 according to the latest figures from the Czech Statistical Office.

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The fastest wage growth is occurring in sectors like IT, engineering, logistics, e-commerce, and finance, where demand for skilled workers is high. In contrast, industries such as agriculture, general administration, and manufacturing are seeing slower wage growth. 

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