Real wages in Czechia fall to record lows

New data released by the Czech statistical office shows that the average wage fell by 6.7 percent in real terms. Staff

Written by Staff Published on 06.03.2023 15:37:00 (updated on 07.03.2023) Reading time: 3 minutes

Data released by the Czech Statistical Office (ČSÚ) on Monday show that in the fourth quarter of 2022, the average gross monthly nominal wage increased by 7.9 percent compared to the same period of the previous year, but decreased by 6.7 percent in real terms. The median salary was CZK 37,463.

Increases in wages have not been keeping pace with inflation for five quarters in a row. This means that despite the higher wages, the purchasing power of people with jobs has been falling. Consumer prices for fuel and energy as well as many basic food items have risen by dozens of percentage points year on year.

Prague has the highest average wage

In the fourth quarter of 2022, the average gross monthly nominal wage for a full-time employee was CZK 43,412, which is CZK 3,188 or 7.9 percent more than in the same period in 2021.

Prague has the highest average gross monthly wage, at CZK 52,213, while the lowest was in the Karlovy Vary region at CZK 38,019.

Consumer prices in the fourth quarter increased by 15.7 percent, which means wages fell by 6.7 percent for employees in real terms year on year.

The average gross nominal wage (průměrná hrubá nominální mzda) is the amount of money you get paid by salary, including bonuses and overtime. About two-thirds of employees have a wage below the national average. Real wage (reálná mzda), also called adjusted wage, takes into account inflation and reflects the amount of goods and services that can be bought. A decline in the real wage means a person can buy less.

Compared to the previous quarter, the seasonally adjusted average wage in the fourth quarter of 2022 increased by 2.1 percent.

The industries that saw the highest growth in average wages year on year were in the production and distribution of electricity, gas, heat, and air conditioning, up by 14.6 percent, as well as financial services and insurance, up by 10.3 percent. There was a year-on-year decrease of 0.3 percent in education, and an increase of only 4.5 percent in health and social care.

For the full year, wages fell 7.5 percent in real terms

The median wage, which is the amount in the middle of the wage distribution, in the fourth quarter was CZK 37,463, an increase of 9.0 percent compared to the same period of the previous year.

The gender gap continues, with men earning CZK 40,232 and women earning CZK 34,554. Some 80 percent of employees received wages between CZK 18,666 and CZK 70,514.

Jitka Erhartová, head of the ČSÚ's labor statistics department, said that for 2022 as a whole, inflation reached 15.1 percent and nominal wage growth was 6.5 percent, with the average wage reaching CZK 40,353. "So, in real terms, wages have decreased by 7.5 percent," Erhartová said.

Inflation expected to slow this year

Analysts say this year should be relatively better, as inflation should slow, but wages will continue to fall in real terms.

"Wages will increase nominally by 7.6 percent, while inflation will fall compared to last year, although it will remain high, at the level of 10.5 percent," economist Lukáš Kovanda said.

He added that wages will drop by 2.9 percent in real terms, which will be the second deepest drop in history, just after last year.

Jakub Seidler, chief economist of the Czech Banking Association (ČBA), agreed, telling ČTK that he also expects average wages to grow by less than 8 percent this year, leading to a slight drop in real wages due to expected double-digit inflation. He added that due to high inflation and the improving economic situation, unions can push for faster growth.

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