Real wages in Czechia slump the most out of all OECD countries

Surging inflation since 2019 has meant that, despite solid nominal growth, real wages have nosedived in the country. Staff

Written by Staff Published on 11.07.2024 10:44:00 (updated on 11.07.2024) Reading time: 2 minutes

Out of all 38 countries in the Organization for Economic Cooperation and Development (OECD), real wages in the Czech Republic have experienced the greatest decline since 2019, a new study finds. In the last five years, real wages in Czechia have dived by a substantial 7.5 percent.

Huge inflation since 2019 has caused real wages to fall, despite the fact that their nominal value has increased substantially in the last five years, the OECD says. In 2019, the average wage was CZK 34,125 – today, it stands at over CZK 45,000. Only Sweden has seen similar declines in real wages since 2019. 

Situation improving, but still worse than neighbors

The good news, however, is that in the last two years Czechia’s real-wage growth has seen a much more positive development. For example, in the first quarter of this year real wages rose by 3.8 percent – this is the 11th-highest growth in the OECD. In the fourth quarter of last year, according to the Czech Statistical Office, the average gross wage in the Czech Republic increased by 6.3 percent year on year.

Unfortunately, a recent, separate study found that recent wage growth in Czechia was slowest out of all four Visegrád Group countries. Polish wages are currently higher on average than those in Czechia. 

At the end of last year, chief economist of accounting firm Deloitte David Marek attributed the slow wage growth in the Czech Republic to inflation. He expressed concerns over the impact of rising energy prices due to ongoing geopolitical tensions and also highlighted the consequences of previous economic policies that resulted in high deficits in public finances and a fragile monetary strategy.

According to a recent survey, six out of 10 employees in the Czech labor force are dissatisfied with their wages. 

Despite these challenges, some sectors have seen an increase in real wages. The energy sector, in particular, saw a significant nominal increase of 13.7 percent last year, resulting in a 5.3 percent rise in purchasing power. Other industries, such as information and communication, accommodation, catering, hospitality, real estate, and manufacturing, also saw slight improvements in their purchasing power.

It is not just the Czech Republic and Sweden that have seen a decrease in real wages. Italy and New Zealand have also experienced significant drops, with real wages falling by 6.9 percent and 6.2 percent respectively since the end of 2019. 

In contrast, Lithuania has seen a 16.5 percent increase in real wages, making it the top-ranking country in terms of wage growth. Hungary and Poland also saw significant increases, with real wages rising by 13.5 percent and 9.3 percent respectively.

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