Breakthrough year for workers: real wages fell by more than 7 percent due to inflation

The median, i.e. the middle value of wages, rose by nine percent year-on-year in the 4th quarter to 37,463 crowns. It was 40,232 crowns for men, 34,554 crowns for women. Eighty percent of employees received wages between 18,666 crowns and 70,514 crowns per month.

In nominal terms, wages increased in each quarter of last year in a year-on-year comparison. In the first quarter it was by 7.3 percent, in the second by 4.4 percent and in the third by 6.2 percent. But in real terms, it fell in every quarter of last year. It was sequentially by 3.5 percent in the first quarter, 9.8 percent in the second and 9.7 percent in the third.

According to Komerční banka (KB) analyst Jaromír Gece, tension on the labor market contributes to the continued rise of nominal wages in the business sector. In the non-business sector, salary growth in the fourth quarter was supported by a 10 percent increase in salaries for some public administration workers since September.

“As inflation, aided by the so-called austerity tariff on energy, slowed from an average of 17.6 percent in the third quarter to 15.7 percent in the fourth quarter, the year-on-year decline in real wages eased to 6.7 percent after the previous -9, 7 percent, with a year-on-year decrease in (real) labor productivity of 1.1 percent. However, in quarter-on-quarter terms, real wages did not decrease further after five consecutive declines at the end of last year,” reports Jaromír Gec.

According to KB estimates, the purchasing power of the average wage after seasonal adjustment increased by 1.1 percent. “Companies thus probably compensated their employees for part of the previous increase in living costs in an environment of still solid profitability,” added the analyst.

According to Vít Hradil, Chief Economist of Cyrrus, Czech employees experienced a truly horror year from the point of view of wage development. “Although the Czech economy as a whole grew by 2.4 percent in real terms, employees did not get much from this performance, as their income fell by 6.7 percent in real terms,” ​​says Hradil.

He reminds us that in the end the result was still slightly better than the Czech National Bank expected, which expected a drop of 8.5 percent.

“The CNB has so far conditioned a further increase in interest rates on the possible faster growth of Czech wages. However, we do not assume that the current data would be a strong enough argument in itself for the Bank Board’s reaction immediately at the March monetary policy meeting. The beginning of 2023 will probably be more authoritative, when the employees entered the wage negotiations already aware of double-digit inflation,” says Hradil.

According to him, the current development on the labor market does not confirm previous fears about a significant increase in the unemployment rate, which can give employees more assertiveness. “Therefore, we assume that the year 2023 will no longer bring a significant drop in real wages. Any redundancies will rather concern low-income workers, which will, on the contrary, increase the average wage. The others will become bolder in their demands and, in our opinion, nominal wage growth will approximately cover inflation, which is why the real wage will roughly stagnate,” estimates the expert.

People improved the most in manufacturing and energy companies

In the last quarter of last year, wages grew the most in the production and distribution of electricity, gas, heat and air conditioning. It was almost 15 percent. On the contrary, wages in education fell by 0.3 percent. “In health and social care, the increase was only 4.5 percent,” the statisticians said.

For the whole of last year, the average salary reached 40,353 crowns. In a year-on-year comparison, it was 2,450 crowns more, i.e. 6.5 percent. However, consumer prices increased by 15.1 percent last year, so wages decreased by 7.5 percent in real terms.