The recent survey by the personnel agency Grafton Recruitment reveals an encouraging trend in Czech salaries. Despite high inflation rates, the decline in real wages has ceased, with nominal growth reaching approximately six to eight percent across various industries. This level of development is in line with the current annual inflation rate of 8.5 percent recorded in August. However, it is worth noting that the IT sector has encountered a pricing limit, hindering further salary increases.
Inflation has exceeded the nominal wage growth reported by the agency. Nevertheless, the agency director Martin Malo suggests that the decline in real wages, which represents purchasing power, has stopped. Some economists share similar expectations.
Pavel Sobíšek, the chief economist at UniCredit Bank, anticipates a slight decline of 0.2 percent in real wages during the third quarter. This signifies a stabilization phase. In the fourth quarter, he predicts a moderate increase in inflation, which means that real wages will not start growing until next year. Similarly, Radomír Jáč, chief economist at Generali Investments CEE, expects the decline in real wages to stop in the second half of this year. He suggests that we can expect approximately stagnant or slightly increased real wages on a year-on-year basis.
The Impact of Employee Shortages
Further wage progress is expected until the end of the year, especially in sectors experiencing intense competition for talent. Companies risking the loss of contracts due to a shortage of workers will likely see wage increases. However, the IT industry is approaching a virtual wage ceiling, making further salary growth in this sector unlikely. Martin Malo also notes that younger employees face more challenges when negotiating higher wages.
While some industries have temporarily suspended new hires and are waiting until the last quarter of this year or the beginning of the next to proceed, the demand for candidates remains high, both for skilled and unskilled positions. Malo believes that the complex and lengthy cross-border recruitment from countries outside the European Union, coupled with unsatisfactory rules regarding economic migration, contributes to this situation.
The future development of wages will continue to be influenced by ongoing economic crises, negligible economic growth, and specific components of austerity measures. From an employee cost perspective, the limitation of tax advantages for employee benefits will play a significant role. As a result, a substantial majority of employers will be compelled to reduce the level of provided help. However, this will lead to complications, including increased pressure for wage hikes, employee dissatisfaction, and higher employee turnover.
The agency warns that from the employees’ perspective, this will translate into a decrease in their standard of living, potentially impacting their work commitment, performance, and, ultimately, their well-being.
The survey examined the financial remuneration of hundreds of job positions across nine industries and thirteen regions. It was conducted in the third quarter of this year, with data primarily derived from candidate entry salaries.