The Decline in Real Wages in the Czech Republic: An Analysis

Despite the nominal wage rise in the Czech Republic, the rapid inflation rate has resulted in a natural decrease in income. In the third quarter of this year, the average salary reached 42,658 koruna, marking a year-on-year increase of 7.1 percent. However, after accounting for inflation, which came to eight percent during the same period, the real wage declined by 0.8 percent. This means employees could purchase fewer goods or services with their average salary than a year ago. The Czech Statistical Office (ČSÚ) data indicates that two-thirds of employees do not reach the average wage.

The median wage, or the middle value of salary, rose 7.1 percent to 37,492 koruna compared to last year. It reached 40,153 koruna for men, while for women, it was 34,705 koruna. Eighty percent of employees received a wage between 19,835 and 66,998 koruna.

The real wage for Czechs last increased two years ago, in the third quarter of 2021. Since then, for eight consecutive quarters, it has been continuously declining. Analyst Tomáš Volf from Citfin points out that this situation significantly demotivates employees.

A contributing factor to this issue is the stagnation in the labor market. “People do not change jobs and remain loyal to their current employers due to concerns about future developments. As a result, companies have nowhere to hire new employees”, adds Volf.

According to data from Up Czech Republic, which specializes in employee benefits in the private and state sectors, six out of ten employees perceive their work compensation as undervalued. This unsatisfactory perception of their wage or salary is closely linked to most employers’ inadequate response to inflation and the reduction of employees’ purchasing power, which has been ongoing for nearly two years.