The Czech economy has entered 2026 facing one of the tightest labor markets in its modern history.

Employment is at a record high, unemployment remains close to the floor, and yet employers across the country say they cannot find enough people to keep operations running.

Over the past two years alone, the workforce has expanded by roughly 200,000 people. Almost all of that growth has come from abroad, with Ukrainian workers playing a central role.

What was once seen as a temporary fix has become a structural pillar of the economy. Without foreign labor, many companies say they would already be forced to cut production or services.

A demographic dead end

Behind the shortage lies a problem that cannot be solved quickly. The pool of domestic workers is shrinking as the population ages and fewer young people enter the labor market. At the same time, demand for goods and services continues to rise. Construction firms, restaurants and social-care providers are among the sectors already working at full capacity, with orders piling up faster than they can be completed.

Managers describe a simple reality: there is work, but no one left to do it. The result is higher costs, longer delivery times and pressure on productivity. Economic growth, once driven by exports and manufacturing, is now increasingly limited by the lack of available staff.

A shift in where people work

The structure of employment is changing as well. Traditional manufacturing is slowly losing workers, while construction, energy, defense and social services are absorbing more of the labor force. This transition is expected to continue throughout the year, increasing demand for retraining and upskilling.

Companies are being pushed to invest more in their own people, not only to fill gaps but to keep pace with new technologies and stricter regulations. In many firms, training has moved from a secondary benefit to a core business necessity.

Sectors with promise, sectors under strain

Analysts see strong prospects for the defense industry and pharmaceuticals, both supported by current geopolitical realities and rising public spending. On the other end of the spectrum are energy-intensive branches such as chemicals and glassmaking, where high operating costs are eroding already thin margins.

The automotive sector sits somewhere in between. It remains a cornerstone of the Czech economy, but faces uncertainty linked to volatile demand, shifting production strategies and the risk of new trade barriers. For suppliers, planning has become harder than ever.

Pay continues to rise, but slowly

One of the few points of agreement among economists is that wages will keep increasing. The growth is expected to be steady rather than dramatic, with nominal pay rising by around five to seven percent. If inflation stays under control, workers should see a modest gain in real income, which could support household spending.

Legislation is adding another layer to the wage debate. From January, the minimum monthly wage increased to 22,400 crowns, or 134.40 crowns per hour. Compared with last year’s level of 20,800 crowns, this is the largest rise in three years. The change affects not only the lowest earners but also tax thresholds, benefit entitlements and employer costs, including those linked to contract work.

Transparency comes to the fore

Another major issue for employers this year is the upcoming introduction of the European directive on pay transparency. The Czech Republic must incorporate it into national law by June 7. Its goal is to narrow wage gaps, particularly between men and women, and give employees stronger tools to demand equal pay.

While few dispute the intention, the way the rules will be applied is already sparking debate. Business groups warn that an overly rigid and bureaucratic approach could place heavy administrative burdens on companies, especially smaller ones. There are fears that complex reporting duties might overshadow the original aim.

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