Czechs Face Continued Decline in Real Wages

Despite an increase in the average wage in the Czech Republic at the end of last year, consumer prices rose even more in the fourth quarter of 2023, resulting in a continued decline in real wages for the ninth consecutive quarter, Novinky.cz writes.

Analysts warn that wages are failing to keep up with inflation with data from the Czech Statistical Office (ČSÚ) expected to shed more light on the situation next week.

Jakub Seidler, chief economist of the Czech Banking Association, noted that year-on-year growth in wages slowed down in the fourth quarter of 2023 to 6.5 percent from 7.4 percent in the previous quarter.

While wages saw rapid growth in certain sectors, such as real estate activities, others, like agriculture, experienced minimal growth, exacerbating the overall decline in real wages.

Vít Hradil, chief economist at Cyrrus, estimates that nominal wage growth reached 6.6 percent for the entire economy, falling short of covering inflation, leading to a 0.9 percent decrease in real wages year-on-year.

This trend of declining real wages has persisted for the second consecutive year, with Martin Gürtler, an analyst at Komerční banka, highlighting a significant decrease in purchasing power over the past two years.

Looking ahead, analysts anticipate a return to wage growth, even in real terms, due to lower inflation and persistent labor shortages.

Gürtler forecasts nominal wage growth of 6.9 percent and real growth of 4.2 percent for this year with expectations of real wages returning to pre-pandemic levels by 2026.

Despite the challenges, the average wage in the Czech Republic remains at CZK 42,685, with disparities across regions.

While wages are highest in Prague, they are lowest in the Karlovy Vary region, underscoring the need for broader economic reforms to address income inequality.