Analysis of the development of average wages of employees - 1 quarter

The News Releases for Q1 2009 are affected by transition to a new methodology of the average wage calculation where data on employees FTE are preferred and the sample contains also data for non-surveyed businesses with less than 20 employees, which are calculated according to a mathematical model. Concurrently, basic data according to the previous methodology will be given for a limited period of time, where numbers of employees are calculated irrespective of the type of their employment (natural persons) and the results correspond only with the sample surveyed. In both concepts, however, the results only refer to employees under employment contract with reporting unit, excluded are entrepreneurs and the self-employed and also persons performing public office, such as members of Parliament, senators, councillors at all levels, judges, etc.

Another significant change is an introduction of a new Classification of Economic Activities (CZ-NACE) replacing the before used OKEČ classification. This change brings another view on the structure of the national economy, which better corresponds with the development of economy and the labour market in the 21 ^st century. 'Information and communication' or 'arts, entertainment and recreation' are included into the classification as new types of activities.

In the upcoming days the Czech Statistical Office will publish at its web site a detail view on the wage development using the new concept including quarterly time series of average wages since 2000.

The total nominal average gross monthly wage ¹ , full time equivalent , reached in Q1 2009 CZK 22 328, in the y-o-y comparison the increase was CZK 681. In the business sphere the average wage increased, y-o-y, by CZK 634 to reach CZK 22 331, in the non-business sphere by CZK 915 to CZK 22 311.
 
The results showed that worries of the first impacts of the economic crisis on the wage growth in the Czech Republic when the nominal increase of the average wage in the business sphere reached only 2.9%, were justified. In the non-business sphere the average wage increased by 4.3%, y-o-y. The difference between nominal wage in the business and non-business sphere was reduced to CZK 20.
 
The real wage development is, in addition to the nominal wage growth, affected also by the growing price level (inflation) expressed by the consumer price index. In 2008 the inflation reached its top level in Q1 (7.4%), in the following quarters it gradually declined and in Q1 2009 it reached 2.1%. The total real wage in Q1 2009 increased, y-o-y, by 1.0%. In the business sphere it increased by 0.8%, in the non-business sphere by 2.2%. It should be noted that in 2008 the increase of the real wage in the non-business sphere showed negative values.
 
The minimum wage showed no changes since January 2007 and accounts for CZK 8 000.
 
The nominal average gross monthly wage per natural persons in the sample survey ² reached in Q1 2009 CZK 22 941, in the y-o-y comparison the increase made CZK 534. In the business sphere the average wage increased, y-o-y, by CZK 465 to CZK 23 483, in the non-business sphere by CZK 903 to CZK 21 067. In the business sphere the increase was 2.0%, in the non-business sphere 4.5%.

The difference between average wages calculated according to different concepts are due both to the inclusion of the below-limit businesses and also to the type of employment, full time equivalent, taken into the account (in the non-business sphere only the latter was observed).

Nationwide wage development is shaped mainly by the business sphere since their employees make more than 80%. While the wage development in the business sphere is used to be more fluent and is affected mainly by economic results of the companies, it is jump-like in nature in the non-business sphere because it depends on what the budget allows.

The impact of the economic crisis on the Czech economy is uneven and the labour market development responded to the crises to a different extent by industries. The biggest impact on the employment was registered in Q1 – dramatic fall of the number of employees was observed in manufacturing (-112 thousand, i.e. –9.0%) where the decrease of mainly non-domestic orders resulted in a slump of production, and subsequently this fact showed in transport and storage (-9 thousand, i.e. –3.1%). Mass dismissals related to workers hired by labour agencies, mostly foreigners. In industry covering activities of employment agencies, the number of employees dropped by 21 thousand, i.e. by 41.3% of the original staff. By contrast, e.g. in trade and market services hardly any impacts have been registered and also in construction the results are not affected by any unexpected change of the trend, more important role is assigned to weather conditions. The drop of employment in agriculture (-5.1%) is rather of long-term character and possibly is not directly related to the crisis.

Referring to the average wage development the impacts of the economic crisis showed in different forms and in Q1 they often were contradictory:

• Major part of enterprises (hundreds) changed their working time - most often a four-day working week was introduced while the remaining day (usually Friday) the employees stayed at home with wage compensation (mostly 60% of the average wage). This fact resulted into the average wage decrease.
• Massive dismissals in many enterprises resulted into the total average wage increase because dismissed were often persons with lower qualification and with the below-the-average wage. Employees with top qualification, who cannot be replaced easily, are dismissed, as a rule, only in hopeless situations.

The above mentioned facts showed in Q1, at least marginally, almost in all industries, however, massive dismissals were observed only in manufacturing.

Differences in the wage level and in its growth rate between industries (CZ-NACE sections) are characterized in the following graph:
 
 
The highest nominal average wage was observed in 'financial and insurance activities' (CZK 53 987) in which the average wage in the y-o-y comparison stagnated; in 'information and communication' (CZK 45 516) where the wage increased by 8.7% and also in 'electricity, gas, steam and air conditioning supply' (CZK 39 420) where the average wage increased by 10.5%. The lowest average wage was observed in 'accommodation and food service activities' (CZK 11 721) where a portion of labour income is obtained in form of a tip. The second lowest wages were reported for 'administrative and support service activities' (CZK 14 957); 'agriculture, forestry and fishing' (CZK 15 840) occupies the third place.

In Q1 some industries were affected by the drop of average nominal wages or by stagnating wages which resulted in to a real drop. In addition of the above mentioned 'financial and insurance activities' this applies mainly to 'administrative and support service activities' and 'accommodation and food service activities' (in both the same drop was registered – nominal wage by –6.1%, real wage by –8.0%), following were 'real estate activities' (-5.3% and –7.2%), 'mining and quarrying' (-1.3% and –3.3%) or 'other service activities' (-3.5% and –5.5%).
 
The average nominal wage in companies and organisations employing 250+ employees reached in Q1 2009 (FTE) CZK 26 026, of which in enterprises with 1 000+ employees CZK 27 254. In enterprises employing 50-249 employees the average wage accounted for CZK 22 400, in enterprises with 20-49 employees CZK 20 770, in enterprises with 10-19 employees CZK 18 572 and in the smallest enterprises (up to 9 employees) CZK 15 266.

Average wage in private and public ³ sector developed differently – in public sector, which makes almost a quarter of the whole economy, the average increased by 6.4%, y-o-y, to reach CZK 23 715 while in private sector wages raised by 2.0 % to reach CZK 21 876.

The y-o-y drop of wages (wages excl. other personnel expenses) was CZK 2.4 billion, which is by 0.9% less. Concurrently the number of employees decreased (FTE) by 3.9%. On the other hand, the volume of other personnel expenses massively increased by CZK 0.9 billion, i.e. by 9.2% which is related both by severance pay and transfer of certain number of employees to employment based on contract for work or contract of services.

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¹ In this connection it is appropriate to remind what does the average gross monthly wage mean. It concerns the share of wages and salaries (incl. premium pays, directs remunerations and bonuses, refund of wages etc.) per one employee regardless the fact whether this employee has a university degree and responsibility for the operation of the whole company or is a person working in the same company as a blue-collar. From this point of view it does not show, what salary does each concrete employee receive. It is also important to be aware of the fact that an employee receives net salary, while the gross wage is such, from which the employer pays appropriate amounts on health and social insurance, policy of employment and advance income tax. Whether the average gross monthly nominal wage reaches whatever level, it is important to take into account the fact that results of the structural statistics, when data on earnings of individual employees are available state that approximately two thirds of employees have a lower wage than the national average. In the publication “Structure of Earnings Survey 2008“, offering the information not only about the average wage but also about the median level of the gross wage (e.g. by sex, age, employment etc), which reports on the employee wage in the middle of the wage distribution (the publication is available on: /csu/czso/structure-of-earnings-survey-2008-1t4slettz7)
² The data refer to business sphere enterprises with 20+ employees (in financial intermediation irrespective of the number of employees) and all non-business sphere organizations.
³ Public sector includes government agencies and public non-financial institutions, public financial institutions
 

Published: 07.06.2009
The data are valid as of the release date of the publication.