Analysis of the development of average wages of employees - 1. quarter of 2007

In Q1 2007, the average gross monthly nominal wage ² per actual person reached CZK 20 399; in the year-on-year comparison the increment was CZK 1 481.

In the business sphere the average wage increased year-on-year by CZK 1 584 to CZK 20 656, while in the non-business sphere it went up by CZK 1 116 to CZK 19 501. The relative increase of the average wage was 7.8%, the growth in the business sphere being 8.3% and in the non-business sphere 6.1%. In the same period, consumer prices went up by 1.5% and the real wage thus rose by 6.2% in total, in the business sphere by 6.7% and in the non-business sphere by 4.5%. The minimal wage was increased on 1 January 2007 to CZK 8 000, in the first half-year of 2006 it amounted to CZK 7 570 and in the second half-year of 2006 it was CZK 7 955.

Compared to the same period of last year, the volume of wages and salaries in the set of reporting units measured, which does not include business subjects employing less than 20 employees, amounted to more than CZK 16.7 billion, which is more than 9.1% at the current growth of the number of employees by 1.2%.

The relative year-on-year increment of the average nominal wage for Q1 2007 (7.8%) belongs among the highest since Q2 2002 (7.8%). The only exception in this period was Q1 2004 (8.9%), when the high growth rate of the average wage was significantly contributed to also by the wage development in the non-business sphere (non-business sphere 9.6%, business sphere 8.7%), when there had been a change in the wage scale – change from a twelve class wage scale to a sixteen class wage scale. In Q1 2007, wages increased faster in the business sphere. The continuing economic growth probably enables enterprises to pay their employees higher salaries. A significant factor affecting the wage growth in Q1 2007 was also the very moderate winter, while in the comparable period of the previous year the climatic conditions were, on the contrary, very unfavourable. Therefore construction works (with other divisions following) could have been under way without any significant seasonal fluctuations this year.

The real wage development is affected by a co-influence of two factors. Together with the nominal wage growth there is also an increase of the price level (inflation) expressed by the consumer price index (CPI). If we compare Q1 2004 and Q1 2007, we find out, that a very high year-on-year relative nominal wage growth in Q1 2004 (8.9%) represented a growth of real wage by 6.5%, while the nominal wage growth reached in Q1 2007 (7.8%) had almost the same marked increasing effect on the real wage (6.2%). It happened due to inflation, which three years ago made up 2.3%, in Q1 2007 1.5% (see Graph 1, more detailed information on http://www.czso.cz/csu/czso/pmz_cr).

Graph 1
Nationwide wage development is heavily shaped primarily by the business sphere as employees of this sphere account for more than three quarters of the set of units measured. While the wage development in the business sphere is more fluent and is affected primarily by economic results of the companies, it is jump-like in nature in the non-business sphere because it depends to a large extent on legislative measures of the government and on what is permitted by the budget. Since 2005, the payment of the so-called other salaries was cancelled in the non-business sphere. Thereby, marked differences in the wage level between individual quarters were suppressed and wage development started to be more fluent. This fact is documented by year-on-year relative increases since Q1 2006, which is the first from this point of view comparable period in this sphere. The nominal wage development and increments by sphere are shown in Graph 2.

Graph 2
Given the fact that the non-business sphere employs a higher proportion of part-time workers than the business one, the following comparisons are made with average wage data related to full-time equivalent (FTE) employees as these data take account of the length of work.

In Q1 2007, the average wage per FTE person increased by CZK 1 523 year-on-year (+7.8%) and reached CZK 21 034, rising to CZK 21 125 (+8.3%, CZK +1 614) in the business sphere and CZK 20 705 (+6.1%, CZK +1 194) in the non-business sphere. Considering the fact that relative increments for the average wage per FTE person are same with those reached for the average wage per actual persons, also the year-on-year increase of real wage is same (6.2% in total, business sphere 6.7%, non-business sphere 4.5%).
Differences in the wage level and in its growth rate between industries (CZ-NACE sections) are well characterized by Graph 3. The graph suggests that the lowest wage level in Q1 2007 existed in ‘fishing’ (CZK 14 240); ‘agriculture, hunting and forestry’; ‘hotels and restaurants‘. On the other hand, the highest wage level was reached in ‘financial intermediation‘ (CZK 48 554), ‘electricity, gas and water supply‘, and ‘real estate, renting and business activities‘. Except fishing, all sections with low wage level recorded very high year-on-year relative increases. The highest relative increase was recorded in construction (12.9%), important factors of this significant growth were the already mentioned unusual climatic conditions.

Graph 3When comparing the wage development in Q1 2007 in industries made at the CZ-NACE division level (more detailed classification on the level of a two-digit code) it is possible to note that in the long term among the three industries (employing a minimum of 20 thousand people and excluding enterprises with less than 20 employees) with the lowest average nominal wage per FTE person:

- manufacture of textiles: CZK 14 130 (the average wage in this industry was approximately 67% of the national average, the nominal or relative year-on-year rise being CZK +988 or +7.5%, respectively);
- agriculture, hunting and related service activities: CZK 14 162 (67% of the average, CZK +1 223 or +9.5%);
- hotels and restaurants: CZK 15 330 (73% of the average, CZK +1 460 or +10.5%).

On the other hand, the following three industries (with the same criterion in force, i.e. at least 20 thousand employees) were paying the highest average nominal wage per FTE person:

- financial intermediation, except insurance and pension funding: CZK 53 291 (the average wage in this industry was approximately 253% of the national average, the nominal or relative year-on-year rise being CZK +3 596 or +7.2%, respectively);
- computer and related activities: CZK 47 951 (228% of the average, CZK +2 206 or +4.8%, respectively);
- electricity, gas, steam and hot water supply: CZK 30 253 (144% of the average, CZK +2 584 or +9.3%, respectively).

When comparing divisions (regardless the number of employees) the highest nominal wage (financial intermediation, except insurance and pension funding – CZK 53 291) was about 4.5 times the wage of employees in the industry paying the lowest wage (manufacture of wearing apparel; dressing and dyeing of fur – CZK 11 414). The inter-industry wage differences (per FTE persons) decreased year-on-year; the variation coefficient of average wages (by CZ-NACE division) was 0.6 percentage point down and reached 38.7%.
The year-on-year increments of the real wage in the CZ-NACE industries (CZ-NACE sections) compared to the national average are shown in the following graph.

Graph 4


The comparison of the wage development made for sectors suggests that the highest average wages have been paid for a long time in financial institutions, insurance companies and pension funds. In Q1 2007 the average wage (per FTE persons) in the financial institutions was 2.5 times the national average, and the insurance companies and pension funds paid wages about 1.8 times the national average. In contrast, wages of employees in the sector of households (i.e. wages of unincorporated natural persons) reach approximately 65% of the national average. In the sector of non-profit institutions serving households wages are about three quarters of the average wage in the whole of the CR. The average wage level, though, is fundamentally affected by the non-financial corporations sector and the government sector. Employees of these sectors make up about 95% of the set of units measured.

The average wage in enterprises and organisations, which employ 250+ employees exceeded CZK 22.5 thousand ( per FTE persons), in enterprises with 50-249 employees it reached almost CZK 20 thousand, enterprises with 20-49 employees paid their employees around CZK 19 thousand. It is important to note that the above mentioned statistical data refer to the set of reporting units, which do not include enterprises with less than 20 employees.

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¹ 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. They only refer to employees under employment contract with reporting units. Persons performing public office, such as members of Parliament, senators, full-time councillors at all levels, judges, etc. are excluded.

² 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. Currently the CZSO publishes a publication „Structure of Earnings Survey 2006“, where are 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 in: /produkty/struktura-mezd-zamestnancu-2006-3phrc73bp3)