Analysis of the development of average wages of employees - 2 quarter

 
The News Releases from 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 are 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.
The total nominal average gross monthly wage ¹ , full time equivalent , reached in Q2 2009 CZK 22 992, in the y-o-y comparison the increase was CZK 622. In the business sphere the average wage increased, y-o-y, by CZK 537 to reach CZK 22 842, in the non-business sphere by CZK 971 to CZK 23 661.

The results for the Q2 do not show so far any signs of improvement of the situation in the labour market in the Czech Republic. The unemployment continues to grow and average wages grow at slower pace compared to the previous years. In the business sphere the y-o-y growth of the average nominal wage reached only 2.4%, in the non-business sphere the growth was 4.3%. The average nominal wage in the business sphere was by CZK 819 smaller compared to the non-business sphere.

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 to reach 2.1% in Q1 2009 and in Q2 2009 1.4%. The total real wage in Q2 2009 increased, y-o-y, by 1.4%. While in the previous three years it grew faster in the business sphere (in 2008 the non-business sphere saw a real wage slump by 2 p.p.), in Q2 2009 the situation was just opposite. The business sphere saw an increase of the real wage by only 1.0% while the non-business sphere recorded a 2.9% growth.
 
Graph 1 
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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 Q2 2009 CZK 23 664, in the y-o-y comparison the increase made CZK 579, i.e. 2.5%. In the business sphere the average wage increased, y-o-y, by CZK 511 to CZK 24 068, in the non-business sphere by CZK 966 to CZK 22 330. In the business sphere the increase was 2.2%, 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 differences in the wage level and its growth rate between individual industries (CZ-NACE sections) are shown in the following graph.

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In the fist half of 2009 the average wage the national economy, FTE, in total, accounted for CZK 22 605, i.e. 2.7% up (CZK 596) compared to the corresponding period of 2008. In the business sphere the average wage increased by 2.4% (CZK 521) to CZK 22 522, in the non-business sphere by 4.2% (CZK 936) to CZK 22 982. Real average wage in the national economy increased by 0.9%, y-o-y, in the business sphere by 0.6% and in the non-business sphere by 2.4%.

The highest nominal average wage was observed in the first half of 2009 in 'financial and insurance activities' (CZK 49 245) in which the average wage in the y-o-y comparison increased by 2.3%; the in  'information and communication' (CZK 42 338) where the wage increased by 3.5 % and also in 'electricity, gas, steam and air conditioning supply' (CZK 37 305) where the average wage increased by 8.2%, y-o-y. The lowest average wage was observed in 'accommodation and food service activities' (CZK 12 702) 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 16 113); 'agriculture, forestry and fishing' (CZK 16 568) occupies the third place. The y-o-y growth of industry with the lowest average wages ranges from 0.1 – 1.4% which is notably below the nationwide average (2.7%).

In the first half of 2009 many industries saw a low wage growth or even a decrease of nominal wage, y-o-y, which resulted into a real drop. Nominal average wage and real average wage decreased in 'mining and quarrying' (-6.6% and -8.3%, respectively) and 'other service activities' (-0.3% and -2.1%). The drop of real wage with the wage growth lower than inflation was recorded mainly in 'accommodation and food service activities' (nominal growth by 0.1%, real drop by 1.7%), in 'administrative and support service activities' (+0.2% and -1.6%) and in 'wholesale and retail trade; repair of motor vehicles and motorcycles' (+0.7% and -1.1%). On the other hand, in addition of the expected wage increase in 'human health and social work activities' and 'education' the above-standard growth of the average wage in the already mentioned industry 'electricity, gas, steam and air conditioning supply' was recorded (+8.2% and +6.3%).

Details related to the real wage development are shown in the following table: 
The average nominal wage in companies and organisations employing 250+ employees reached in the first half of 2009 (FTE) CZK 26 284, of which in enterprises with 1 000+ employees CZK 27 416. In enterprises employing 50-249 employees the average wage accounted for CZK 22 774, in enterprises with 20-49 employees CZK 21 019, in enterprises with 10-19 employees CZK 19 091 and in the smallest enterprises (up to 9 employees) CZK 15 462.

The y-o-y drop of wages (wages excl. other personnel expenses) was CZK 10.9 billion, which is by 2.0% less. Concurrently the number of employees decreased (FTE) by 4.6%. On the other hand, the volume of other personnel expenses massively increased by 0.9 billion, i.e. by 4.0% 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. 
The impact of the economic crisis on the Czech economy shows in several statistical indicators: the y-o-y drop of the registered number of employees by almost 188 thousand persons is related to massive dismissals and cancellation of jobs which is observed mainly in industries and related activities (transport and storage) and where also the average number of hours worked per employee decreases. A marked drop of the number of employees was registered in labour offices (falling into 'administrative and support service activities'). The second main sphere are wages which, in the first half-year, showed a downward trend compared with the development in the previous years. This is related to measures adopted by employers in connection with the expected unfavourable situation (reduction and even freezing of wage growth (tariffs), cutting of special remunerations and other similar things), which will affect undoubtedly the development in the upcoming period of this year.

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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: http://www.czso.cz/csu/2009edicniplan.nsf /engp/3109-09
 
² The data refer to business sphere enterprises with 20+ employees (in financial and insurance activities irrespective of the number of employees) and all non-business sphere organizations.