Analysis of the development of average wages of employees - 3. quarter of 2006

In Q3 2006, the average gross monthly nominal wage per actual person reached CZK 19 968; in the year-on-year comparison the increment was CZK 1 139.

In the business sphere the average wage increased year-on-year by CZK 1 180 to CZK 20 104, while in the non-business sphere it went up by CZK 991 to CZK 19 484. The relative increase of the average wage was 6.1%, the growth in the business sphere being 6.2% and in the non-business sphere 5.4%. In the same period, consumer prices went up by 2.9% and the real wage thus rose by 3.1% in total, in the business sphere by 3.2% and in the non-business sphere by 2.4%. The minimal wage was increased two times in the year 2006, namely on 1 January 2006 and on 1 July 2006, always by CZK 385 to the current CZK 7 955. Thus, the y-o-y increase of the minimal wage for the second half-year was 10.7%.

From the point of view of a medium-term comparison (comparison with the average for 8 preceding quarters), the relative year-on-year increment of the average nominal wage for the Q3 seems to be a rather ordinary increment. In Q3 2006 it was 6.1%, the average increment for Q3 2004 – Q2 2006 was 6.2%. As for a long-term comparison (the average annual increase for 2001-2005 was 6.9%) it is a below-average increment. However, we have to be aware that in 2001 and 2002 the year-on-year increment was about 7-9%, later it dropped to some 6.5% and in 2005 it fell to 5.5%.

As for the real wage, the situation is somewhat different, because its 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). During the period of 2001 to 2005, the CPI was rather markedly fluctuating moving in between 4.7% in 2001 to 0.1% in 2003. Thus, in 2003, due to a very low inflation, there was recorded the highest growth of the real wage. While the current relative increment of nominal wages is on the level of the year 2003, the real wage increased by 3.6% year-on-year during January-September 2006; in the same period of 2003 it was (namely due to the influence of the low inflation) 6.8% (for more detailed information see http://www.czso.cz/csu/czso/pmz_ts).

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 under observation. 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.

In previous years, wage differences between the business and non-business spheres usually became wider always in Q1 and Q3 of a given year, i.e. the average wage in the business sphere was higher than in the non-business. In Q2 and Q4, the average wage levels then mostly converged, owing to half or a certain part of the additional salary regularly paid in the non-business sphere. In some periods the wage level in the non-business sphere exceeded the one in the business sphere. Nominal wage development and its relative increments by sphere are shown in the Graph 1.

In 2005, the wage development in the non-business sphere was influenced by adjustments to salaries and wages of employees in public services and administration. Apart from the normal year-on-year rise in average salaries, salaries in selected professions rose in a differentiated way. The Government Regulation No. 637/2004 Sb. ² and No. 307/2005 Sb. extended the circle of employees whose wage rates are provided according to the scale of increased wage rates (e.g. employees providing social care directly, employees in charge of administrative social care services, employees engaged in work on roads, collection and processing of municipal waste, and health personnel). Furthermore, a new scale of increased wage rates was put in place for employees – members of the Police of the CR, the Prison Service of the CR, the Fire and Rescue Service of the CR, and the Customs Administration of the CR. On 1 January 2005, the payment of the additional salaries was cancelled in the non-business sphere. The latest wage adjustment in particular helped suppress rather large differences in the wage levels between individual quarters in the non-business sphere. The wage development in this sphere therefore becomes smoother, with possible jumps caused to happen in response to legislative measures only. The first period comparable from that point of view in the non-business sphere is the year 2006. While in the Q1 and Q3 2005 the measure was reflected in a higher year-on-year wage increase than that, which was reported in the Q2 and Q4, from the Q1 2006 the expectation that the wage development will be without marked fluctuations has been confirmed in this sphere.

Graph 1
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 Q3 2006, the average wage per FTE person increased by CZK 1 169 year-on-year (+6.0%) and reached CZK 20 575, rising to CZK 20 580 (+6.2%, CZK +1 196) in the business sphere and CZK 20 556 (+5.5%, CZK +1 068) in the non-business sphere. The real wage increased by 3.0% in total, in the business sphere by 3.2% and by 2.5% in the non-business sphere.

Differences in the wage level and in its growth rate between industries (CZ-NACE sections) are well characterized by the Graph 2. The graph suggests that the lowest wage level existed in ‘fishing‘, ‘hotels and restaurants‘; ‘agriculture, hunting and forestry’, while the highest in ‘financial intermediation‘, ‘electricity, gas and water supply‘, and ‘real estate; renting and business activities‘. Although relative year-on-year increments for industries from the opposite ends of the scale do not suggest marked differences in the Q3 (‘fishing‘ 5.6%; ‘financial intermediation‘ 6.8%), it has to be realized that a relative growth in low nominal wage categories represents an increase of the average of about CZK 800, while a growth in high nominal wage categories represents an increase of the average by more than CZK 2 000.

Graph 2
When comparing the wage development in January-September 2006 in industries made at the CZ-NACE division level (more detailed classification on the level of a two-digit code) there occurred no major difference against the first half-year. The following three industries (employing a minimum of 20 thousand people and excluding enterprises with less than 20 employees) paid the lowest average nominal wage per FTE person:
- manufacture of wearing apparel; dressing and dyeing of fur: CZK 11 092 (the average wage in this industry was approximately 55% of the national average, the nominal or relative year-on-year rise being CZK +482 or +4.5%, respectively);
- manufacture of textiles and textile products: CZK 13 723 (68% of the average, CZK +877 or +6.8%);
- agriculture, hunting and related service activities: CZK 14 354 (71% of the average, CZK +844 or +6.2%).

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:
- computer and related services: CZK 44 501 (the average wage in this industry was approximately 220% of the national average, the nominal or relative year-on-year rise being CZK +2 480 or +5.9%, respectively);
- financial intermediation except for insurance and pension funding: CZK 43 251 (214% of the average, CZK +2 932 or +7.3%, respectively);
- electricity, gas, steam and hot water supply: CZK 28 693 (142% of the average, CZK +2 867 or +11.1%, respectively).

Earnings of employees in the industry (regardless the number of employees) with the highest wage (air transport) reached in January-September 2006 about 4.5 times the wage of employees in the industry paying the lowest wage (manufacture of wearing apparel; dressing and dyeing of fur). In January-September 2006 inter-industry wage differences slightly increased compared to the same period of 2005; the variation coefficient of average wages (by CZ-NACE division) was 0.7 percentage point up and reached 35.9% of which in Q3 2006 it increased much more markedly, namely by 1.8 percentage points to 34.5% (per FTE persons).

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 Graph 3.

Graph 3
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. The January-September 2006 average wage (per FTE persons) in the financial institutions was double the national average, and the insurance companies and pension funds paid wages about 1.7 times the national average. In contrast, wages of employees in the sector of households (i.e. wages of unincorporated natural persons) do not even reach two thirds 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.

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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 “Sb.” stands for the Collection of Laws of the CR