Analysis of the development of average wages of employees - 4. quarter of 2007

 
In Q4 2007 the nominal average gross monthly wage ² per actual person reached CZK 23,435 and in the  year-on-year comparison the increase was CZK 1,488.

In the business sphere the average wage increased, y-o-y, by CZK 1,470 to CZK 23,484, in the non-business sphere by CZK 1,547 to CZK 23,259. The wage growth was relatively balanced; in total, the average wage increased by 6.8%, while in the business sphere the increase was 6.7%, in the non-business sphere it was 7.1%. Even thought the relative y-o-y average nominal wage increase in Q4 compared with the previous quarters of 2007 showed the lowest values, in longer time perspective of approximately 5 years it still belongs to the above average. Only after an unexpectedly high growth in Q1 (+7.9%) the growth rate in Q2 slowed down a little (+7.4%) and after stagnation in Q3 (+7.5%) further deceleration was recorded in the last quarter of the year (+6.8%).

The development of real wage is in addition to the nominal wage growth affected also by the growth of price level (inflation) expressed by the consumer price index. Consumer prices increased in Q4 by 4.8% with the real wage rising by 1.9%, y-o-y, in the business sphere by 1.8% and by 2.2% in the non-business sphere.
The slow-down of the real wage growth in Q4 2007 (by 3.4 percentage points compared with the previous three quarters) came mainly from the increase of inflation (+2.6 p.p.), the impact of the nominal wage growth was not that significant (+0.8 p.p.).

The real wage growth in Q4 2007 ranked among the lowest ones in the last few years. On the nation-wide level since 1999 (36 quarters) the real wage growth dropped below the limit of the y-o-y 2% increase, only 3times before 2007, i.e. in Q2 2000 and 2004 and in Q4 2005. However, in all three mentioned periods the low increases of real wages came mainly from the fall of wages in the non-business sphere, the y-o-y drop of the real wage in the sphere ranged from 1 to 3%. The business sphere fell in the last quarter of 2007 below the level of a 2% growth of real wage for the fist time since 1999.

For the development of nominal wage, real wage and consumer price index see Graph 1, more detailed information on /produkty/pmz_cr.
 
Graph 1 
Over the whole year 2007 the minimum wage accounted for CZK 8,000, in the first half of 2006 it accounted for CZK 7,570 Kč and in the second half-year for CZK 7,955.

Nationwide wage development is heavily shaped mainly by the business sphere since their employees make more than three quarters of the set of units measured. While the wage development in the business sphere is 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 to a large extent on legislative measures of the government and on what the budget allows. Since 2005, the payment of so-called other salaries was cancelled in the non-business sphere. Thereby, marked differences in the wage level between individual quarters were suppressed and the wage development started to be smoother. This fact is most clearly documented by year-on-year relative increases recorded since Q1 2006 which is the first from this point of view comparable period in this sphere. The nominal wage development and relative increments by spheres are shown in Graph 2.
 
Graph 2
In Q1-Q4 2007 the nominal average gross monthly wage reached CZK 21,692 which was by CZK 1,485 more, year-on-year. In the business sphere the average wage increased year-on-year by CZK 1,525 to CZK 21,853, in the non-business sphere by CZK 1,333 to CZK 21,117. The relative increase of the average wage was 7.3 % in total, the growth in the business sphere being 7.5% and in the non-business sphere 6.7 %.

Consumer prices increased over the year 2007 by 2.8%, real wage thereby increased by 4.4 % in total, in the business and non-business sphere by 4.6% and 3.8%, respectively.
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 the average wage data related to full-time equivalent (FTE) employees as these data take account of the length of work.

In Q4 2007, the average nominal gross monthly wage per FTE persons increased, y-o-y, by CZK 1,549 (+6.8%) and reached CZK 24,206; in the business sphere the increase was CZK 1,523 (+6.8%) rising to CZK 24,069 and in the non-business sphere to CZK 24,708 (+7.2%, CZK 1,653). Real wage increased y-o-y by 1.9% in total, in the business sphere also by 1.9% and by 2.3% in the non-business sphere.

Differences in the wage level and in its growth rate between industries (CZ-NACE sections) are characterized in Graph 3.

Graph 3 
The nominal average gross monthly wage per FTE persons over the whole 2007 accounted for CZK 22,382, i.e. it increased y-o-y by CZK 1,537 (+7.4%) In the business sphere it increased by CZK 1,572, i.e. by 7.6% accounting for CZK 22,380 and in the non-business sphere it increased by CZK 1,412, i.e. by 6.7% accounting for CZK 22,387.

When comparing divisions more important from the aspect of employment (employing a minimum of 20 thousand persons ³ ) the comparison at the CZ NACE divisions (more detailed classification on a two digit code) suggests that at both ends of imaginative ladder there are in individual reference periods the same industries with more or less stable ranking. Over the whole year 2007 the highest nominal average wage was reached in 'computer and related activities' (CZK 47,161), year-on-year growth being 4.5% (by 2.9 percentage points less than the nationwide average). In contrast, the lowest nominal average wage was recorded in 'manufacture of textiles and textile products' (CZK 14,965), the year-on-year increase being 7.1 % (by 0.3 percentage point below the nationwide average). Relatively high is also a difference in absolute sum earned in addition, year-on-year, by employees in the above industries. While in the first mentioned industry the gross wage increased by more than CZK 2 thousand, in the following industry the employees earned by only about CZK 1,000 more.

Other industries where employees receive best wages are the following: 'financial intermediation except insurance and pension funding' (CZK 45,464, year-on-year growth by 5.7%, i.e. CZK 2,462) and 'electricity, gas, steam and hot water supply' (CZK 32,173, year-on-year growth by 7.2%, i.e. CZK 2,169). Among industries where employees receive the lowest wages still belong the following: 'hotels and restaurants' (CZK 16,276, year-on-year growth by 10.7%, i.e. CZK 1,573) and 'agriculture, hunting and related service activities' '(CZK 16,408, year-on-year growth by 9.8 %, i.e. by CZK 1,469).

When comparing divisions irrespective of the number of employees the highest nominal wage (division 'air transport' – CZK 57,199) was 4.8times the nominal wage of employees in the industry paying the lowest nominal wage ('manufacture of wearing apparel; dressing and dyeing of fur' - CZK 11,960). Year-on-year, the average wage in the industry paying the highest wage increased by 12.7%, i.e. by almost CZK 6.5 thousand, in the industry paying the lowest wage it increased by 7.0 %, i.e. by approximately CZK 800. The inter industry wage differences (per FTE persons) increased year-on-year, the variation coefficient of average wages (by CZ NACE divisions) was 0.4 percentage point up reaching 35.5 %.

The real wage increased, y-o-y, by 4.5% in total, in the business sphere and the non-business sphere by 4.7% and 3.8%, respectively. The y-o-y increases/drops of the real wage for the last 5 years broken by industries (CZ-NACE sections) are shown in the following table. 
The average nominal wage in enterprises and organisations which employ 250+ employees reached CZK 23,911 (per FTE persons), in enterprises with 50-249 employees it reached CZK 21,208 and in enterprises with 20-49 employees the average wage accounted for CZK 20,478. It should be noted again that all the above mentioned statistical data refer to a set of reporting units which does not include enterprises with less than 20 employees, financial institutions and organisations of non-business sphere irrespective of the number of employees. In relative terms, in small enterprises with lower wage level employees earned more (around 8%) than in enterprises with 250+employees with higher wage level (around 7%). It might seem that small enterprises are catching up with the wage level of bigger ones. However, in this case higher percentage of lower wage base in smaller enterprises represents almost the same absolute value as lower percentage of higher wage base in bigger enterprises, i.e. approximately CZK 1.5 thousand.
 
The increase of the volume of wages for sets of reporting units excluding enterprises employing less than 20 employees accounted for almost CZK 71.3 billion compared with 2006 which is by 9.0% more given the current growth of the number of employees (+1.5%). In the business sphere the volume of wages increased by 9.6%, the number of employees by 1.9%. In the non-business sphere the number of employees increased by 0.1%, the volume of wages increased by 6.9%.
 
Comparison of the volume of wage development made for sections suggests that wages increased by more than 10% in the following ones:
 
-          Wholesale and retail trade; repair of motor vehicles – by 17.8% at current growth of the number of employees by 7.9%,
-          Real estate, renting and business activities – by 16.9%, at 9.4% growth of the number of 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“, 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: /produkty/struktura-mezd-zamestnancu-2006-3phrc73bp3)
³ the survey does not include enterprises with less than 20 employees