Analysis of the development of average wages of employees - First part of 2008

In Q2 2008 the nominal average gross monthly wage² per actual person reached CZK 23,182 and in the year-on-year comparison the increase was CZK 1,718. In the business sphere the average wage increased, y-o-y, by CZK 2,017 to CZK 23,692, in the non-business sphere by CZK 624 to CZK 21,344.

More notable wage growth has already started last year and in Q1 2008 it reached its record value (+10.2%). In Q2 the growth rate slowed down and the y-o-y growth of the average gross monthly nominal wage was 8.0%. Even though, the increase ranks among the biggest increases in the last 7 years. At first sight a marked difference between both spheres is obvious. Unlike 2001, the big growth in Q2 2008 was driven by wages in the business sphere (growth by 9.3%) while wages in the non-business sphere (growth by only 3.0%) slowed down the nationwide wage growth. Similar growth rate in the business sphere was recorded last time in Q1 2001 (save for Q1 2008). In contrast, the wage increase in the non-business sphere belongs to the smallest increases over the last 11 quarters, i.e. smaller increase was last observed in Q4 2005.

The real wage growth 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 Q2 by 6.8% depreciating extensively a relatively big wage growth with the real wage rising by only 1.1%, y-o-y, which is the smallest growth of the real wage since 1998. In the business sphere the real wage increased by 2.3%. In the previous years the real wage fell more markedly only in Q4 2007 (growth by 1.6%) when the inflation began to increase notably. Similar small increases in real wage were recorded in the business sphere in Q4 2005, given then a significantly smaller wage growth and lower inflation. In the non-business sphere in Q2 2008 a small wage growth and high inflation contributed to a relatively large fall of real wages (-3.6%). Wage growth in the non-business sphere depends on legislative measures of the government and on what the budget allows, i.e. the growth is rather jump-like in nature than smooth. Time from time, although in the last year rather exceptionally, the drops of real wages were recorded in this sphere. More significant depreciation of wages compared to Q2 2008 (save for the previous quarter) was recorded in the non-business sphere last time in Q3 1998.

For the development of nominal wage, real wage and consumer price index see Graph 1, more detailed information on /produkty/pmz_cr.

Graph 1

Minimum wage accounts for CZK 8,000 showing no changes from January 2007.

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. 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 and wage levels in both spheres were more balanced. Since Q1 2008 differences between both spheres became more obvious again. The nominal wage development and relative increments by spheres are shown in Graph 2.

Graph 2

In Q1-Q2 2008 the nominal average gross monthly wage reached CZK 22,840 which was by CZK 1,901 more, year-on-year. In the business sphere the average wage increased year-on-year by CZK 2,247 to CZK 23,418, in the non-business sphere by CZK 628 to CZK 20,753. The relative increase of the average wage was 9.1 % in total, the growth in the business sphere being 10.6% and in the non-business sphere 3.1 %.

Consumer prices increased in the given period by 7.1 %, real wage thereby increased by 1.9 % in total, in the business sphere by 3.3% and in the non-business sphere it fell by 3.7%.

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 Q2 2008, the average nominal gross monthly wage per FTE persons increased, y-o-y, by CZK 1,777 (+8.0%) and reached CZK 23,928; in the business sphere the increase was CZK 2,074 (+9.3%) rising to CZK 24,267 and in the non-business sphere to CZK 22,664 (+3.0%, CZK 668). Real wage increased y-o-y by 1.1% in total, in the business sphere by 2.3% and in the non-business sphere it fell by 3.6%.

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 in Q1-Q2 2008 accounted for CZK 23,569, i.e. it increased y-o-y by CZK 1,966. In the business sphere it increased by CZK 2,312, accounting for CZK 23,980 and in the non-business sphere it increased by CZK 664, accounting for CZK 22,030. The relative increase of the average wage was by 9.1% in total while in the business sphere the increase was 10.7% and in the non-business sphere 3.1%. The real wage rose by 1.9% in total, in the business sphere by 3.4%, in the non-business sphere it fell by 3.7%.

The y-o-y increases/drops of the real wage broken by industries (CZ-NACE sections) are shown in the following table.

When comparing divisions more important from the aspect of employment (employing a minimum of 20 thousand persons³) 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. In Q1-Q2 2008 the highest nominal average wage was reached in 'computer and related activities' (CZK 51,000), the year-on-year growth being 9.6%. In contrast, the lowest nominal average wage was recorded in 'manufacture of textiles and textile products' (CZK 15,680), the year-on-year increase being 8.5 %. 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 4.5 thousand, in the industry with the lowest wages the increase was about CZK 1.2 thousand.

Other industries where employees receive best wages are the following: 'financial intermediation except insurance and pension funding' (CZK 50,987, year-on-year growth by 2.9%, i.e. CZK 1,457) and 'electricity, gas, steam and hot water supply' (CZK 35,165, year-on-year growth by 15.8%, i.e. CZK 4,806). Among industries where employees receive the lowest wages still belong the following: 'agriculture, hunting and related service activities' (CZK 16,645, year-on-year growth by 11.8%, i.e. CZK 1,759) and 'hotels and restaurants' (CZK 16,671, year-on-year growth by 5.9 %, i.e. by CZK 933).

When comparing divisions irrespective of the number of employees the highest nominal wage (division 'air transport' – CZK 70,278) was 5.5times the nominal wage of employees in the industry paying the lowest nominal wage ('manufacture of wearing apparel; dressing and dyeing of fur' - CZK 12,672). Year-on-year, the average wage in the industry paying the highest wage increased by 26.7%, in the industry paying the lowest wage it increased by 8.6 %, in absolute sums by approximately CZK 14.8 thousand and by only CZK 1,000, respectively.

The most dynamic average wage growth was recorded in real estate activities (+32.2%), the slowest growth was recorded in education (+2.8%). The inter industry wage differences (per FTE persons) increased markedly year-on-year, the variation coefficient of average wages (by CZ NACE divisions) was 0.3 percentage point up reaching 40.0 %. Big difference between individual industries was recorded mainly in Q2 when the variation coefficient increased by 5.5 percentage points y-o-y (in Q1 by 1.7 p.p.).

In Q1-Q2 2008 the average nominal wage in enterprises and organisations employing 250+ employees reached CZK 25,199 (per FTE persons), in enterprises with 1000+ employees it reached CZK 26,600. In enterprises with 50-249 employees the average wage accounted for CZK 22,260, in enterprises with 20-49 employees CZK 21,639. 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 bigger enterprises employees earn more than in smaller enterprises.

The wage level is markedly affected by ownership: in the whole private sector (majority share of private capital) the average wage accounted for almost CZK 24,000, of which in enterprises with majority of foreign capital the average wage reached is almost CZK 29,000. In Q1-Q2 2008 employees in public sector (where state is majority or sole owner) employees earned approximately CZK 23,000 on average.

The increase of the volume of wages (wages excl. other personal expenses) for sets of reporting units excluding enterprises employing less than 20 employees accounted for over CZK 42.6 billion in Q1-Q2 2008 which is by 10.2% more given the current growth of the number of employees (per FTE persons) by 1.0%. In the business sphere the volume of wages increased by 12.4%, the number of employees by 1.6%. In the non-business sphere the number of employees dropped by 0.9%, the volume of wages increased by 2.1%.

When comparing industries (CZ-NACE sections) the biggest wage growth y-o-y was recorded in 'real estate, renting and business activities' – by 20.1%, given the current increase of the number of employees by 5.5%. In contrast, the smallest growth of wages (by 1.3%) was recorded in education given the current drop of the number of employees by 1.5%.

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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. In the publication “Structure of Earnings Survey 2007“, 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-2007-blbwqbyco7).

³ the survey does not include enterprises with less than 20 employees