Commentary on the development of average wages of employees - 2. quarter of 2004

In Q2 2004 , the nominal value of the gross average wage per actual persons was CZK 17 817 – it increased by CZK 740 (+4.3%) year-on-year . Such a low year-on-year increase has not been recorded since Q1 1998 -– i.e. throughout the whole period for which the CZSO has had available converted comparable time series of quarterly data. Consumer prices grew by 2.6% and the real wage increased by 1.7%. In the business sphere the average wage increased by CZK 991 (+5.9%) to CZK 17 924 and the real wage by 3.2%, while in the non-business sphere these wages dropped by CZK 102 (-0.6%) to CZK 17 462 and 3.1%, respectively. The fall of the real wage to negative numbers was last recorded in the non-business sphere in the year 2000.

In Q1 2004, both the business sphere and the non-business one contributed to the high year-on-year growth of wages (+8.8%, the former by 8.6% and the latter by 9.6%). In Q2 2004, however, the low increase resulted from opposing wage developments: while the wages grew in the business sphere, they dropped in the non-business one. The available data indicate that the average wage growth rate in the business sphere was also low compared to previous periods – lower year-on-year relative increases were only recorded for Q4 2002 and Q1 2003. As a rule, differences between the two spheres became wider in Q1’s and Q3’s – the average wage in the business sphere was always higher than in the non-business sphere. In Q2’s and Q4’s, the wage levels rather converged due to the regularly paid half of another (13th) pay in the non-business sphere. The wage development in the non-business sphere this year was affected by the adjustment to salaries and wages in public services and administration due to the transition from the 12-grade wage scale to 16-grade one (effective as of 1 January 2004) on the one hand and the effect of the reduction in another (13th) pay from 50% to 10% on the other hand. The former measure contributed to the higher rise in wages in Q1 2004, whereas the latter made Q2 wages drop year-on-year, stopping the last two years’ tendency of the average wage in the non-business sphere to exceed the average wage in the business sphere in Q2’s and Q4’s by as high as several hundred crowns. In Q2 this year the average wage in the non-business sphere was about CZK 460 down on that in the business sphere.

Given the fact that there is a higher percentage of persons employed part-time in the non-business sphere, the following comparison of the two spheres is made on average wage data related to full-time equivalent (FTE) employees as they take account of the length of work.

In 2000 to 2004, the quarterly year-on-year increases² in the business sphere ranged between CZK 850 and CZK 1 350. The highest nominal wage increase in this period occurred in Q1 2004 while the highest relative one in Q1 2001 (+9.3%). However, the highest growth of the real wage was recorded for Q1 and Q3 2003 (+6.1% both), primarily due to a drop in consumer prices.

In the above-mentioned period, the increases in the non-business sphere ranged from roughly CZK 150 to CZK 1 800, the highest nominal occurring in Q1 2003 when the wage scales were raised effective as of 1 January, whereas a similar measure taken in 2002 took its effect as late as 1 March. The high nominal increase also caused the relative increase to be rather high, which, helped by a drop in consumer prices, resulted in a record-making increase in the real wage.

In Q2 2004, the nominal wage in the business sphere stood at CZK 18 346, which translates into a year-on-year increase of CZK 996 (+5.7% nominally and 3.0% really). A similar growth of the real wage was recorded for Q3 and Q4 2001, too. In the non-business sphere, the nominal wage reached CZK 18 456 – i.e. a year-on-year drop of CZK 71 (-0.4% nominally and -2.9% really). In the examined period of the individual quarters between 2000 and 2004, this real wage drop came close to its level in 2000 when it ranged between 1.4% and 2.4%.

Seen in detail (two-digit code of CZ-NACE – division), three industries (employing at least 50 thousand employees, but excluding enterprises with fewer than 20 employees) with the lowest nominal average wage per actual persons were the following (they were same as in Q1 2004):
- ‘agriculture, hunting and related service activities’: CZK 12 366 (the average wage by CZK 5 451 below the national average, with a nominal or relative year-on-year increase of CZK 748 or +6.4%, respectively)
- ‘retail trade except for motor vehicles and motorcycles; repair of personal and household goods’: CZK 13 184 (-CZK 4 633, +CZK 565, +4.5%)
- ‘manufacture of furniture, manufacturing n.e.c.’: CZK 13 474 (-CZK 4 343, +CZK 1 029, +8.3%).
The lowest average wage was recorded for ‘manufacture of wearing apparel; dressing and dyeing of fur’ (about 28 thousand employees) at CZK 9 975 (by CZK 7 842 below the national average, with nominal and relative increases of CZK 592 and 6.3%, respectively).

On the other hand, three industries (also with at least 50 thousand employees) with the highest nominal average wage per actual persons) were the following:
- ‘wholesale trade and commission trade, except of motor vehicles and motorcycles’: CZK 22 918 (the average wage by +CZK 5 101 above the national average, with a nominal or relative year-on-year increase of CZK 1 726 or 8.1%, respectively)
- 'manufacture of motor vehicles, trailers and semi-trailers’: CZK 21 334 (+CZK 3 517, +CZK 1 362 or +6.8%)
- ‘post and telecommunications’: CZK 21 286 (+CZK 3 469, +CZK 1 219 or +6.1%).

The highest average wage was measured for ‘air transport’ (about 5.5 thousand employees), namely CZK 39 130 (by CZK 21 313 above the national average, with a nominal or relative increase of CZK 5 925 or 17.8%, respectively).

The different development in Q1 and Q2 implies that the gross average wage related to actual persons increased over the first six months of the year by 6.4% (+CZK 1 045) year-on-year to CZK 17 267. With the 2.5% growth of consumer prices over the same period, the real wage thus increased by 3.8%. The business sphere employees’ wage was CZK 17 437 on average, which is by CZK 1 166 (+7.2%) up on the corresponding period of 2003; their real wage increased by 4.6%. Employees of the non-business sphere were better off by CZK 645 (+4.0%) and their wage reached CZK 16 702 a month on average. Their real wage was by 1.5% up.

‘Health and social care’ was the only, rather significant industry as far as employment is concerned in which the real wage dropped in the first half of the year. The drop was 0.9% and resulted from an increase of 4.1% in Q1 and a decrease of 5.1% in Q2. In the same period, the average wage of employees in this industry stood at CZK 16 082 and was by CZK 1 185 below the national average.

On the other hand, ‘manufacture of furniture; manufacturing n.e.c.’ (with at least 50 thousand employees) recorded the highest growth of real wage, + 7.3%. However, the average wage of its employees is about three quarters of the national average.

Sectorally, the highest average wages are recorded, in the long run, for financial institutions, insurance companies and pension funds. In the first half of the year, these institutions’ employees were paid close to CZK 36 thousand a month on average. The average wages in the sectors of non-financial corporations and general government were approximately half of that. Still lower wages were paid to employees in the sector of non-profit institutions serving household (less than CZK 13 000). The average wage of employees in financial institutions increased by 4.8% really, employees of financial corporations were better off by 4.4%. The real wage of the general government sector (which comprises especially government departments and semi-budgetary organizations partially financed from state and local budgets) increased by 1.7%; in non-profit institutions it increased even less (by 0.2%).

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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. Employees of the non-business sphere make up almost a quarter of all employees included in the quarterly survey.

² The absolute and relative increases are calculated in relation to the corresponding period of the previous year converted to the same methodology.