Commentary on the development of average wages of employees - 3. quarter of 2004

In Q3 2004 , the nominal value of the gross average monthly wage per actual persons was CZK 17 738 – it increased by CZK 1 205 (+7.3%) year-on-year . Consumer prices grew by 3.2% and the real wage by 4.0%. In the business sphere the average wage increased by CZK 1 177 (+7.0%) to CZK 17 943 and the real wage by 3.7%, while in the non-business sphere these wages increased by 8.3% (+CZK 1 303 to CZK 17 028) and 4.9%, respectively.

While in Q1 2004, both the business sphere and the non-business one contributed to the high year-on-year growth of wages (+8.7%, the former by 8.5% and the latter by 9.6%), the low increase in Q2 2004 (+4.2%) resulted from opposing wage developments: the wages grew in the business sphere (+5.7%) and dropped in the non-business sphere (0.6%). The available data for Q3 2004 signal a higher year-on-year increase again (+7.3%) fuelled by higher growth in both spheres: +7.0% and 8.3%, respectively. Seen in the long-run (from 2001 to 2004) the relative year-on-year Q3 increase in nominal wage in the business sphere ranges approximately between 6.1% (2003) and 8.5% (2001). Over the same period the non-business sphere experienced the highest wage level growth in 2002 (+11.4%) and the lowest in 2003 (+7.5%). Year-on-year increases in Q3 2004 remain within these intervals, being closer to the lower limit for both spheres.

As a rule, differences between the two spheres always 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 and in some periods, the wage level in the non-business sphere exceeded that in the business one. The wage development in the non-business sphere this year was affected by the adjustment to salaries and wages of employees in public services and administration (due to transition from 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 and Q3 2004, whereas the latter measure made Q2 wages drop year-on-year.

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 these data take account of the length of work.

In 2001 to 2004 the wage in the non-business sphere was usually growing faster, closing on the wage level in the business sphere (BS). While in Q1 and Q3 2001 the difference between the wage levels in the two spheres was about CZK 1 300 to CZK 1 400 in favour of the business sphere, and the earnings in both sphere became almost equal in Q2 and Q4, the year 2002 saw a difference of about CZK 1 600 or CZK 800 in odd quarters and the wage level in the non-business sphere higher by about CZK 700 to CZK 800 in even quarters. In 2003 the difference in Q1 and Q3 stood at about CZK 700 already, and the earnings in the non-business sphere in Q2 and Q4 were higher by about CZK 1 200 to CZK 1 400. This year the wages in both spheres came closer even more – the difference in Q1 and Q3 was about CZK 500 in favour of the business sector. As mentioned above, however, in Q2 this year the growth rate of the average wage in the non-business sphere considerably fell behind the business sphere and so the wages of business sphere employees grew by about CZK 100 only. Over Q1 to Q3 in total, the wage convergence of the two spheres looks as follows: the business sphere employees received monthly by about CZK 900 more in 2001, CZK 570 more in 2002, CZK 60 more in 2003, and this year saw the difference tend to become larger again – by about CZK 300 a month.

The development of the real wage is also affected, in addition to wage growth, by the consumer price index – inflation that acts as a factor hampering the growth of real wage. Paradoxically, it thus may happen that real wage increases are low in a period of relatively high increases in nominal wage, and vice versa. It can be proven by particular data that higher growth dynamics of real wages occurs under dropping or stagnating growth development of nominal wages and a co-action of price development. By comparing the first nine months of last four years (2001-2004) we find that the highest wage growth (per actual persons) occurred in 2001 (+9.0%), while the lowest was recorded this year (+6.7%), but real wages were rising at virtually the same rate in both periods: +4.0% in 2001 and 3.9% in 2004. Inflation exercised a considerable effect here – it stood at 4.8% in the first nine months of 2001 as against “only” 2.7% in the corresponding period of 2004. The influence of the consumer price index on the development of real wage is seen even more in 2003, in which year the wage growth in the first three quarters (+6.8%) was about the same as in 2004, but the real wage grew more (+3.0 percentage points). For inflation did not grow that year – it even dropped by 0.1 percentage point.

Over Q1 to Q3 2004, the average wage per actual persons stood at CZK 17 418 – an increase of CZK 1 092 (+6.7%) compared to the corresponding period of 2003. In the same period consumer prices rose by 2.7% and the real wage by 3.9%. The business sphere raised its average wage by CZK 1 162 (+7.1%) to CZK 17 599 and the real wage increased by 4.3%. In the non-business sphere the average wage and the real wage increased by 5.4% (+CZK 861) to CZK 16 808) and 2.6%, respectively.

A comparison of the wage development by CZ-NACE division (two-digit code) revealed the following three industries (employing at least 50 thousand employees, but excluding enterprises with less than 20 employees) with the lowest nominal average wage per actual persons:
- ‘agriculture, hunting and related service activities’: CZK 12 431 (the average wage by CZK 4 987 below the national average, with a nominal or relative year-on-year increase of CZK 941 or +8.2%, respectively)
- ‘retail trade except for motor vehicles and motorcycles; repair of personal and household goods’: CZK 13 201 (-CZK 4 217, +CZK 725, +5.8%)
- ‘manufacture of furniture, manufacturing n.e.c.’: CZK 13 358 (-CZK 4 060, +CZK 1 127, +9.2%).
The lowest average wage was recorded for ‘manufacture of wearing apparel; dressing and dyeing of fur’ (about 28 thousand employees) at CZK 10 069 (by CZK 7 349 below the national average, with nominal and relative increases of CZK 843 and 9.1%, 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 22 542 (the average wage by +CZK 5 124 above the national average, with a nominal or relative year-on-year increase of CZK 1 631 or 7.8%, respectively)

– ‘post and telecommunications’: CZK 20 971 (+CZK 3 553, +CZK 995 or +5.0%).
- 'manufacture of motor vehicles, trailers and semi-trailers’: CZK 19 930 (+CZK 2 512, +CZK 1 434 or +7.8%)

The highest average wage was measured for ‘air transport’ (about 5.4 thousand employees), namely CZK 38 595 (by CZK 21 177 above the national average, with a nominal or relative increase of CZK 5 927 or 18.1%, respectively).

Of the industries employing at least 50 thousand employees, ‘health and social care’ was the industry with the lowest growth of real wage (+0.2%). Its average wage stood at CZK 16 268 and was by CZK 1 150 below the national average.

On the other hand ‘manufacture of fabricated metal products except machinery and equipment’ was the industry (rather significant where employment is concerned) with the highest growth of real wage, an increase of 6.5%, the average nominal wage being CZK 16 500.

Sectorally, the highest average wages are recorded, in the long run, for financial institutions, insurance companies and pension funds. In Q1 to Q3 2004, employees of the financial institutions were paid CZK 36 340 and those of insurance companies and pension funds received CZK 30 541 (all per month and on average). The average wages in the sectors of non-financial corporations and general government were approximately half of those of financial institutions: CZK 17 336 and CZK 17 030, respectively. The wages paid to employees in the sector of non-profit institutions serving households were even lower (CZK 12 618). In real terms, the average wage grew most in the sectors of insurance companies and pension funds (+9.9%) and non-financial corporations (+4.2%). Employees of financial institutions were better off (+2.8%), as were employees of the general government sector (which now includes government departments and organizations semi-subsidized from state or local budgets in particular). The smallest growth of real wage occurred in non-profit institutions (+0.4%).

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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 a quarter of all employees included in the quarterly survey.