According to data released by the Czech Statistical Office (CSU) on Monday, the average gross wage in the first quarter of 2022 increased by 8.6% compared to the same period the previous year, reaching CZK 41,265. However, when accounting for inflation, the wage fell by 6.7%. The CSU reported that consumer prices rose by 16.4% in the first quarter, leading to a decline in the real value of wages. Jitka Erhartova, head of labor statistics, highlighted that the decrease in the average wage reflected the impact of inflation on purchasing power.

When considering seasonal factors, the average wage still experienced a 2.2% increase compared to the previous quarter. Meanwhile, the median wage, representing the midpoint of salaries, rose by 8.9% year-on-year to CZK 34,741. The median wage for men was CZK 37,696, while for women, it stood at CZK 31,856. Notably, 80% of employees earned wages between CZK 18,601 and CZK 65,512.

Wage growth varied significantly across industries, with only the energy sector experiencing a rise in wages exceeding inflation. Average salaries in the energy sector increased by 23.1% to CZK 79,221. However, this growth was attributed to the payment of exceptionally high extraordinary rewards, according to the CSU. In all other sectors, wages fell in real terms. The education sector recorded the most significant decline, with purchasing power decreasing by 10.7%. The average salary in banking and insurance also fell by 10% in real terms.

Economists have commented on the wage data, with Petr Dufek, chief economist at Creditas, stating that a wage-inflation spiral is still more of a theoretical scenario and does not require interest rate hikes as a response. Real earnings have been declining for the second consecutive year, impacting household consumption, which is now 10% lower than pre-pandemic levels. Jakub Seidler, the chief economist at the Czech Banking Association, warned that real wages are currently at the lowest level since Q1 2017, indicating a six-year low. He suggested that the slightly weaker wage dynamics in the first quarter lessen the argument for tightening monetary policy and imply that Czech National Bank (CNB) interest rates will likely remain unchanged or even decrease slightly in the coming year.

Article by Prague Forum