Despite the fact that the Czech Republic is known for its architectural beauty, for being at the top for beer consumption for capita and for being successful in ice hockey championships, Czech job statistics and percentage figures show that the capital city of Prague in 2017. has a very low unemployment rate, the lowest among the EU members. The statistics from March 2017. show the lowest unemployment rate since 2009. Czech unemployment and economy appear to be very stable. Prague unemployment rate is quite low due to a booming labor market, rising economy, high wages, despite the recent governmental crisis!
According to the OECD data, this former Soviet satellite state is economically growing, unlike other EU members. In the Czech vs Germany opposition, Czech youth unemployment rate takes the second place, only because Germany is the ever winning country in the EU. However, this year Czech youth gets even the greater chance of finding a job, which means that only one out ten young people won’t be able to find a job. However, the situation with unemployment is not that black and white!
Reasons for low unemployment rate
1. Cheap labor – the average labor cost per hour in 2016. was € 10.20, which is well below the EU average.
2. Successful factories – The Czech Republic has a very strong manufacturing industry that presents more than one-third of all employment in imminent car companies like Toyota, Peugeot, Skoda, Citroen.
3. Cheap and attractive assembly plant jobs for global manufacturers.
4. Closely connected to EU health, so the welfare of the EU very positively affects the health of the Czech Republic. For example, there is recorded an increase of 2.2% in the second quarter, higher than it was this time the previous year.
Reasons for possible unemployment
We have to take a look at two important factors that influence the unemployment rate in the Czech Republic. The first factor is education. It‘s clear that the higher level of education improves the chances of finding a better job. Although the unemployment rate for well educated Czechs is extremely low, those with compulsory education had to face the unemployment rate of 30%. The second factor that influences the unemployment rate is the job contract. Many young people in Czech republic are not able to find full-time jobs, which implies insecurity and insufficient wages. So, many of them are forced to look for a second job and they live in constant uncertainty. This is, of course, a problem since young people cannot be fully independent. So, as you can see, when you scratch the surface the situation is not that beautiful.
Czech economy challenges
However, the recent success should not be taken for granted. Wages are rising due to labor shortages, but on the other hand, this state prevents the economy from growing. Like other EU countries they also deal with aging population, and the government prevents employment of foreign workers due to numerous bureaucratic obstacles. What Czechs need to do is to invest their efforts to make their country the knowledge center. They have to turn the assembly center into the knowledge center in order to improve the skills and productivity with more sophisticated approaches. The government must support the improvement of the education system and the creation of high-skilled jobs. Up to now, there is a relatively small number of young people entering the universities after they finish the secondary education. Another challenge the government has to face is to reduce the risk of job losses due to automation in the factory-heavy economy. Therefore, it‘s important to consider the options of employing foreign workers and not relying too much on the industry that might easily become machine operated.
The ongoing strong labor demand and the increase in the minimum wage will definitely positively affect the unemployed, increase the chance for employment and consumption. Statistics show the recovery of private and public investment, and the inflation will be kept above 2% through 2018. The monetary reform that occurred in April will allow a free float of koruna exchange rate against euro, that will also have a positive impact on the Forex market. In addition, structural policies (reduction of labor shortages and Czech GDP growth) will enable overall economic development and higher incomes. The foreign investment greatly determines the global value, so for a steady Czech economic growth, this country must face the challenge to increase the value in order to enhance the globalization returns.
The common saying that money can‘t buy happiness may be true, but the fact is that Czechs have enjoyed the economic prosperity since they broke from the communism, and they can be proud with GDP much higher than the EU average. The statistics, as we have seen, show that Czech Republic has become one of the leading manufacturing economies in the EU. Although the country can be proud of its industrial pedigree, it mustn’t be solely focused on classical industry. They must overcome an intellectual challenge if they want to keep on moving forward. The Czech government must change their strategy if they want to catch up with the West and save the current competitive advantage. They‘ll do this by applying more ‘working heads, and less working hands‘.
Of course, Prague can‘t change its economic structure overnight, but it must concentrate on the options how to evolve it. They would have to leave the economic model based on low wages and foreign investment and give more space for improving domestic business. They should also be aware that digitalization and automation can bring to the unemployment problem by 2025. Also, Czech innovators need a better approach to funding since banks are not a great source of finance for them. Funding of innovative companies is necessary, especially in the innovation in production, development, and research, since innovation is the factor that makes an economy grow! Thus, the government should encourage private funding. Despite the progress and low unemployment rate that the country has been facing for some time already, they must be aware that economic stagnation increases the inequality that thrusts the liberal democracy into a serious risk.