Saturday, 15 March 2025
Closing the wage gap between the Czech Republic and Germany will require a significant acceleration in labor productivity growth, according to a new analysis by UniCredit Bank. The analysis highlights that the Czech economy continues to lag behind Germany, primarily due to a lower share of workers in high-value expert positions. Prime Minister Petr Fiala (ODS) recently suggested that Czech wages could match German levels within the next electoral term, a claim criticized as unrealistic by both the opposition and most economists.
In 2023, the value generated per hour of work by a Czech employee was approximately 30.5 euros (CZK 763)—just 49% of the 62.3 euros (CZK 1589) generated by their German counterparts. At the same time, average labor costs per employee in the Czech Republic, which include wages and social contributions, were only 41.8% of German levels. Adjusted for purchasing power, Czechs reached 55.4% of Germany’s wage level.
The analysis identifies labor productivity as the primary factor behind wage disparities. While the difference is not driven by sectoral structure, it is strongly influenced by the share of employees in expert positions. In 2023, only 19.4% of Czech workers were employed in roles classified as “professional,” compared to 22.8% in Germany. Similarly, only 16.3% of Czech workers held “technician” positions, while the share in Germany stood at 19.8%. Closing this gap could raise Czech labor productivity to 77.7% of the German level, an increase of 28.7 percentage points.
The analysis also points to the role of brand perception in the wage gap. “Labor productivity is not solely about the physical output of production but also about intangible value. For example, attaching parts to a BMW vehicle in a German factory generates more perceived value than performing the same task on a Škoda vehicle in the Czech Republic, even though the production process is identical,” the report explains.
Interestingly, in professions tied to information technology, Czech wages (adjusted for purchasing power) are approaching German levels. Roles such as software engineers, network administrators, and IT consultants are particularly competitive. The analysis attributes this to the flexibility of the IT labor market, where remote work allows skilled professionals to collaborate with employers in higher-wage economies while living in countries with lower living costs.
Prime Minister Petr Fiala’s claim in November that Czech wages could equal German earnings within four years has sparked considerable debate. Economists widely view the statement as unrealistic, given the Czech Republic’s current economic growth trajectory. Deputy Speaker of the Chamber of Deputies, Jan Skopeček (ODS), later acknowledged that reaching German wage levels in such a short timeframe is unfeasible. However, he emphasized the importance of continuing to narrow the wage gap over time.
The opposition, particularly the ANO party, criticized Fiala’s statement, with party leader Andrej Babiš dismissing it as “nonsensical.” During a parliamentary session, Babiš even proposed a discussion on the prime minister’s mental state in response to the comment.
The analysis underscores that achieving German wage levels will require targeted efforts to boost labor productivity, particularly by increasing the share of expert positions in the workforce. The report calls for structural reforms and investment in education, innovation, and high-value industries to accelerate this transformation. Without significant changes, the wage disparity between the Czech Republic and its western neighbor is unlikely to close in the foreseeable future.
Source: CTK
