Labour market and unemployment in the Czech Republic during the transition process



•                 Labour market – the initial stage

•                 General characteristics of the LM in the 1990´s

•                 Labour mobility

•                 Educational structure

•                 Economic activity of the LFS

•                 Labour productivity and wages

•                 Unemployment

              Labour market – the initial stage – LM in the socialist Czechoslovakia

•        the rate of UNE was officially 0 % - UNE in market economies as a proof of market economy
inefficiency

•        to be unemployed = a criminal offence of “parasitism”

•        the system of “alocation vouchers”

•        wage motivation limited with breaking the central plan →

•        → quantity instead of quality

•        wages many times as a substitute of the social benefits

    Employment structure in Czechoslovakia, Hungary, Poland in 1990 (in % of total employment)

                             Labour market – the initial stage – 1990

•       broad amnesty

•       decreasing the over-employment

•       collapse of east European markets

•       legislative changes (the possibility to register at the Labour Office to get social
benefits)





                                 unemployment as a new phenomenon

                                           LM till 1997

•       1990 – 1997 – era of relatively low unemployment rate – between 3-4 %

•       several causes: postponed economic restructuring, creation of „transformation wage pillow“,
drop of labour productivity

•       sometimes marked as a „Czech economic miracle“

•       relatively low share of long-term unemployment

•       relatively flexible labour market

                                           LM since 1997

•       monetary crisis in May 1997 → slumpflation → constant UNE growth

•       economic recession in following 2 years

•       general decay of economic activity

•       1999 – UNE approaches the 10 % level

•       privatization of banking sector → real economic restructuring

•       economic recovery in 1999 → soft UNE decrease (but still between 8-9 %)



                                   Mobility of the labour force

•       „socialist tradition“: to remain living on the same place for many years (often for the
whole life)

•       problem of housing – controlled rental + mortgage inaccessibility → inflexible housing
market

•       unwillingness to migrate

•       migration mainly towards Prague and Brno

            Migration flows among regions in the CR between 1991 – 2004 (in thousands)

                    Migration balance among counties/regions in CR 1991 – 2004

                                             Education

•       relatively good quality education system during the socialist era

•       lower share of tertiary education in comparison to the developed countries, but:

•       growing share of upper secondary and tertiary education

•       on the other hand: today – lack of skilled manual workers

               Educational structure in the CR 1991 – 2002 (in % of employed people)

                               Economic activity of the labour force

•       one of the highest rate of labour participation – over 70 % during the whole transition
period

•       employment rate – highest level among the V-4 countries

•       why?: tradition („heritage“ of socialism), low share of shadow economy, low „across border“
job-migration



               Labour participation rate in V-4 countries (in % of population 15-64)

                    Employment rate in V-4 countries (in % of population 15-64)

                                   Labour productivity and wages

•       price liberalization in 1991 → 56% inflation rate → drop of real wages → creation of
„transformation wage pillow“

•       pressure on rapid real wages growth in following years

•       real wages grew faster than the labour productivity in 1994 – 1997

                   Annual changes of labour productivity in V-4 countries (in %)

                Labour productivity in V-4 countries (in EUR, constant prices 2000)

                       Annual changes of real wages in V-4 countries (in %)

           Labour productivity and real wage growth differential (in percent points) CR

                                           Unemployment

•       1990–(May)1997–UNE rate between 3–4 %

•       since 1997 – constant UNE growth

•       1999 – 2004 – UNE rate between 7–9 %

•       the UNE rate 3-4% seemed to be artificially low

•       today: UNE under 6 %

                            Unemployment rate in the CR 1993 – 2005 (%)

                                 NARU estimation in V-4 countries



                                    Thanx for your attention J