Minimum wage to be equal to 50% of average wage

The Czech minimum wage can possibly start growing as of 2020 to reach a level equivalent to a half of the 2016 average wage every January, Labour Minister Jana Malacova said today.

The ministry proposes to include this indexation mechanism in a draft amendment to the Labour Code, Malacova told journalists after a meeting with leaders of CMKOS umbrella trade union.

Trade unionists agree with the proposal as they see as insufficient the current plan to get the lowest income to 40 percent of the average salary.

Employers are in favour of introducing the mechanism but they do not agree with its parameters.

"We should gradually reach the target: 50 percent of the average wage. It's a matter of discussion and economic development," Malacova said.

"We should be seeking a minimum amount of Kc16,000 and we'll see what the average wage development will look like," she added.

The Chamber of Commerce has long been seeking depoliticising the minimum wage issue.

"The new proposal of the indexation mechanism does not take into account future development of the Czech economy and works exclusively with lagging indicators," Miroslav Diro, spokesman for the Chamber, told CTK.

The mechanism should be based on a Finance Ministry forecast which serves as a basis for drafting state budgets, and not on the average wage but on the median wage, said Diro.

Jaroslav Hanak, president of the Confederation of Industry, described the proposal as irresponsible. "We worked with a 44 percent average wage coefficient at previous tripartite meetings," he said.

The Kc800 increase of the minimum wage next year would be optimal for companies and an increase by Kc1,000 is acceptable for a big portion of businesses, he said. Should Malacova's proposal be approved, an overwhelming majority of companies would fail to offset the increase with increased labour productivity, which would complicate the economic growth, said Hanak.

Cyrrus chief analyst Lukas Kovanda said the proposal does not correspond with the economic reality and that it is an evident populist pre-election step, endangering competitiveness of Czech companies, sustainable development of public finances and favourable development of the entire economy.

The minimum wage is Kc12,200 from January this year. Unions are demanding a rise of 12 percent or Kc1,500. Employers argue that it is not consistent with GDP growth and businesses in some industries might have problems raising wages by 12 percent. They are proposing an increase by Kc800. Malacova backs the unions' demand.

The cabinet of Andrej Babis said in its policy statement it would prepare binding rules for a predictable growth in minimum wage.

The previous cabinet of Bohuslav Sobotka vowed to raise the minimum wage close to 40 percent of the average wage, which was Kc29,504 last year.

If the indexation mechanism were in force, people with lowest incomes would earn some Kc14,750 as of January next year. However, in reality they will earn between Kc13,000 and Kc13,700.

Unions back the planned model but want to come to an agreement on the final mechanism with employers and the government within a tripartite structure. The agreement would then be passed to the Chamber of Deputies, CMKOS leader Josef Stredula said at the press conference.

Commenting on unions' requirements for pay rises in the public sector, Malacova said she believed the government and the unions would arrive at an agreement until the end of the month. No date for a meeting has been set as yet, however, she added.

CMKOS wants salaries to grow by 10 percent in the public sector, while the cabinet prefers a 10 percent rise for teachers, professions with low incomes would get 7 percent, clerks 6 percent, medical professions 4 to 5 percent and the police and soldiers 2 percent.

Health unions went on strike alert over wages on Friday.

Babis said earlier he knew unions' demands, which is why it was not necessary for him to talk to them again. On Friday, he described the health union's action as a threat, saying he would not meet its representatives.

Source: ČTK