Six tasks for Government of the Czech Republic

The Czech economy has been doing well these years. Future growth, however, will depend on the successful start of digitization of the state and industry and whether sufficient skilled workers for this new era will be provided.

The Czech economy has been growing for the fifth consecutive year. The Confederation of Industry of the Czech Republic expects this year's gross domestic product to grow by 3 percent. The Confederation warned already a year ago in its predictions, that the record growth pace of the last year would not last and the Czech Republic´s industrial production and value added would slow down slightly.

Although Czech companies are doing well, they have been struggling for several months at the limits of their production capacities. The biggest brake of further growth is the disastrous labor shortage. In August, companies registered 313,000 vacancies. Labor offices registered 230,000 unemployed. Moreover, for four months, the number of registered jobseekers has not fallen. The biggest demand is for craftsmen, repair and service workers, machine and equipment operators and drivers.

the Government and trade unions must not worsen the situation on the labor market

"We now need to fill the labor gap with workers from abroad. We sent a letter to Prime Minister Andrej Babiš that we need 50,000 Ukrainians and Serbs, so that we do not have to reject contracts. It is not about unskilled workers who would work for low wages. We also need to speed up their hiring process, " says Jaroslav Hanák, President of the Confederation of Industry of the Czech Republic.

Lack of skilled workers may get even worse. The government plans to abolish the three-day waiting period concerning the paid sickness leave. The Confederation of Industry estimates that temporary incapacity to work could increase by 2 to 3 percent due to this measure. "Companies could then lack further 20 to 40 thousand employees. The Confederation of Industry therefore calls for the eventual abolition of the waiting period to be linked to a broad-based system of electronic sick notes that should help prevent abuse of sickness leave," says Jan Rafaj, 1st Vice-President of the Confederation of Industry. The Confederation also urges the government to keep its promise and fully compensate companies for the costs of cancelling the waiting period.

Companies will need up to 60,000 new workers if trade unions succeed in reducing the statutory working time from 40 to 37.5 hours a week. In addition, the volume of overtime work would increase and existing employees would be overloaded. "CMKOS's idea of ​​shortening working hours is irresponsible. The labor market lacks 310,000 people. The productivity of companies is not strong enough to reduce working time without corresponding adjustment of wages," says Hanák. Trade unions defend the proposal by the fact that Czechs on average work longer than the Germans. But in Germany, 28 percent of workers work part-time. It is only 7 percent in the Czech Republic. If we compare the actual time worked in full-time jobs, the result is the opposite. Last year, an average German worked 40.9 hours per week, while the average Czech only 40.3 hours .

Discussions on an amendment to the Labor Code began in August. Although the Confederation sees some of the proposals as positive, the overall amendment will not contribute to greater flexibility in labor relations. Some of the employers' demands are not in the proposed amendment at all. For example, companies want to shorten notice periods, to simplify the procedure for terminating employees' contract due to the violation of work obligations, to allow termination of employment without stating a reason while providing a higher severance, and a significant reduction on severance pay in case of contract termination due to long-term inability to work, or more flexible working hours account.

"The notice period today does not reflect the reasons for which an employee is dismissed. If an employee commits a serious breach of work duty, the employer must still employ that person for the next two, or two and a half months," Rafaj notes.

The state must create conditions for the digitization of the industry

The future of the industry is in digitization. It is important to implement new technologies such as blockchain or artificial intelligence. Companies must learn to use available data. Companies are forced to digitize and automate production also due to the labor shortage. New machinery and technologies generally lead to the elimination of routine operations, creating more room for creative work with larger added value. New jobs are created that require higher skills, creativity or communication skills and are better paid. "Companies are constantly investing in robotisation and digitization. However, their effect on labor savings is yet to be felt. We are not that far yet, " adds Hanák.

Digital market rules are being developed at European level. "The Confederation has long been pushing for Europe without barriers. We are pushing for their removal in the free movement of goods, services, people and capital, and we are now adding the free movement of data in the EU, " says Vice-President of the Confederation, Milena Jabůrková. However, it means that the government must be active at European level, especially after Brexit, as the United Kingdom was the EU leader in digitization.

At home, the government must do more in the digital area. The Confederation welcomed the Digital Czech Republic strategy and the activities of the government rep for digitization and IT. Now it is crucial to make the strategic concepts a reality. In that, the Confederation sees numerous risks. "The Ministry of Industry and Trade failed in terms of digitization. It did not duly complete the tenders for the construction of high-speed Internet infrastructure. Without it, companies will not be able to digitize or progress towards artificial intelligence," Hanák criticizes the government. It is also impossible, that there are four deputy ministers at the Ministry of Industry dealing with digitization or industry 4.0 without knowing exactly what they are responsible for.

E-Government implementation in the Czech Republic is another chapter. The Confederation welcomed the government's launching of new activities such as Citizen's Portal or electronic identity cards. Now, more specific services for citizens need to be linked to them. In the health sector, digitization would help to show the total costs of treatment and allow its optimization. Savings can then be used for patient needs. Digitization could also greatly speed up today's too long process of registering new drugs and approving their reimbursement.

The Czech Republic needs reform of education and investment support

The situation on the labor market is closely related to the reform of education. Priority should be given to support for technical disciplines, as these workers are largely absent on the labor market. The Confederation pushed for the introduction of the GCSE in mathematics and insists on its preservation. It is also necessary to improve polytechnic education at elementary schools and the language skills of graduates.

"From the beginning, we support the elements of dual education, the co-operation of vocational schools with companies. Many companies even have their own technical schools. However, the companies cannot support the whole system by themselves, they need help from the government, especially the Ministry of education. We recommend increasing the powers of school headmasters to be able to decide on cooperation with businesses," says Hanák. The Confederation launched a pilot project on dual education in the Moravian-Silesian Region. Next year, the plan is to extend it to the Zlín, Central Bohemia and Ústí regions.

Although the Czech economy has been doing well for the last five years, it still needs to innovate and support investment in R&D. The government should change the system of tax deductions related to research and development and change the approach of the Financial Administration so that companies are not afraid to use the tax deductions and come up with new projects as is usual abroad. Investment incentives must be reviewed fundamentally to take into account the added value of investment plans for the economy. "The number of created jobs must no longer be the main pillar of investment support. However, the state must retain the possibility of supporting unique technologies, investments with significant added value for the economy, existing investors or investments offering to solve major local problems," adds Radek Špicar, Vice-President of the Confederation of Industry.

Adoption of euro would be a positive impulse for industry. The Czech Republic promised to adopt the euro already in 2004 when it joined the EU. "The logical argument for the single currency is the strong ownership and commercial interdependence of the Czech Republic and the Eurozone. Adopting the euro will also be a signal for the investors that we are an integral part of the developed EU. Our joint survey conducted with the Czech National Bank shows that almost one fifth of companies already use the euro also in domestic transactions," says Hanák. The Czech Republic can share experience with Slovakia, which has already adopted the euro and which has a similar structure of the economy. When discussing the euro, it is pointless to point to countries like Greece, it is better to use real numbers. The Slovak experience is very valuable in this respect.
Lenka Dudková
section Aktuálně