Skills shortage Czech Republic runs out of skilled workers during the boom

The battle for the best minds and hands in the Czech Republic is intensifying. On the one hand, in view of the good economic situation, skilled workers are in demand everywhere, on the other hand, vocational training is below the requirements of companies.

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12% wage increase plus a one-off payment were obtained by the employees at Škoda. (andreas pohlmann)

In the end, the Czech Volkswagen subsidiary Škoda had no choice but to pay a 12% wage increase retroactively from April 1 2018, with a duration of one year. In addition, there is a one-off payment of 7000 Czech crowns (just under 270 euros) for each employee. “This incredibly high payment reflects both the macroeconomic situation in the Czech Republic and the competitive environment in which it finds itself,” commented Bernhard Maier, CEO of Škoda Auto.

Indeed, the competition Maier complains about has become tough: Skilled workers are now scarce in the Czech Republic. In the latest economic survey by the German-Czech Chamber of Commerce (AHK Czech Republic), investors ranked the last of a total of 21 companies in the “availability of skilled workers” ranking for the third time in a row.

At the same time, due to the excellent order situation compared to the previous year, the companies also want to hire more employees again. In the same survey, almost three quarters (73%) of investors rated the current economic situation in the Czech Republic as good and only 2% as bad. According to the Chamber this is the lowest number of all times. “Full employment in the country is increasingly becoming a problem,” said Michael Krüger, Commerzbank's head for the Czech Republic and Slovakia.

Czech companies are looking for specialists and do not find any

Wage costs rose rapidly last year, not only at Škoda, but in many other sectors, and this trend is expected to continue according to the economic survey. Two out of five companies expect a sharp increase in wage costs of more than 8%, with more than half expecting up to 8%. As a result, the location factor “labour costs” falls to 11th place. According to the chamber, this shows that the Czech Republic is slowly losing this competitive advantage. Three years ago, the factor was still in the top five.

Managers are also increasingly dissatisfied with the “qualification of employees” and the ”vocational training system”, which leads to long-term criticism. The shortcomings in the training system were also underpinned by an OECD study last year: only 6% of Czech pupils in vocational education and training completed a combined school and in-company training with a strong practical orientation. According to the chamber, the figure is 40% in Germany and 59% in Switzerland.

“For companies, it is above all the formula of at least 'half and half' that counts for the ratio of training at school and in the workplace. This is decisive for the 'practicability' of the graduates. We welcome the fact that the Minister of Education, Stanislav Štěch names the dual system as an objective,” said Bernard Bauer, Managing Director of the AHK Czech Republic.

Foreign workers are meant to help the Czech Republic

Rudolf Jindák, head of foreign affairs at the Czech president's office, also described the lack of skilled workers as “the biggest economic problem and a brake on growth”. The Czech economy and society must be opened up - not only to capital flows but also to foreign workers. In a guest lecture before the chamber, Jindák distanced himself from the government's position of only temporarily bringing foreign temporary workers into the country. “We should try to bring people to the Czech Republic who want to stay and work here permanently,” he said, especially from EU member states.

Jindrák asked the representatives of the German-Czech economy to stay in the country despite the shortage of skilled workers and to continue to contribute to the good relations between the two countries. “Keeping foreign investors here is one of the Czech government's major tasks,” he reported. According to him, President Miloš Zeman is also aware of how great the problem of a shortage of skilled workers is for the economy and is working on further measures.

On the other hand, the shortage of skilled workers is proving to be a driver for investment. In the chamber survey, companies have never been as enthusiastic about spending as they were in 2018. 55% of companies expect capital expenditure to increase, which is an increase of 14% over the previous year.

“A good part of this money is likely to be investments in digitisation and automation. Many companies are hoping for greater independence from the labour market,” Krüger analyses.

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