An analysis by UniCredit Bank highlights that achieving wage parity between the Czech Republic and Germany is unattainable without a significant acceleration in labor productivity.
Despite efforts to increase wages, the Czech Republic lags behind its Western neighbors, particularly due to a lower proportion of highly skilled workers in positions that generate the highest added value.
Prime Minister Petr Fiala recently pledged that wages in the Czech Republic would match those in Germany if his government stays in power for another four years. However, this promise has been met with skepticism by the opposition and most economists. In 2023, the value added per hour of a Czech worker was just half that of a German worker—€30.5 (763 CZK) compared to €62.3 (1,589 CZK). At the same time, the average cost of labor in the Czech Republic was only 41.8% of the German level. When considering purchasing power, Czechs’ purchasing power reaches just 55.4% of Germany’s.
The primary reason for the wage disparity is the productivity gap, particularly the proportion of workers in expert roles. In 2023, 19.4% of Czech workers were classified as ‘specialists,’ compared to 22.8% in Germany, and 16.3% were ‘technicians,’ versus 19.8% in Germany. Closing this gap could increase Czech labor productivity by up to 28.7%, bringing it closer to 77.7% of Germany’s productivity.
This productivity gap not only results in less efficient production but also affects the perceived value of products made in the Czech Republic. For example, the added value of a “Made in Germany” BMW generally surpasses that of a Škoda car produced in the Czech Republic, despite the similarities in manufacturing processes.
The analysis also notes that in some sectors, particularly in information technology, Czech wages have reached German levels when adjusted for purchasing power parity. Professions such as software engineers, network administrators, and IT consultants are examples where Czech wages are more competitive with Germany. However, for broad wage parity across sectors, the Czech Republic will need to boost overall productivity.
