Attracting foreign workers will help sustain Czech economic growth
As reported by Radio Prague, the Czech Statistical Office (CZSO) published statistics for the last quarter of 2017 in mid-February, according to which the country's GDP growth was 5.1%. For the entire year, gross output increased by 4.5%, inflation was 2.5%, and the unemployment rate was the lowest in the European Union at 2.3%.
High growth rates were achieved through the development of almost all sectors of the national economy, emphasized CZSO Vice-Chairman Marek Rojíček. "Wages and pensions increased, so households spent more year-on-year. Investments also grew, but the largest contribution came from industry, and significant growth was also recorded in the services sector," he added.
Observers from several leading business publications in the Old World and North America, including the Wall Street Journal and Handelsblatt, noted the high indicators of the Czech Republic's economic development. The Italian newspaper Panorama even called the Czech Republic "the industrial Switzerland of Europe" and "a Mecca for foreign investors." It also noted that economic growth is leading to an increase in the population's well-being. In the third quarter of 2017, the average wage in the country rose by 6.8%, and in the fourth quarter by another 3.2%. According to forecasts by the Economic Chamber of the Czech Republic, the average earnings of Czech workers will increase by more than 8% in 2018.
But experts call the explosive growth of wages in the Czech Republic, as well as the labor shortage, the main threats to the country's sustainable economic development. "In addition, the danger is posed by rising interest rates, which is relevant not so much for large companies as for small and medium-sized ones, and the strengthening of the koruna. We assume that in the coming months the situation with the national currency will not change and the trend toward strengthening will continue," noted Radek Špicar, Vice President of the Confederation of Industry and Transport, in an interview with Czech Radio.
The chief analyst of the Economic Chamber of the Czech Republic, Karina Kubelková, agrees with her colleague. In this regard, economist Jan Bureš of Patria Finance points out that the Czech economy has been suffering from a labor shortage for several years.
"Moreover, the lack of workers will remain the main limiting factor for economic growth in the coming years. What will come to the fore is not so much a shortage of skilled workers—there is always a shortage of them, regardless of whether the economy is in crisis or boom—but of unskilled workers. If we look at the statistics of the labor exchange, the most in-demand are representatives of low-paid professions, for example, auxiliary workers. Their wages are growing the fastest, which hurts companies that use cheap labor," Bureš explained.
As the main solution to the labor shortage problem, experts and officials cite attracting foreigners. Back in the fall of 2015, the Czech Republic adopted a law providing for a significant simplification and acceleration of visa issuance for Ukrainian citizens with technical education—engineers, technical specialists, and IT specialists.
In February of this year, the Union of Employers of the Czech Republic, the Chamber of Commerce of the Czech Republic, and the Confederation of Czech Industry sent a letter to the government calling for simplifying the procedure for hiring labor from Ukraine. Commenting on this letter, Acting Minister of Industry and Trade Tomáš Hüner, in an interview with Hospodářské noviny, pointed to the positive experience of Bulgaria in attracting foreign workers.
"A potential employee can come to Bulgaria on a tourist visa and get a job. If the company is satisfied with them, it can apply to the relevant authorities to change the foreigner's residence status in the country. This significantly speeds up the employment process," the minister explained.
However, on January 31, the government (at the initiative of the Ministry of Industry) doubled the quotas for workers from Ukraine. In the future, the Czech Republic will issue 19,600 work permits to Ukrainians annually, compared to 9,600 in 2017 and 3,800 in 2016. In addition, the cabinet approved the so-called "farmer regime," under which an additional 1,500 visas for work in agriculture will be allocated for Ukraine.
Czech Foreign Minister Martin Stropnický explained that the Czech authorities will now issue up to 800 additional work visas to Ukrainians monthly, and the procedure for obtaining them will be accelerated and simplified. According to Stropnický, the government's plan will also apply to a lesser extent to workers from Mongolia and the Philippines.
These measures were criticized by experts. In their opinion, they indicate the absence of a coherent state concept for attracting foreign labor. Today, bureaucratic restrictions complicate the employment of citizens from non-EU countries to such an extent that companies hire them only as a last resort, František Jareš, an employee of the staffing agency Student, told Radio Prague.
"We do not expect a significant increase in the number of foreigners in this regard. I am sure that the number of visas issued will not change. Unfortunately, even with an increase in the quota, the Ministry of the Interior's capacity to process applications is limited. The state simply cannot keep up with the needs of business," the specialist claims.
According to Jareš, businesses are often willing to disregard norms to hire foreigners outside the law, which is a direct consequence of the incompetence of officials. This option provides an opportunity to save on wages, since under legal employment, companies are obliged to pay foreigners no less than Czech citizens.
In turn, Josef Středula, chairman of the Czech-Moravian Confederation of Trade Unions, believes that the influx of guest workers could lead to a decrease in the cost of labor and an increase in crime in the Czech Republic. “This concerns primarily Vietnamese and Ukrainian workers,” he noted.
Středula's words are confirmed by statistics, according to which Ukraine leads in the number of illegal migrants in the Czech Republic. In 2016, Czech police detained 1,500 citizens of that country out of a total of 5,000 illegal immigrants. This is 25% more than in 2015. In 2017, more than a thousand Ukrainians were deported from the Czech Republic, confirmed the Ukrainian ambassador to the Czech Republic, Yevgeny Perebyinis.
But Igar Tyshkevich, an expert on the international and domestic policy program of the analytical center “Ukrainian Institute of the Future,” believes that the Czech Republic has no alternative to attracting Ukrainians as cheap labor.
“The population of the entire Eastern European bloc, including the Czech Republic, is aging due to the problem of the so-called independence generation, which formed during the decline in birth rates from the late 1980s to the mid-1990s, when these countries were experiencing a deep economic crisis. Ukrainians are a fairly good replacement option for the Czech Republic, as they assimilate quietly into Czech society. They look the same as Czechs, speak a similar language, and therefore do not cause rejection among the local population,” the expert emphasized.