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Employment growth to decelerate despite inflow of immigrants

Company: Komerční banka, a.s.

The number of foreigners living in the Czech Republic is rising, and their share out of the total population exceeds the average of the CEE region. Most foreigners residing longterm in the Czech Republic also work there (86%). The proportion of foreigners in the Czech total employment is rising, as well. Companies often hire foreigners as agency employees, which explains the low wages in this segment and slow growth. The Czech Republic is able to attract not just a cheap labour force but also a qualified one. In skilled works, the wages of foreigners even exceed the Czech average. Also, the
proportion of self-employed persons among foreigners is significantly higher than the proportion of all sole traders in the population. Despite the influx of foreigners, however, employment growth is likely to slow down this year and the next. Nevertheless, foreigners will remain an important source of the labour force even in the future.

Finding a suitable work force from domestic sources is starting to be a challenge. The source of the work force, however, is also immigrants coming to the Czech Republic. Those represent a cheap labour force for domestic companies. Moreover, they are usually willing to work even in worsened conditions, doing manual and unqualified work that Czechs do not want
to do. Companies often use foreign workers for one-off or temporary works. It may be in the situation when an enterprise has more orders, needs help with seasonal works or its own employees are ill. Companies often seek foreign workers through work agencies, which are able to deliver the appropriate staff very quickly and only for the period for which the company needs.

This brings higher flexibility to employers and the possibility of how to deal with labor shortages for certain work or a short period.

In 2015, around 468,000 foreigners lived in the Czech Republic. More than half stayed on a work permit (55.6%), more than 44% had temporary residence, and the rest were awarded stays on an asylum basis. The number of asylum seekers in the Czech Republic, however, remains negligible. In 2015, there were around 3,000 asylum seekers. The number of asylum seekers is not growing, either. Last year, just 1,280 applications for asylum were submitted. Compared with
754,000 in Germany, this is an insignificant number. 

Most immigrants come to the Czech Republic from the EU. The share of EU citizens in the total number of immigrants in the Czech Republic represented 42% in 2015 and is still growing. On the other hand, the share of citizens from third countries is declining. The Czech Republic is frugal about granting citizenship. Within the years 2007 to 2013, around 2,000 citizenships were granted on average. In 2014, a new law for Czech citizenship came into force. This led to an
increase in the number of citizenships by 5,100 in 2014, the highest yearly increase since 2000. Still, the Czech Republic ranks 24th in the number of citizenships granted in the ranging countries of the euro area.

The number of immigrants living in the Czech Republic is moderately increasing. In other countries of the CEE region, the share of foreign citizenships in the total population is stable and at the same time substantially lower than in the Czech Republic. While in the Czech Republic this share is around 4.5%, in other countries of the CEE region it is less than 2%. In
comparison with developed countries of the euro area, the share of immigrants in the total population is still significantly lower; for example, in Austria foreigners represent 14% of the total population and in neighbouring Germany 10%.

Most of the foreigners residing long term in the Czech Republic also work there. In 2015, 87% of the total number of foreigners either worked there on the basis of a trade licence or an employment contract. The number of self-employed people is relatively stable; on the other hand, the number of employees is gradually rising (323,000 in 2015). This follows the statistics from the labour offices, the number of valid trade licences, the number of permits issued to foreigners from third countries, and Green and Blue Cards (Blue Cards enable long-term residence for the purpose of highly qualified employment).

More information in the attached report.

Tags: Economics | Finance | Human Resources |

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