Employment in the Czech Republic: Trends During Economic Transition and the Global Recession

Abstract

The Czech Republic represents a small open market economy with large stakes in international trade in the middle of the European Union that employs an extra-large share of a relatively well-educated workforce in manufacturing industries equipped—with some exceptions—with average or outdated technologies. In this chapter, Daniel Munich and Klara Svitakova provide detailed analysis of longer-term trends in employment in the Czech economy from the pre-crisis period of the late economic transition, through the years of the world economic crisis, until 2015, when signs of economic recovery became evident. In particular, they investigate trends in total hours worked along with its structure and components. While overall employment has been relatively stable in the long term, more detailed insights reveal notable changes experienced by particular demographic groups. Irrespective of the crisis, many steady changes regarding the extensive margin (work participation) were experienced by the youngest (15–24) and the oldest (55–64) population groups. Having opposite signs but being of similar size, these two effects more or less compensated for each other. While developments on the lower side of the age distribution were driven by the steadily increasing average duration of initial schooling, developments on the upper side were driven by the steadily improving health conditions of the older population, growing work opportunities due to a changing occupational mix, and rising statutory retirement ages. On top of changes in the mean hours of work per person due to the changing demographic structure of the population, there were also negative shifts on the extensive margin (work participation) as well as positive shifts on the intensive margin (hours worked by those who work). Although the latter component of change was smaller, it helped accommodate the adverse impact of the economic crisis that showed signs first in late 2008 and unfolded fully during 2009. The impact of the crisis seemed to be bigger due to the overheated economy and the Czech labor market, which was on the verge of the world economic crisis. The adverse impacts had been partly accommodated by retirements and the extended duration of initial schooling of young generations. The most adversely affected, with the consequence of unemployment, were men’s occupations requiring middle- and low-level skills in manufacturing and construction. The crisis had a lasting impact on lowering the average hours of those who work and reshuffling employment between some occupations.