A country with non-existent unemployment: The special characteristics of the Czech labour market. OSW Report July 2019

Debiec, Krysztof (2019) A country with non-existent unemployment: The special characteristics of the Czech labour market. OSW Report July 2019. UNSPECIFIED.

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Abstract

The low unemployment rate in the Czech Republic is an effect of a number of structural and political factors which have generated a certain economic potential. This potential was achieved when external stimuli occurred in the form of economic boom, which has been visible especially since 2014. The policy adopted by each of the Czech governments during the recent recession and stagnation was of great significance, alongside the support for the economic policy through actions taken by the National Bank of the Czech Republic (above all the low interest rate policy and interventions on the currency market). One of the reasons why the unemployment rate in the Czech Republic continues to be low is the relatively low labour costs and the high level of the country’s industrialisation where the automotive industry, which heavily relies on the market situation, has an essential share. So-called ‘assembly plants’, i.e. industrial plants generating numerous jobs with low added value, also play an important role in reducing the scale of unemployment. A great number of such plants have been created in effect of investment incentives over the past twenty years (the wave reached its peak in 1998–2007). They were often created with the intention of reducing unemployment. At the same time, the Czech Republic, a developed country heavily reliant on exports, is extremely sensitive to changes in the economic situation in Europe. The Czech economy is particularly strongly influenced by the situation in other EU member states, which are the outlet for almost 85% of the Czech exports. Germany is a major player in this context as it accounts for a third of Czech exports and a quarter of its imports, and has engaged its capital fairly intensively in the Czech Republic.

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