Ascending unemployment: looked over issue of economy

Most of the attention devoted to economic issues will now focus on the state budget and public finances. However, no one can distinguish what is true and what is a trick. What was valid before the elections is no longer true and no one knows how next year’s budget will turn out. The level of transparency of public budgets has decreased to such an extent that it makes little sense to analyze them. Data from the labor market is much more reliable. Information provided by the Czech Statistical Office and the Ministry of Labor and Social Affairs shows a seemingly inconspicuous but steady rise in unemployment.

The labor market reflects the structural changes that the Czech economy is undergoing. Industrial stagnation is leading to a permanent decline in employment in this part of the economy. Over the past six years, employment in industry has fallen by 155,000 people. Some of this has been absorbed by the service sector, where employment has increased by 100,000 employees over the same period. Unfortunately, the rest remain in the unemployment statistics. When combined with demographic trends as large cohorts are retiring and smaller generations are entering the labor market, this results in an increase in imbalances, to which wages and corporate strategies are responding.

Economic growth has picked up speed this year. Although the acceleration in economic growth reduces the cyclical component of unemployment, negative structural factors prevail. Despite higher economic activity, a large proportion of the unemployed remain difficult to employ because their qualifications do not match the demand of companies. The main problem is the low flexibility of the education system, which responds with a delay and is unable to offer courses that meet the needs of the modern economy in a flexible manner.

As a result, current unemployment is at its highest since the beginning of 2017, measured by the share of unemployed people in the population aged 15-64. This is a warning sign that should spark a debate not only on economic policy but also on the long-term strategy for workforce development. Without investment in education, retraining, and support for workforce mobility, the Czech economy risks getting stuck in a trap of low productivity and rising unemployment.