Average wage growth breaks records, due to a lack of labour and salary valorisation

Observers predict the average wage will continue increasing.

Illustrative stock photoIllustrative stock photo(Source: Sme)

The average nominal monthly wage in Slovakia has posted the highest growth since the first quarter of 2008. It rose to €1,101, up by 9.7 percent year-on-year in the second quarter of the year.

Taking into account the inflation rate, an increase of the real wage amounted to 7 percent. The seasonally adjusted average wage rose by 2.9 percent compared with the first quarter of 2019, as stems from the Statistics Office data.

The increase surprised the analysts.

“Nominal wages reflect the tightening labour market and the administrative changes like the surcharges for weekend and night work,” said Katarína Muchová, analyst with Slovenská Sporiteľňa, as quoted by the TASR newswire.

Where did salaries grow the most?

The highest level of the average monthly wage, i.e. above €1,890, was posted in the sector of financial and insurance activities, information and communication as well as in electricity, gas and steam supply. The wage was lower than the average in eleven sectors, with people earning the least in accommodation and food service activities (€657) and construction (€740).

As for the regions, the average nominal monthly wage was higher than the average only in the Bratislava Region (€1,368). In the rest of the country, it ranged from €832 in the Prešov Region to €1,033 in the Trnava and Košice Regions.

At the same time, the lead of Bratislava Region in absolute wage value is so high that, despite lower relative growth compared to most other regions, it achieved the highest increase in absolute value (by €110).

The growth rate will continue

The average wage increase was impacted by several factors, such as the lack of labour force, the positive economic performance and the historically highest valorisation of salary tariffs in public administration (by 10 percent), according to the analysts with the Institute for Financial Policy (IFP), which runs under the Finance Ministry.

“The salaries of employees in the central administration increased by a record 20 percent, the most since 2002,” the analysts said, as quoted by the SITA newswire.

Moreover, the surcharges for night, weekend and holiday work were increased in the second wave in May 2019, while employees received the bonus 13th salary, they added.

Another factor was the increase in the minimum wage.

The wages in Slovakia have grown quicker than the labour productivity for 22 quarters in the row, with the gap even widening in the last quarter, said Ľubomír Koršňák, analyst with UniCredit Bank Czech Republic and Slovakia.

“Slovakia thus has theoretically lost its competitive advantage from former years,” Koršňák added, as quoted by TASR. Several other CEE countries, which are the main rivals of Slovak exporters, are reporting a dynamic wage increase though, he added.

Analysts predict that the rate of wage increase will continue in the near future. The main risk is a slow-down in economic growth.

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Theme: Economics

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