ANALYST VIEW - Combating unemployment with part-time jobs?

The Czech have the lowest unemployment rate

The unemployment rate (ILO) in the CEE region continues to decline. With an unemployment rate of 4.0% in Q216, the Czech Republic was ranked first within the whole EU. Poland and
Hungary are doing well too. With the unemployment rate below 6%, they are staying under the EU average. On long-term unemployment, the dubious honour goes to Slovakia. The country’s problems stem from the unemployment of people with a basic education only, but the problem is also unemployment in outlying regions or unemployment among some ethnic minorities.

As regards long-term unemployment, the dubous honour goes to Slovakia, as the ratio of those seeking jobs for over a year is above 60%, versus close to 50% in Hungary and the Czech Republic and under 40% in Poland.

Labour demand becoming more flexible?

“In the long term, we expect CEE countries to be able to generate job vacancies as demand for the CEE’s output remains strong. However, employers in some sectors will continue to be hampered by the lack of qualified labour force," said Jana Steckerová at KB Bank, member of Societe Generale Group.

In her view, the problem of finding skilled labour could lead to the creation of more part-time jobs and greater employment of young people or women, which are the categories that still have considerable reserves.

Up to now, employers have compensated for the missing labour force by increasing number of overtime hours, which is unsustainable in the longer run.

Much more part-time jobs in the EU

While the share of part-time jobs in total employment is as high as 20% in the EU, in CEE countries it is only around 5%. “Part-time work is mostly taken up by women. In the EU, a full one-third of women work on a part-time basis; in neighbouring Germany and Austria, this percentage rises to nearly 50%," Steckerová said.

The CEE region, therefore, with its 4.1% is lagging behind substantially. On the ground however, there is a huge demand for part-time work, according to jobs agencies, the analyst added.

“Not just women, but also young people are very keen to secure part-time work as it allows them to gain work experience during their studies. It seems then, that despite the shortage of labour in some sectors, employers in the CEE region are not yet willing to offer more part-time jobs."

Wage pressure all around

For the purposes of this analysis, Steckerová has estimated the non-accelerating inflation rate of unemployment (NAIRU) using the Phillips curve.

“The fact that the unemployment rate has reached NAIRU means that the lack of labour force has started to be evident on the market, creating an upward pressure on wage growth," she said.

“In the first phase of the economic cycle, companies tend to postpone wage hikes to improve their financial results. Conversely, when the unemployment rate reaches the NAIRU, companies increase wages even at the expense of their profit margins to be sure of hiring qualified staff," she added.

In her view, the question is whether higher wages will spill over into price growth, which has not happened much yet. External factors like low import prices, oil prices, etc. have prevailed up to now.

Although in the past this situation led to fast growth in core prices, currently it seems that the spill over of higher wages into price growth will be rather slow, Steckerová said.

“Faster acceleration of inflation will continue to be hampered by low import prices and inflationary expectations anchored at low levels. Due to deflation in most of the region, we also expect solid real wage growth. Combined, this is likely to contribute to increase households’ willingness to spend. Domestic demand is therefore likely to remain the main driver of GDP growth in the region."

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• labour shortage