Prague – More layoffs will hit the Czech Republic this autumn. Experts say companies are using the summer holidays to prepare postponed restructuralisation plans. This will coincide with the end of seasonal jobs as well.
The unemployment rate will increase from the current 8% to as much as 10%. Perhaps even higher. In June at least 16 districts in the Czech Republic already registered unemployment rates at around this level.
“Many companies are using the quieter time of the summer holidays to create personnel and economic analyses,” says Tomáš Zdechovský, executive director of the PR agency Commservis.com. Some are putting together strategies on whom and under what conditions to lay off or transfer to a different position,” he adds.
Companies moving east and west
According to Zdechovský, the crisis is like “a formula for radical steps toward long-postponed restructuralisations and budget cuts”. He says companies are already cutting employee benefits and have drastically cut on-the-job training expenses.
Some companies are planning to move production outside the Czech Republic. In some cases east, to Bulgaria, Romania, Moldova or Ukraine, where labour costs are significantly lower, says Zdechovský.
The Czech Chamber of Commerce already confirmed this trend earlier, saying about a fifth of Czech companies are considering shifting production abroad.
“It’s debatable,” says Josef Středula, head of the Kovo union. “For now, we’re seeing moves to the west, not the east. Manufacturers are moving to Germany and Austria,” he says, referring to the move of Siemens from Zličín and Intos from Žebrácko to their respective home countries.
But otherwise Středula agrees. “From last November, we said the worst would be the time of vacations, when companies will have no commissions,” says Středula.
“It has already begun. September, October, November – those will be the months when lay-offs will pick up speed and culminate,” he says.
“I expect that at the end of the year, unemployment will reach around 10%. And if the situation on the market does not improve, it could go even higher.”
Jan Bureš, an economist with Poštovní spořitelna, also predicts a 10% unemployment rate.
That is why unions are calling for quickly introducing a shorter work week, so that more people could retain their jobs, although they would be working for lower salaries.
Unemployment would mean still further spending cuts among households and at the same time increased state spending. That would create enormous pressure and further pull down the GDP,” says Středula.
What about unemployment after the crisis?
In June unions have asked to government to create a crisis plan for unemployment in the Czech Republic and its impact on the state budget. They also call for a report on the state of the Czech Republic, much like the US State of the Union Address.
The unions want to already start planning for a time after the crisis has passed.
We have asked that the government sets up a council for human resources development, so that we can prepare fro the post-crisis period. Otherwise we could lose our way,” says Středula. “But there could also be much to gain from this.”