By Krisztina Than and Alan Charlish
BUDAPEST/WARSAW – Central European economies are recovering faster than expected from the coronavirus pandemic and industrial production is increasing, but a chronic shortage of workers before the crisis could be a bottleneck for future growth.
The labor shortage caused by years of emigration to Western Europe and an economic boom in the region is already pushing up wages and inflation, prompting the Hungarian and Czech central banks to signal possible increases interest rates.
As investment and funds from the European Union pour in, companies in manufacturing, information technology and construction are scrambling to attract employees.
Eurostat methodology shows three of the five lowest unemployment rates in the European Union in April, at 3.4% in the Czech Republic, 4.3% in Hungary and 3.1% at the lowest in the EU Poland.
In the same month, inflation rates in these countries were three of the four highest in the EU, led by an annual rate of 5.2% in Hungary and 5.1% in Poland.
“Temporary friction between supply and demand due to the rapid recovery of the national economy, (and) the further tightening of labor market capacities expected in some sectors combined with dynamic wage growth have increased the risks of inflation, ”the National Bank of Hungary said after its May rate. Meet.
The bank signaled a possible 0.6% rate hike on June 22 to control inflation, which would make it the first EU country to enter a tightening cycle.
The Czech economy does not need more support from a loose monetary policy, Central Bank Governor Jiri Rusnok said on May 28, suggesting that a rate hike could be considered at his next policy meeting. June 23.
“Labor shortages and the very hot labor market despite the pandemic are already reflected in inflation, and in Poland this is reflected in the prices of services. They are increasing by around 7% year on year and the pandemic is not slowing it down much, ”said Andrzej Kaminski, economist at Bank Millennium in Warsaw.
“These labor shortages mainly concern industry, especially manufacturing.”
(Graph: Unemployment rates in Central Europe remain low – https://graphics.reuters.com/EASTERN EUROPE–ECONOMY/LABOR/dgkvlnjxrvb/chart.png)
As vaccination spurs recovery – Hungary has vaccinated 54% of its population – production and consumption have jumped, as labor markets tightened from last year, companies and recruiters said .
German Continental Automotive Hungary, which employed around 8,200 people at the end of 2020 at seven production sites, two research centers and a tire warehouse in Hungary, said the recovery started in the third quarter and reported “good situation of customers’ orders at most sites.
Robert Keszte, Country Manager, Hungary, said that for engineers, software / IT experts and technicians in general, there was a visible gap between supply and demand, with regional imbalances in the availability of qualified workers.
“I believe that the most difficult times are still ahead of us. With the reopening and recovery of the economy, the hiring climate for companies is also exploding… I expect a much more difficult situation for the second half of 2021 compared to 2020. ”
“We have based our growth plans on increasing the efficiency and the level of automation in both blue collar and white collar positions,” he added.
Gabor Toldi, Managing Director of the Recruitment Consulting Firm Fault code Solution, said the labor shortage was severe in the manufacturing sector and for white-collar jobs, companies in eastern Hungary importing thousands of workers from Ukraine.
“A skilled worker can earn up to 500,000 gross monthly forints ($ 1,753.09) now, but that still does not compare to salaries of 1 million forints in Germany,” he said, adding that the German economy was still siphoning off workers.
Tomas Ervin Dombrovsky, Labor Market Analyst in the Czech Recruitment Group LMC, which operates the jobs.cz website, said demand for workers in the manufacturing sector had returned to 2019 levels last fall.
Czech job vacancies, according to the employment agency, have increased since November and are close to a pre-pandemic record.
(Graph: Inflation in Central Europe is accelerating – https://graphics.reuters.com/EASTERN EUROPE–ECONOMY/LABOR/rlgpddxlqpo/chart.png)
Firms under pressure to find workers further raise wages, after years of double-digit wage growth before COVID-19.
Hungarian gross wages jumped 9.2% per year in March, while in the Czech Republic nominal gross wages rose 3.2% in the first quarter. Wages in the business sector in Poland increased by 9.9% year on year in April.
“We are trying to adjust wages to the labor market. We are short of employees and it is very difficult for us to find them, ”said Ryszard Florek, managing director of Polish window manufacturer Fakro, adding that the company hoped to increase its enrollment with up to 100 students during the holidays. summer.
“Previously there were a lot of employees in the market who came from tourism and gastronomy … however, right now it’s opening up there (too).”
Florek said employers would inevitably have to pay more and the question was whether labor costs could be passed on to prices or whether workers could be replaced by machines.
“Companies that still have… great possibilities for automation will certainly do so,” he said.
($ 1 = 285.21 forints)