Economists: Raising the minimum wage would be economic suicide

Czech trade unions have re-elected potential presidential candidate Josef Středula as president for another four-year term. Immediately after his re-election, he said he would not rule out a general strike or blockade of Prague if the minimum wage for workers was not increased, Czech news site Echo24 reported. He argued that employees should not be forced to bear the brunt of the economic impact of inflation and rising prices.

However, economists like Eva Zamrazilová, chairwoman of the National Budget Council, believe it would be economic suicide to pursue such a policy, warning that raising the minimum wage could trigger a new inflationary spiral.

“Raising the minimum wage would currently be an extremely irresponsible move that would cement inflation. This would not only result in further wage growth unrelated to labor productivity, but it could also lead to a significant increase in unemployment.”

Josef Stredula |  Photo: Roman Vondrouš, ČTK

BH Securities chief economist Štěpán Křeček believes that the threat of strikes and blockades by Mr Středula was an attempt on his part to gain support for his possible future presidential candidacy, which was backed by the current President Miloš Zeman and former leader of KDU-ČSL and TOP 09 political parties Miroslav Kalousek at a trade union congress in late April.

“This is most likely an attempt to increase the visibility of Josef Středula, who is obviously going to run for president. Squares full of protesters led by the leader of the unions would make for a great election campaign.

Mr Křeček says that the minimum wage will have to increase due to rising inflation, but the increase of 2,000 CZK per month demanded by the unions would be irresponsible.

“Given the parameters of our economy, this is an unrealistic plan that could cause significant economic damage.”

However, despite warnings from economists, Prime Minister Petr Fiala agreed to a meeting with union leaders and Labor Minister Marian Jurečká to discuss raising the minimum wage, which is due to take place on May 25.

Berta D. Wells