Employment of foreign nationals

Employment of foreign workers is becoming a major phenomenon in the Czech labour market. While total employment increased by 42,100 people year on year in 2006 Q3, the number of foreigners employed in the Czech Republic (as employees or self-employed) was up by 35,900 year on year to 243,600 at the end of September. This represents roughly 5% of total employment. 1,2

The extraordinary increases in the employment of foreigners in 2005 and 2006 seem to have been related to the buoyant GDP growth. Chart 1 suggests that labour demand has been an important factor affecting the employment of foreigners throughout the period since 1997. A smaller impact of administrative rules on the employment of foreigners is indicated by the fact that the employment of foreigners increased significantly during 2005, and not back in 2004 when the Czech Republic entered the EU and the conditions for the employment of EU citizens were relaxed.

Chart 1

Also consistent with this hypothesis is the fact that the biggest increases in the number of foreign employees are concentrated in sectors where labour demand is strong. This is particularly visible in manufacturing and real estate and renting (see Chart 2). Employment of foreigners has also been rising fast in construction and trade. These four branches employ approximately 80% of the total number of foreigners employed.

Chart 2

Foreign employees tend to work in manual professions, where their numbers have also been growing the fastest. They usually work as auxiliary and unskilled workers, plant and machine operators or craftsmen (see Chart 3). Almost 75% of foreign employees work in these professions. Data on registered unemployment in the Czech Republic also clearly show that 50% of the unemployed come from such professions. The growth in employment of foreigners thus reveals apparent rigidities on the labour market linked with insufficient motivation to accept job offers, to migrate to find work or to undergo retraining.

Chart 3

1  LFS data on total employment and MLSA and MIT data on the number of foreigners employed. The LFS data are based on a survey of households and do not include foreigners living in hostels or commuting. The data on the share of legal employment of foreigners in total employment can therefore be regarded as an upper estimate.
2  According to Eurostat data, the share of foreigners in total employment in 2001 was 3.5% in the Czech Republic, 9.4% in Austria, 4.6% in the United Kingdom, 3.3% in Denmark and 1.0% in Hungary. The share of employment of foreigners in the Czech Republic is thus at levels common in some European countries and possibly higher than in other new EU Member States.