MONETARY POLICY REPORT | SPRING 2022 (box 2)
(author: Adam Ruschka)
One of the consequences of Russia’s invasion of Ukraine is a massive inflow of refugees into many countries, including the Czech Republic. Most of them are of working age and thus represent – if they stay for an extended period – a potential labour force for the long tight Czech labour market. This box describes the position of Ukrainian nationals on the local labour market up to now, and then presents the structure of the Ukrainians arriving in the current refugee wave and indicates how they might integrate into the labour market in the future.
Ukrainians currently make up a large proportion of the foreign workers in the Czech Republic (32% of all job seekers registered at labour offices). Their number can be expected to rise significantly further due to the war. In March 2022, labour offices registered around 240,000 Ukrainians (see Chart 1), 57% of whom were men and 43% were women. A marked rise in the number of women can be seen in the March data compared with February. This is the first manifestation of growth in the number of war refugees in the domestic statistics. Almost half of the Ukrainians do not need a permit to work in the Czech Republic,[1] while the rest apply for an employee card (a long-term residence and work permit) or a work permit (a permit to work for a maximum of two years). So far, there have been almost no blue cards, that is, cards issued to foreigners who provide evidence of high skills (at least a three-year university education), among the permits granted to Ukrainians.
Chart 1 – Almost half of the Ukrainians registered as job seekers at labour offices do not need a permit to work in the Czech Republic
total number and type of work permits; source MLSA
Up to now, Ukrainians in the Czech Republic have mostly been doing less skilled, physically demanding work (see Chart 2). Half of them work as machine operators or in other blue-collar jobs. Around a quarter of the Ukrainians working in the Czech Republic are scattered across a wide range of occupations, some of which are more skilled; this is reflected in a higher-than-average wage in this group. The occupation and skills range of Ukrainian workers and the correspondingly lower wage levels in the positions they hold mean that they earn a lower wage on average compared with other nationals (see Chart 3) and the Czech average.
Chart 2 – Workers from Ukraine mostly hold less skilled and lower-paid positions in the Czech Republic
shares of occupation categories in Ukrainians’ employment in % and Ukrainians’ earnings; data for 2021; source AEIS (MLSA)
Chart 3 – Ukrainians in the Czech Republic earn less on average than workers from other countries and Czechs, as they work in lower-paid occupations
average wage in Czech Republic by citizenship; data for 2021; source AEIS (MLSA)
The labour market situation will change somewhat (and not just for Ukrainians) with the arrival of war refugees.[2] This is due to the different structure of the newcomers compared with the Ukrainians already registered at labour offices (see Chart 4). The new Ukrainian immigrants are mostly women (66%). Almost two-thirds of the newcomers are of working age (15–64 years old) and thus represent a potential labour force. The preponderance of women in this age group is even stronger, with men accounting for only a quarter. Even so, the current arrivals of men from Ukraine are hypothetically increasing the labour force in the Czech Republic by around 1% in absolute terms.
Chart 4 – The structure of the Ukrainian refugees is dominated by women due to the war
absolute numbers as of 29 April 2022; source Czech Ministry of Interior
The Ukrainian newcomers are likely to initially seek similar jobs as their compatriots already registered here. However, given the newcomers’ different skills structure, the average skills level of the Ukrainians integrated into the Czech labour market, and hence their average wage, should gradually increase. As mentioned above, the skills range of Ukrainians is broad. It is reasonable to assume that if Ukrainians held the same mix of positions as those which are available on average in the Czech Republic, their wages would be very similar to those of Czech workers. The effect on the average wage would be almost negligible, as a comparison of the average wages in these positions[3] reveals that Ukrainian workers’ wages are not systematically over- or underestimated on the Czech labour market (see Chart 5). The average difference in the wages of Czechs and Ukrainians in a particular position (across all positions) is less than 4%, which is on the border of statistical error.
Chart 5 – Wages in occupations held by Ukrainian workers are not systematically under- or overestimated
average difference in wages of Ukrainian workers in individual positions in Czech Republic compared to Czech average; in %; each horizontal column represents group of positions in given CZ-ISCO category; positions at same skills level are indicated in same colour; data for 2021; source AEIS (MLSA)
Note: Highly skilled positions (CZ-ISCO 1 and 2) include, for example, corporate CEOs and IT specialists. CZ-ISCO 3 and 4 positions include, for example, experts and officials. CZ-ISCO 5–7 groups include, for example, craft workers, metal workers, sales workers and care workers. CZ-ISCO 8 and 9 groups include assemblers, drivers, stationary plant operators and persons employed in elementary occupations.
Even so, the arrival of large numbers of Ukrainians in the Czech Republic will affect the wage statistics. First, it can be expected (for the above reasons) to have a pure composition effect, as Ukrainians will, at least initially, probably take positions at the lower end of the wage spectrum. Higher labour supply in the Czech Republic, and hence higher competition on the labour market and downward pressure on the currently high labour market tightness, will also have a downward effect on future wage growth.[4] The Labour Force Survey (LFS) statistics are likely to undergo significant changes. These will stem from a marked increase in the total labour force and gradually also in the number of persons employed, and also from the assumption that Ukrainians will find it more difficult than Czechs to find jobs and will thus raise total unemployment (more than proportionately). However, the nature of the survey[5] implies relatively high uncertainty regarding the capture of the effect of Ukrainian workers.
[1] Foreigners do not need a work permit if, for example, they have permanent residence in the Czech Republic, have been posted in the Czech Republic by an employer under a long-term contract or have graduated from a secondary school, a post-secondary technical school or a university here (see, for example, an overview of rules at the website of the Association for Integration and Migration (external link)).
[2] The increases in refugees gradually declined from an initial more than 10,000 a day after the outbreak of the war, stabilising at 2,000–3,000 a day in early April. The CNB’s forecast expects a total of 300,000 immigrants to have relocated from Ukraine to the Czech Republic by 2022 Q3 in the current refugee wave, about half of whom will enter the labour market. It does not expect the refugees to leave before the end of the forecast horizon (i.e. before the end of 2023).
[3] The occupations are aggregated using the CZ-ISCO classification.
[4] However, the effect of direct competition will be lower because of the large number of job vacancies in the Czech Republic. Initially, therefore, it is likely that only a small proportion of the newcomers will act as competition. After they overcome the initial barriers (language, administration, accommodation, etc.), Ukrainians will probably compete at all skills levels.
[5] The LFS is conducted in the form of interviews in households and at other accommodation facilities. The frequency of contact with foreign respondents is much lower than that with Czech ones.