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Skoda Auto wage talks may lead to unprecedented demands elsewhere

In culminating tough wage talks at a flagship of the Czech industry, Volkswagen-owned Skoda Auto made a final offer that would altogether increase an average blue-collar salary by 13% this and next year, reports said Wednesday. 

According to Skoda Auto's personnel director Martin Jahn, the offer reached the carmaker's limits and further rises would impair its expansion plans. The trade union, whose initial demands would increase average wages on the whole by staggering 24%, said its leadership will decide on the final offer on Thursday and postponed a potential strike to Tuesday. Union leader Jaroslav Povsik said the new offer would be sufficient for the rest of this year but not for 2008, Czech Television reported.

As Czech wages have annually grown by a much lower 6%, analysts warn that a Skoda Auto double-digit rise could embolden union negotiators elsewhere to demand unprecedented pay hikes that could in turn lead to slower economic growth, lower exports and higher inflation and unemployment. „A double-digit growth does not correspond with the situation in the economy,” said Next Finance analyst Marketa Sichtarova, adding „it would be a precedent for the whole economy.” According to Sichtarova, an annual wage growth above 7% is unhealthy for the Czech economy.

„It could spill over across other sectors. Not only within the automotive industry,” said Raiffeisenbank analyst Ales Michl. Steep wage growth could discourage some foreign investors from expanding their production in the Czech Republic. „It is difficult to pack up and move an automaker, but it is easier to pack up a plant producing computers or flat-screen TVs and move it elsewhere,” Michl said. At 22.057 koruny (€816, $1095), Skoda workers earn on average the highest salaries within the Czech automotive industry but about a quarter of what their Western counterparts make. According to Michl, the Czech wages have been catching up „at a very nice pace.” „We are getting closer but it is impossible to jump,” he said. (