Czech wages driven up as multinationals snap up available workers

By bne IntelliNews December 19, 2007

Beth Potter in Prague -

IBM Czech Republic has been on a hiring spree for the last two years, adding an average of 100 new people per month at its Brno complex. Now at 2,400 workers strong, IBM is one of the most prominent "gorillas" in an elite tribe of four or five 800-pound companies quietly snapping up every single available worker with computer and language skills in the region. Inevitably, this is creating shortages for smaller firms and driving up wages.

Pietro Andrea Podda, an economic researcher in the Czech Republic affiliated with Manchester Metropolitan University Business School, points out that such growth has been driving up wages in recent months and making it less attractive for multinationals to locate here. Average monthly wages rose to Kč23,000 (€757) from about Kč20,000 in October, according to information compiled by the Czech Statistical Office. "Look at companies like Accenture and DHL," Podda says. "It's not just in IT."

For anti-virus software start-up Grisoftl, however, it was only about IT and the shortage of skilled IT workers. In 2007, the company tried and failed to find 40 new workers to open a technical support center in September, says spokeswoman Kamila Pavlištová. Instead, Grisoft was forced to turn to Bulgaria to grow. The company now plans to hire another 40 workers in coming months in the Sofia office. It has 80 workers in an office in the Czech town of Brno that it opened in 2000.

The Czech Republic has "a long-term shortage of educated IT specialists," Larry Bridwell, the company's global security strategist, said in a statement.

And even though IBM insists it's not looking specifically for graduates with IT skills, it's now calling on five universities around the region to provide students with sets of skills, says Ales Bartunek, the IBM general manager. If recent college grads don't have those necessary skills, Bartunek says the continued competition for qualified workers "in all of Central Europe" could start to be a problem soon.

IBM Czech Republic workers handle various service-related computer jobs - workers from 70 different countries now are "sustaining the growth," he says. "If you're going to be successful in the Czech Republic or not depends on if we have balance enough to make it work," Bartunek says. "Do we have as good of relationships with universities as we can? We need to be facilitators between the academic world and the business world."

IBM has already started contributing curricula to the universities to teach to students, especially about service industry skills, says Vladimira Pavlekova, a spokeswoman for IBM.

And it has hedged its bets in recent years by opening related offices in Bucharest, Budapest, Krakow, St Petersburg and Sofia. When the Brno office opened in 2001, it was seen as a better match than places like China and India in terms of providing workers with good skills and low labor costs, but the country's political stability and its central location also played a huge role in the decision. "Our customers worldwide also appreciate the cultural match," Bartunek says.

Other industries are also looking for ways to add more workers to the pipeline, including car maker Å koda Auto. The manufacturer is in the preliminary stages of lobbying the government to start a "guest worker" programme, says Radek Å picar, external affairs director.

Dutch firm SEO predicts that the Czech Republic will be short 1.5m workers by 2050. If that's the case, it would be the worst labour shortage of all the countries in the EU. But regardless of whether those dire predictions come to pass, the shortage definitely puts any hard-working young person in the driver's seat to their future.

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Czech wages driven up as multinationals snap up available workers

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