Lack of people is stifling the Czech economy. Let’s use migration to our advantage.

PPCE - 2022/01/10


In addition to the shortage of raw materials and parts, a barrier to the growth of the Czech economy is the shortage of specialists in engineering, electrical engineering and IT. The proportion of unemployed persons in December 2021 was 3.5% and the unemployment rate is one of the lowest in the EU. Employers offered 343 148 jobs. The Czech education sector is not producing enough highly skilled labour to satisfy the market, and Czech industry is also stagnating unnecessarily (under increasing robotization). Therefore, the new government should address as soon as possible how to make the Czech Republic more attractive to foreign workers. Both the highly and the less skilled.

At the same time, it must make the relocation process more attractive for Czech companies so that it is transparent and prompt, because companies need to get foreign employees to the Czech Republic within a maximum of 2-3 months. Another related task for the new government should be to make the Czech immigration system more efficient so that we do not fall behind our competitors in the global war for talent and are able to use migration to our advantage.

The system needs to be digitised and made more flexible

We are at the tail end of the EU in terms of the complexity of the immigration process and its duration. The system undoubtedly needs digitisation and streamlining. At present, a potential applicant for residence, or his employer, has to navigate through a complex jungle of opaque regulations, conflicting information from different authorities between which the process is fragmented, internal (non-public) immigration authority methodologies, restrictions, regulations and prohibitions. If the applicant is not exactly Indiana Jones, it can take up to a year to get through the Czech immigration jungle and it is certainly not “without losing a flower”. If a company, or even a foreigner, hires a seasoned Indiana Jones, even the best one cannot guide the applicant through the journey in less than 3 months. Usually, we’re talking 3-6 months.

For now, our economy is still oriented towards industry, which primarily needs blue-collar jobs. We can partially replace less skilled professions within the economy by switching employees between industries, but the Czechs don’t want that kind of work anymore, so companies are desperate for workers.

Journey from the assembly plant of Europe

Industry and business leaders are calling for a transformation of the economy. We should become producers of final products and innovations, in short, of higher added value, and move away from the role of subcontractors at the beginning or somewhere in the middle of the supply chain, whose added value is bitten off by the final producer and innovator.

This will require the highly skilled professionals that all (and especially developed) countries in the world are fighting for today. It is clear that even with massive support for education, we will not be able to train such experts fast enough and will therefore have to import them from abroad. And that is good, because they bring with them a unique know-how that stays here.

The development of the number of economically active foreigners is closely linked to economic cycles

In times of crisis, when labour supply exceeds labour demand and unemployment increases, there is no need to import labour, as this is always a more expensive and less comfortable form of employment for companies than employing “nationals”.

Since the crisis year of 2009, the number of foreigners decreased until 2011, then stagnated, and a further increase occurred only in 2015, when the global and also the Czech economy recovered. Since 2015, we have experienced sustained economic growth and record low unemployment, recently even around the natural rate of unemployment, forcing businesses to look abroad for labour.

The COVID-19 pandemic has brought only a slight and short-term slowdown in economic growth (not a slump, unlike the 2009 crisis), which is reflected in the growth in the number of foreigners employed in the Czech Republic. According to CSO 2020 data, the number of foreigners employed in the Czech Republic reached 741,967 at the end of the year. Thus, foreigners accounted for 14.2% of total employment in the national economy. They are mostly employed in the manufacturing industry.

The Czech Republic is becoming a technological superpower

Global technology players are setting up their branches, research and development centres and regional headquarters in the Czech Republic. In the last two years alone, we have seen the entry of several successful and innovative start-ups from Silicon Valley into the Czech market – companies such as Pure Storage, Medallia, Outreach, SentinelOne, to name but a few. They are ranked alongside technology giants such as Microsoft, SAP, Broadcom and IBM, who have been building their presence here for many years, if not decades.

At the same time, purely Czech technology start-ups are emerging here, which have global potential, such as the already internationally established companies Avast, Y-Soft or Průša Research. Their common denominator is the hunger for highly qualified scientists. Thanks to this, the proportion of highly qualified employees from third countries is growing.

We need foreigners even in times of economic crisis

In the pre-crisis year of 2008, approximately 8% of the Czech market was made up of highly skilled foreigners, whereas by 2020 this proportion will have almost doubled to 15% of total migration. Interestingly, we still need such foreigners even in times of economic crisis – in 2011, when the number of foreigners from third countries reached its minimum after the crisis in 2009, the ratio of the highly skilled to the less skilled reached 21% in relative terms.

Just thicker and bigger drops

The new government will need to address the support of education (and especially higher education) to be able to produce new professionals. And encourage the creation of other strategic partnerships, such as the collaboration between the Centre for Aerospace Research at the Faculty of Mechanical Engineering of the Czech Technical University and GE Aviation Czech to develop a new turboprop engine or test sustainable fuels. This is the way to take our education to the next level.

About the author:

Miroslav Mejtský, labour migration and relocation services expert at Petyovský & Partners