Czech police get pay raise as labour market tightens, election nears

PRAGUE (Reuters) — Czech police, firefighters and other security workers will get a 10 per cent pay hike in July, the finance and interior ministers agreed on Thursday, the latest sign of accelerating wages in Europe's tightest labour market.

The Czech Republic has the European Union's lowest unemployment while worker pay is becoming an issue before a parliamentary election in October.

Wage growth and its impact on demand and inflation are among factors followed by the central bank which is preparing to end its ultra-loose monetary policy in the coming months.

The centre-left government used a budget surplus last year, the first in two decades, to raise wages for medical workers and teachers. The prime minister has also pushed a foreign retail chain to raise wages for its workers. Bus drivers have threatened to strike unless they receive pay hikes as well.

The average gross monthly wage for a police officer in 2015 was 34,031 crowns ($1,324), according to the police website. The national average gross wage reached 27,220 crowns in the third quarter of last year, up 4.5 per cent from a year ago.

But starting wages are lower, making it harder to recruit new officers, especially when some job openings for warehouse positions are advertised with higher salaries.

Finance Minister Andrej Babis and Interior Minister Milan Chovanec said the wage hike would cost 1.6 billion crowns, CTK news agency reported.

The raise would be across the board for the police force, which totals 40,000 workers, CTK said.

Czech wages are at the lower end of the EU spectrum. The statistics office in December presented comparative data from 2014 showing pay was 37 percent of the EU average.

Czech unemployment, according to Eurostat, fell to 3.4 per cent in January, below that of economic powerhouse Germany.

The tight labour market is putting pressure on firms to raise wages. This is filtering into inflation, which returned to the Czech central bank's two per cent target in December, adding to signs the bank may soon end a cap on the crown currency it put in place in 2013 to fight deflation risks.

($1 = 25.6950 Czech crowns)