Coronavirus crisis expected to raise unemployment rate by 5%, says Czech Labor Ministry

The Czech Labor and Social Affairs Ministry expects a rise in the jobless rate by up to 5 percent due to the current coronavirus crisis

ČTK

Written by ČTK
Published on 01.04.2020 15:53 (updated on 01.04.2020)

Prague, April 1 (CTK) – The Czech Labour and Social Affairs Ministry expects a rise in the jobless rate by up to 5 percent due to the current coronavirus crisis, the office said in its report on the shortened working time (Kurzarbeit) today.

The economic impact will depend on how many people will be really without work and for how long.

The six-month increase in the jobless rate by 5 percent would cost the state budget 44 billion crowns in the form of falling taxes and compulsory payment and rising unemployment benefits.

The ongoing development indicates that the coronavirus crisis will have at least the same impact on the economy as the previous depression from 2008 and 2009.

“The causes are stronger, coming faster. At the same time, they might only have a short-time impact, while different branches will be hit,” the ministry said.

People have started to be registered at job offices as unemployed.

Last week, Labour and Social Affairs Minister Jana Malacova (Social Democrats, CSSD) told CTK that on March 25 alone, 2,790 people were registered as unemployed.

Compared with the previous day, it was roughly 1,000 more. In the past days, she repeatedly said that there no major fluctuations in the monthly average data.

However, trade unions have seen the cases of the companies that are planning mass sackings.

At the end of February, job offices registered 227,400 job seekers. The overall jobless rate was 3 percent.

The job office will release the data for March on April 8. At the end of 2010, the jobless rate was close to 10 percent, with 561,500 Czechs without employment.

“One can expect unemployment to rise by at least 5 percent and the associated impact on the budget depending on the duration of the negative shock,” the ministry said.

If the jobless rate rises by 1 percent in one month, the state will have to pay out 0.9 billion crowns as unemployment benefits. It will lose 0.8 billion in taxes. In all, this will be 1.7 billion.

If this lasts three months, the overall sum will be 4.8 billion, if six months 8.8 billion and if one year 13.6 billion.

If the jobless rate increases by 5 percent, the budget will lose 8.5 billion in a month. Three months would mean a loss of 24 billion, six months of 44 billion and one year 68 billion crowns.

The Antivirus With Kurzarbeit programme is to prevent sacking. Job offices will be paying two types of contributions to the companies that will be hit by the limitations passed against the epidemic.

They will be paying them for the period between March 12 and end of April. The estimated expenditures for March amount to 10.9 billion.