New Front Opens in Campaign to Raise Wages as Czechs Press Ahold

  • Premier Sobotka singles out retailer as it wrangles with union
  • Czech hourly earnings in 2015 were less than half EU’s average

Czech Prime Minister Bohuslav Sobotka opened a new front in his campaign for higher wages in the central European nation, putting pressure on a Dutch food retailer that’s wrangling with local unions over salary increases.

Sobotka, whose Social Democrats are fighting a plunge in popularity before a general election next year, told Dutch Ambassador Eduard Hoeks to inform his government and the management of Royal Ahold Delhaize NV about workers’ earnings at outlets run by the retailer, which owns the Albert grocery chain in the Czech Republic. In doing so, the prime minister threw his weight behind unions demanding Ahold raise salaries that worker representatives say average about 12,500 koruna ($489) a month.

“Ahold and other international companies generate big turnover and profits in the Czech Republic and pay out big dividends to their owners,” Sobotka said Monday, according to the state-run CTK news service. “But a very small amount of money is left here for our employees.”

Rising wages across the European Union’s former communist east aren’t stopping governments in the region from trying to wrest additional benefits for workers as slowing economies risk delaying efforts to catch up with the richer West.

Hungary, Romania

Hungary is planning to cut the corporate tax to 9 percent in January to give employers, including foreign car manufacturers, more room to pay people. Romanian lawmakers approved a 15 percent increase for school and health-care workers this month, with Social Democratic leader Liviu Dragnea saying it was targeted at stopping doctors and teachers from leaving the country for more pay.

Sobotka’s appeal is the latest push to raise earnings as the country of 10.7 million people tries to close the disparity in living standards with its western neighbors. As governments in other eastern EU countries impose special taxes on banks and retailers, Sobotka suggested this month that foreign-owned companies are taking too much out of the economy in the form of dividends.

The comments were a rare case of a Czech government official questioning the model in which companies owned by mainly western European parents have driven the economy in the last two decades while repatriating profits abroad.

Sobotka’s Social Democrats trail the ANO party of his billionaire finance minister, Andrej Babis, by a large margin in opinion polls. While they’re partners in the ruling coalition, the two leaders have clashed over a number of economic issues, with Babis saying he’s aiming to cut waste and graft while fending off proposals by Sobotka to boost corporate taxes.

Czech labor costs were an average of 9.90 euros ($10.5) an hour in 2015, compared with 25 euros in the EU and 32 euros in neighboring Germany, according to Eurostat. By comparison, Czech gross domestic product per capita, adjusted for prices, is 85 percent of the EU average.

At Loggerheads

Ahold, which employs more than 17,500 workers at more than 300 stores in the Czech Republic, said last week it had proposed an 8.5 percent pay raise for workers at its shops from January, with a further increase of 7 percent, on average, for 2018, according to a statement on its website. The retailer didn’t immediately comment on Sobotka’s statement.

Its shares dropped, trading 2.4 percent lower in Amsterdam at 3:07 p.m. on Monday.

The Zaandam, Netherlands-based company said it had sent the proposal in writing because union representatives had refused to meet management. It has also invited Sobotka to show him “a full picture of the situation, including concrete numbers and plans,” according to a Nov. 22 statement on its website.

“There has only been a written exchange of documents and an informal meeting,” Ahold said last week in a statement. “Instead of negotiating, the unions have decided to publicly escalate the situation, which until now has prevented -- or stopped -- constructive dialog for some time.”

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