The Skoda effect

The public doesn't have enough data to determine whether Škoda Auto's management or the unions were the winners in yesterday's wage agreement. Analysts will have us believe, though, that the clear loser is the Czech economy as a whole, because of the risk of a wage and inflation spiral as workers elsewhere seek to emulate Škoda's unions. Škoda is an exceptionally successful company. It netted Kč 11bn last year and managed to keep wages at 7-8% of total costs, according to Supervisory Board Chair Vratislav Kulhánek. Analysts wanting to dampen wage demands at other companies should develop an algorithm that allows workers to compare their company's success to Škoda's. It could take into account such things as labor productivity, revenue growth and return on investment. Without some hard numbers, the debate over the Škoda effect will be populistic on both sides. [Czech Republic collective bargaining]