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When will low labour cost in Central and Eastern Europe loose their attractiveness?



Today, total employers cost for a semi skilled worker or a skilled worker are favourable in Central and Eastern Europe. In a recent location study Buck Consultants International compared the total employers cost based on a 40 hour work week (including gross salary, all mandatory add-ups and all benefits - common in those labor markets) for selected regions in Germany, Poland and Romania. The costs for a semi skilled worker were: 6,000 Euro in Romania, 9,000 Euro in Poland and 37,000 Euro in Western Germany. The figures for a skilled worker were: 8,000 Euro in Romania, 13,000 Euro in Poland and 45,000 Euro in Western Germany.

Salary wage increases
One of the big questions is whether these differences will disappear and if so, how fast? The table below shows that between 2001 en 2010 the annual growth of the total employers cost in Poland was approximately 4 times higher than in Germany and in Romania even 5-9 times.


But in these 10 years the annual growth steadily decreased, especially in Romania. Furthermore, the difference in annual increase between Poland and Romania also decreased significantly. After 2010 the impact of the economic crisis is very visible: the annual increase of labor costs continued to decline in Poland and Romania, although both are still higher than in Germany. If we take the 2012 figures for the next 10 years, Polish and Romanian labour costs are in 2022 still less than one third of the German ones.

Germany
Our expectation that the gap between labour costs does not close as quickly as some people say is also based on the development of the labour costs in Germany. In 1992 the Eastern Germany labour costs were 53% of the Western German labour costs. Twenty years later, in 2012, the difference is still 39%, despite substantial investments in former East Germany by former West Germany and the one-for-one German Mark conversion ratio policy. In that whole period the gap narrowed ‘only’ with less than 30%.

More information:
Mathijs Pronk: telephone: +31-70-3352227, mathijs.pronk@bciglobal.com

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