Shortage of skilled staff is a reason of concern for Central and East European companies
The EU’s successive waves of eastward enlargement have also opened the community labour market for citizens of Central and East European countries. In 2004, as many as eight former communist countries joined the Union. Romania and Bulgaria followed suit in 2007, with Croatia being the last to join the community bloc in 2013. In search of safer and better-paid jobs, millions of Poles, Romanians, Hungarians and Bulgarians are working and paying taxes throughout the continent, from Sweden to Portugal and from Austria to Ireland.
Their migration was a relief for their home countries, which no longer had to pay unemployment benefits to the numerous victims of the economic transition from a largely bankrupt centralised economy to capitalism, with its sometimes wild and unscrupulous facets. As a result, at present the labour market in Central and Eastern Europe continues to improve, with unemployment rates plummeting to the lowest level ever, although still above the EU average, a survey made by the well known consultancy firm Coface shows.
Macroeconomic data show that over the past few years salaries have increased and inflation dropped, making household-generated consumption the main driver of economic growth. For instance, as of 2010, gross salaries have increased by over 30% in Romania and Bulgaria and by over 20% in Hungary and Poland, respectively, the survey reveals.
Coface also notes that, in exchange, companies have been facing more difficult times, with increasingly demanding employees cautiously negotiating the level of salaries, and thus forcing them to accept higher labour costs. The low birth rate and the migration to Western Europe have also contributed to a workforce deficit, raising a barrier to business expansion. Even the companies that pay higher salaries are facing employment difficulties. Pay rises are currently exceeding work productivity gains, but regional labour costs are still three times lower on average than in the West.
This disparity, which is a trump card for Central and Eastern Europe in terms of unit labour costs (the average cost of labour per unit of output produced) alongside the geographical and cultural proximity to the West, should bring significant competitive advantages to the region. However, these benefits might get compromised on medium term, if the migration of skilled young people continues, Coface warns in its survey. The labour force deficit might be reduced by encouraging migrants to return to their countries of origin, but this is rather unlikely. That’s why Coface recommends to the governments in the region to encourage the labour inclusion of ethnic communities, women and elderly people and to boost professional training.
(Translated by: Diana Vijeu)