How has the price of labour changed since 2004?

Since 2004, 13 new Member States (including Slovakia) have joined the European Union. During this time, many significant investments have been made in these countries, largely due to the low cost of labour. But how has the situation changed during our EU membership? Are the new Member States still attractive to investors?

We measure the cost of labour on the basis of the indicator“Average hourly labour cost“. Includes the total cost of the work for the employer (wages + tax + levies). The table below shows how the price of labour in the new EU Member States has changed between 2004 and 2016.

It is clear from the data in the table that the price of labour has risen in all countries. However, growth rates have varied considerably.

Which countries are becoming less attractive to investors in terms of labour costs? First of all, both Slovakia and Estonia. These two countries have seen the highest labour price increases since 2004. With a growth of over 150%, they outpaced even the more important European economies such as Poland, the Czech Republic and Hungary (in these countries the price of labour increased by 40-80%).

Which countries are interesting for investors? In terms of labour costs, certainly Bulgaria and Romania. Although employers’ labour costs in these countries have risen by more than 170%, the cost of labour in these countries is still about 50% lower than in Slovakia. Therefore, we expect that the highest inflows of significant investments in the coming years can be expected in Bulgaria and Romania.

We should note that the price of labour is a very important, but not the only, factor in investors’ decisions about where to direct their investments. They also take into account the state of infrastructure, the political situation, demographic developments and many other factors when making decisions.