- Title: End of economic era in Europe's 'cheap' ex-communist East
- Date: 19th July 2017
- Summary: BRATISLAVA, SLOVAKIA (RECENT - JUNE 29, 2017) (REUTERS) (SOUNDBITE) (Slovak) VW TRADE UNION LEADER, ZOROSLAV SMOLINSKY, SAYING: "(In the past) we could live on it, on these 2.700 Czechoslovak Crowns (103.70 euros), but then we had to. This is maybe the advantage of Czechs and Slovaks, that they are being used to live on very little money. But I think, both countries are in the EU now and we have to keep up with trends and gradually close the gap." CARS PARKING IN FRONT OF THE VW FACTORY VW MAIN GATE (SOUNDBITE) (Slovak) DEPUTY HEAD OF VW TRADE UNION, JOLANA JULKEOVA, SAYING: "This is really a great problem in Slovakia, and not only here in Volkswagen, to get a skilled manpower. We receive several hundreds of workers every month, but they are leaving soon."
- Embargoed: 2nd August 2017 11:03
- Keywords: Slovakia VW plant higher wages end of Europe's "cheap" ex-communist east
- Location: BRATISLAVA, SLOVAKIA
- City: BRATISLAVA, SLOVAKIA
- Country: Slovakia
- Topics: Economic Events
- Reuters ID: LVA0036QDUMUX
- Aspect Ratio: 16:9
- Story Text: Zoroslav Smolinsky was 22 years old when he joined the production line at a car plant in his native Bratislava that had just been bought by Volkswagen.
It was 1992 and the German auto giant was one of a hoard of big Western manufacturers beating a path to Central and Eastern Europe after the fall of communism in search of cheap labour.
Smolinsky was paid 2,700 crowns per month before tax, the equivalent of roughly 75 euros. "We could live on it," he said. "We had to."
It marked the birth of an economic model that transformed Slovakia, the Czech Republic, Poland and Hungary, now all members of the European Union and NATO.
Slovakia is now the world's top car maker per capita, producing more than a million cars every year.
But a quarter of a century later, the labour market is running dry, with unemployment levels at record lows across the region.
That has driven up wages, and today Volkswagen's 12,300 employees in Bratislava earn an average of 1,804 euros per month before tax, double the Slovak average. That, however, remains less than half the average Volkswagen pay packet in Germany, and Smolinsky says the disparity can no longer be justified.
Now a 48-year-old union leader with salt-and-pepper stubble, Smolinsky last month engineered the first strike at a major Slovak car plant since the end of communism, and in doing so posed a question with ramifications far beyond the factory gates: Is the cheap-labour model behind the transformation of Europe's ex-communist East coming to an end? And if so, what will replace it?
"Times have changed," he told Reuters. "We're in the EU and have to keep up with trends and gradually close the gap."
The Bratislava strike - resolved with a 14.1 percent wage hike phased over more than two years - is part of a trend across the region, fuelled by record low unemployment that has emboldened workers and their governments to press for greater parity with Western Europe.
Emigration and ageing populations will further tighten the labour market, meaning more pressure on wages.
It is a trend, say company bosses, policymakers and analysts, that will push firms to improve productivity in order to justify costs, encourage governments to support innovation and skilled industries and, in the long-term, send firms further afield in search of cheaper labour.
Wage disparity is at the heart of a perception among Poles, Slovaks, Czechs and Hungarians that they are seen by Western Europe as second-class Europeans, reinforced by reports they are being sold lower-quality brand foods and by talk in Brussels of a two-tier EU that would leave them firmly on the lower rung.
Politicians in the region have seized on such grievances to pursue nationalist and authoritarian policies, and have taken up the call for better pay.
Slovak Prime Minister Robert Fico backed the Volkswagen strikers, while in the Czech Republic the ruling Social Democrats have erected billboards ahead of an October election declaring "The End of Cheap Labour".
- Copyright Holder: REUTERS
- Copyright Notice: (c) Copyright Thomson Reuters 2017. Open For Restrictions - http://about.reuters.com/fulllegal.asp
- Usage Terms/Restrictions: None