Competitive Wage Costs
Employers in Western Europe looking to save on wage costs are increasingly relocating operations to eastern Europe, Asia and Latin America.
In Western Europe itself, there are significant differences in gross median weekly pay between the principal states. The countries with the highest gross pay levels are Denmark, Switzerland, Norway, Liechtenstein, Germany and Luxembourg. At the bottom of the pay league in the established EU states are Spain, Greece and Portugal. In fact, Portugal’s median weekly earnings are just 33% of those in Germany.
Pay in the EU’s eastern European member states* is generally much lower than in Western Europe, with the highest rates being approximately 46% of those paid in Germany. Social security charges are generally higher than in Western Europe, but corporate taxation is usually low enough to offset such costs.
Median gross weekly private sector earnings: Eastern Europe *
(February 2010)
| Country | Weekly pay in euros † | Index: Germany = 100 |
| Bulgaria | 46 | 7 |
| Croatia | 205 | 30 |
| Czech Republic | 199 | 29 |
| Estonia | 142 | 21 |
| Hungary | 114 | 17 |
| Latvia | 120 | 18 |
| Lithuania | 98 | 14 |
| Poland | 144 | 21 |
| Romania | 106 | 16 |
| Slovakia | 232 | 34 |
| Slovenia | 312 | 46 |
Source: FedEE, Pay in Europe 2010 **
Pay levels in many of the EU’s global competitor countries are much lower than even in Bulgaria, Latvia and Romania. Both India and China are rapidly growing production and IT service centres, whilst Russia is attracting considerable inward investment because it combines a huge internal market for goods and services with very low wage costs. Even though pay levels are low in Spain and Portugal compared with the rest of western Europe, many companies in both countries are taking advantage of linguistic and cultural ties with South America to outsource production and call centre operations.
Median gross weekly private sector earnings: alternative production centres
(February 2010)
| Country | Weekly pay in euros † | Index: Germany = 100 |
| China | 66 | 10 |
| Brazil (Rio de Janeiro) | 170 | 25 |
| Mexico | 87 | 13 |
| Russian Federation | 87 | 11 |
| South Korea (Republic of) | 327 | 48 |
Source: National statistical offices and economic agencies
Notes:
† Gross median (pre-tax) pay expressed in euros, based on a five-day week of 40 hours. All figures rounded to nearest euro.
* Eastern Europe has been taken to include eight of the central and eastern European states that joined the European Union on May 1st 2004, plus Bulgaria and Romania (EU members since January 1st 2007), and the EU candidate country, Croatia