Bloomberg: Eastern Europe’s workers must match high wages with skill

Wages in Eastern European countries such as Poland, the Czech Republic and Romania are increasing, making foreign and even local companies look elsewhere for even cheaper labour, Bloomberg said in an analysis.

In these countries, governments are starting to see the limits of an economic model based on attracting western foreign investors with lower-paid labour. As wages rise and unemployment drops in some of Eastern Europe’s biggest countries, they must invest more in research and education. Moreover, they face the prospect of seeing both local and foreign investors look for cheaper labour force even further east.

“Changing your economic model is easier said than done,” said David Marek, the chief economist at Deloitte in Prague, quoted by Bloomberg. “East Europe’s economies can’t get out of the trap of being the West’s ‘assembly line’ until they start properly investing in research and development,” he added.

In a turnaround from the 1990s, Bloomberg notes, when the collapse of communism attracted private western European and US companies that were keen to take advantage of the low wages and later tariff-free access to the European Union.