June 7, 2013

Will Eastern Europe provide lower labour costs than China?

We compared Central and Eastern European labor costs to a leading manufacturing location in China, Shenzen. The result is surprising.

In 2011, the Eastern part of European Union provided 116% (Bulgaria) to 487% (Prague) of Shenzen labor costs. We think, it's quite comparable. And the top of all that: labor costs in Shenzen doubled from 2010 to 2011 (wage inflation was 'only' 62% in Shanghai from 2010 to 2011). 
We have no statistics about 2012 or 2013 labor rates in China, we leave it to your imagination...

CEE regional average labor costs in the % of Shenzen labor costs, 2011
Bulgaria: 116%, Romania: 167-197%, Hungary (without Budapest): 210-244%, Poland: 242-285%, Slovakia (without Bratislava): 245-298%, Czech Republic (without Prague): 315-372%, Budapest: 320%, Bratislava: 414%, Prague: 487%
Graphics: Manufacturing Hungary Blog

In absolute terms, average monthly labor cost in Shenzen in 2011 was 513 USD or 369 EUR (and 257 USD in 2010). Average monthly labor cost in Bulgaria was 431 EUR in 2011, 775-900 EUR in Hungary (without Budapest), 905-1529 EUR in Slovakia and 1800 EUR in Prague, Czech Republic.

Average monthly labor costs (cost ranges) by locations. 
Bud= Budapest, Bts = Bratislava, Prg = Prague
Graphics: Manufacturing Hungary Blog

Sources: labor rates - China, Bulgaria, Romania, Hungary, Slovakia, Poland, Czech Republic
Yearly average exchange rates; taxes and social security rates

The word you are looking for: nearshoring!

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