Across the world, the words Made in Slovakia are obtaining recognition for their increasing levels of quality from a comparatively affordable workforce. With a glowing reputation coupled with low wages, Slovakia finds itself at an advantage compared to manufacturers in many other western countries, according to Michal Valentík, an investment strategist at Generali PPF Invest. “Maybe you didn’t know it, but the average wage in the manufacturing sector in China is over €400 per month”, adds Valentík.
This has created a new global phenomenon whereby large international companies are now thinking twice about moving manufacturing to China, with the numbers of U.S. companies moving their production facilities back to the United States doubling over the past year and a half, according to CNN Money. “With standards of living in China rising, so too are their demands for increased wages. Production in China will therefore become less profitable”, adds Next Finance analyst Jiri Cihlar.
American economist and professor John Pickles argues that another competitive advantage of countries with educated and skilled workers is the higher quality of its products. Slovakia competes well in this respect, coupled with significantly lower labour costs compared to western countries. Because of this, last year 2179 foreign enterprises were established in Slovakia. “Of these 286 were from individuals, and the rest were legal entities”, stated Marián Jánošík, a spokesman for the Statistics Office. In the last eleven months of 2013, such firms invested nearly one billion euro in Slovakia, with the state attracting some investors by providing tax holidays.
Despite its low wages, Slovakia is still not the cheapest option in Europe for international companies seeking cheap labour. “We have lost our competitiveness in regards to production-oriented labour costs. Today we face a pretty serious problem: how to employ people without education”, says Juraj Borgula, vice president of the Association of Engineering Industry of Slovakia. In Slovakia the minimum monthly wage is €352 euro. For comparison, in Bulgaria the minimum wage after conversion to the single European currency is just €191.
“We cannot try to compete with global labour costs because 80 percent earn less than Slovaks [globally]”, adds the Chairman of the KOVO trade union Emil Machyna, adding that, “We must therefore focus on working with higher added value by investing in research and education”.
