Plant manager Gabor Kiraly remembers the meeting a couple of years ago when he and his Austrian bosses learnt how severe the worker shortage in Hungary was about to become – it was, he said, a “shocking realization”. The unemployment rate in the western Hungarian town of Papa, where Hirtenberger Automotive Safety employs 725 people making products such as seat belt pre-tensioners, was approaching virtually zero. High turnover was already a big problem.
Enter the robots. Hirtenberger has since spent 2.5 million euros automating two production units at the factory to meet surging demand from the likes of BMW, Mercedes, Volkswagen and Audi. And it’s not alone. Companies across eastern Europe are ramping up investment in automation to cope with a labour shortage that started after the 2008 financial crisis and after final curbs were lifted in 2011 on worker flows to richer countries in the European Union.
While policymakers and economists in many parts of the world worry about the potential social negatives of robots displacing humans, here automation is a godsend for companies that want to avoid losing market share. The changes indicate a shift in the labour-intensive model of the former Communist satellite states, which have attracted foreign investment with tax incentives and labour costs that pale in comparison to those in the West.
While companies have jacked up wages significantly, it hasn’t been enough to persuade young people to stay, or to make up for demographic trends that indicate a shrinking, aging population. Economists warn the labour shortage could have a crippling effect on some of eastern Europe’s economies before the end of this decade, at a time when companies in the west are also complaining about the scarcity of workers, including in Germany, the Netherlands, France and Britain.
“While the gradual tightening of labour markets has been evident for at least three years, 2018 may be a tipping point, with labour shortages starting to weigh on economic growth,” analysts at UniCredit said in a note. Companies may also start to think about relocating.
The Frankfurt-based International Federation of Robotics (IFR) estimates that 9,900 robots were installed in central and eastern Europe last year, up 28 percent from the year before. The IFR projects a 21-percent compound annual growth rate in robot shipments to the region by the end of this decade, nearly double the European average.