Location search Eastern Europe: The labor market 2025

Location decisions are among the most important decisions that industrial manufacturing companies make. It is important to consider a wide range of information, data and experience and to carry out a systematic and transparent selection process as part of the location search. One of the most important location factors – indeed the most relevant for most companies – is the labor market.

In the past, the countries of Eastern Europe scored particularly well in this aspect. However, wage costs and unemployment have often developed more dynamically than in the DACH region. We therefore take a look at the development over the last five years and answer the following questions for you:

• How do labor costs and unemployment rates differ between Eastern Europe and the DACH region?
• Which countries in Eastern Europe continue to have good labor market conditions?
• Which regions are particularly attractive production locations in Eastern Europe?

Europe offers an astonishing spread in labor costs and unemployment that companies can take advantage of.

Katrin Söntgerath, Senior Consultant

Wage costs and unemployment in a pan-European comparison

In contrast to other economic areas such as North America and Asia, Europe will continue to offer major differences in labor costs and unemployment in 2025:

A comparison of labor costs in Europe reveals a significant east-west divide. Western Europe has significantly higher labor costs than Eastern Europe. The countries in the DACH region in particular – Germany, Austria and Switzerland – have the highest average wage costs of between EUR 5,500 and EUR 7,800 per month. This region is characterized by economic stability and an advanced level of industrialization. However, these factors mean that labor-intensive companies in particular are increasingly considering alternative locations due to the high wage costs.

Wage costs in Eastern Europe are significantly lower than in Western Europe. Average wage costs in countries such as Poland (EUR 1,850), Romania (EUR 1,800) and Hungary (EUR 1,600) are less than half the Western European average. Particularly noteworthy is the Balkan region, where countries such as Bosnia and Herzegovina (EUR 850), Montenegro (EUR 650) and Albania (EUR 600) have the lowest wage costs in Europe.

For companies with a focus on cost efficiency, the Balkans therefore offer considerable potential for reducing personnel costs and strengthening competitiveness. In addition to low labor costs, investors benefit from a well-trained skilled workforce and advantageous geographical connections to central markets in Western Europe.

Labor costs in the Balkans are a tenth of the level in the DACH region.

Dr.-Ing. Kai Philipp Bauer, Senior Manager

The unemployment rate in Europe shows a similar distribution compared to wage costs, with heavily industrialized countries in Western Europe tending to have a lower unemployment rate. In the DACH region, the unemployment rate is between 3% in Germany and 5% in Austria, which is typical for highly developed economic areas with stable labor markets.

In contrast to the distribution of labor costs, which decreases significantly from West to East, the unemployment rate in Eastern European countries such as Poland (5%), Romania (6%) and Hungary (4%) is at a similar level to parts of Western Europe. However, there is a clear divergence in the Balkans, which not only have the lowest labor costs in Europe, but also the highest unemployment rates – making the region particularly attractive for investors from an economic perspective. The unemployment rate in both Albania and Bosnia and Herzegovina is 11%, while in Montenegro and North Macedonia it is the highest in Europe at 13%.

In addition to low labor costs and the high availability of labor, other factors offer attractive locational advantages. Many countries in the region have a young, motivated and increasingly qualified workforce. Targeted investments in education and professional qualifications are creating promising potential for skilled workers, particularly in the technical and industrial sectors, which contribute to the region’s competitiveness.

The labor market in the Balkans

In an international comparison, the Balkans have the lowest wage costs in Europe. However, the average country value does not always provide a complete picture, as there are considerable regional differences within the individual countries. Not every region offers the same economic conditions and locational advantages.

The lowest wage costs in Europe – and therefore also in the Balkans – can be found in Albania. The regional differences within the country are around 18 %. While wage costs in the northern and southern parts of the country average EUR 550 per month, they reach EUR 650 in the capital region around Tirana. This comparatively small wage gap between urban and rural areas makes the capital a particularly attractive location.

In other Balkan states, however, the regional differences are much more pronounced. In Serbia, for example, wage costs in the capital Belgrade amount to EUR 1,500, while they are only around EUR 1,000 in the southern parts of the country – a difference of 50%. There are also significant regional differences in North Macedonia. For example, wage costs in the capital Skopje amount to EUR 1,050, while in other regions they are between EUR 650 and EUR 800, which corresponds to a difference of 30 to 60 %.

These regional wage differences are decisive factors for companies considering a cost-efficient choice of location in the Balkans. A targeted location analysis can provide significant cost benefits while ensuring access to qualified labor.

Low wage costs at national level do not necessarily mean that every region within a country is equally attractive for companies. In Serbia in particular, there are considerable regional differences!

Paula Link, Consultant

There are also significant regional differences in unemployment rates within the individual countries. This is particularly evident in North Macedonia, where the unemployment rate varies between 6% and 22% depending on the region. The high unemployment rates in certain parts of the country are largely due to low levels of industrialization and limited economic development opportunities. A similar pattern can be seen in Albania, where there are also considerable regional differences. While southern Albania has the lowest unemployment rate in the country at 7.5 %, it is almost twice as high in central Albania at 14.3 %.

The labor market in Poland and Romania

A look at wage costs in Poland also reveals considerable regional differences. The Masovian Voivodeship, which includes the capital Warsaw, has the highest wage costs at an average of EUR 2,550 per month. Industrially strong regions in the west and south of the country are also characterized by comparatively high wage costs, with EUR 2,250 in Lower Silesia and EUR 2,150 in Pomerania. In contrast, the lowest wage costs are found in economically weaker, predominantly eastern regions. The average wage level is EUR 1,800, particularly in the Carpathian Foothills voivodeship and in Warmia-Masuria. At EUR 1,850, wage costs in the Heiligkreuz voivodeship are also among the lowest in Poland.

Compared to Poland, Romania not only has a lower wage level overall, but also a lower regional variance. Wage costs here range between EUR 1,200 in the Sud-Est region and EUR 1,400 in Vest. One exception is the capital Bucharest, where average wage costs are significantly higher than the national average at EUR 1,950.

The regional differences between Eastern and Western Romania are primarily due to the increased settlement of foreign companies in the western parts of the country. The geographical proximity to the Central and Western European markets and the well-developed infrastructure made these regions particularly attractive to investors. In the recent past, however, more and more companies have been relocating beyond the Carpathians in order to achieve even better labor cost advantages. Despite these differences, overall wage costs in Romania are higher than in many Balkan states. Even the region with the lowest wage costs (Sud-Est with EUR 1,200) exceeds the wage level in the Balkans – with the exception of Belgrade, where wage costs are EUR 1,500.

Development of wage costs compared to DACH

In addition to the absolute wage costs, many companies take particular account of the dynamic development of wage costs when choosing a location, as they fear that wages will converge with Central European levels. Wages and labor costs have developed dynamically in Eastern Europe. However, wage costs have also risen significantly in the DACH region in recent years, driven by inflation and high wage settlements. So the exciting question is: how big is the wage cost advantage in Eastern Europe and how will it develop in the future?

To do this, we must first differentiate between the relative labor cost advantage and the absolute labor cost advantage. While the relative labor cost advantage has fallen across the board in the last five years (albeit at different rates), the absolute labor cost advantage has risen in 11 out of 16 countries.

At 3.5% or less, the smallest losses in relative labor cost advantages are recorded in Bosnia, Montenegro and Albania. The labor cost advantage in these countries is therefore currently 80% to 85% compared to DACH. In the same period, the absolute wage cost advantage has increased by around EUR 4,000 per year. This underlines the high attractiveness of these three countries as potential production locations.

The countries of Eastern Europe are losing between 0.5% and 2% of their relative wage cost advantage to the DACH region per year, while the majority are increasing their absolute wage cost advantage. It is therefore clear that many Eastern European countries will still be an attractive production location in 20 years’ time.

Dr.-Ing. Kai Philipp Bauer, Senior Manager

Even in the established industrialized countries of Hungary, Slovakia, Serbia and Poland, the losses are only around 4.5%. Wage cost advantages of between 60% and 80% can still be realized on the labour market here. In absolute terms, these countries were able to increase their labor cost advantage by around EUR 2,000 and will therefore remain a solid location option in the future.

The situation is different in Romania, Croatia, the Czech Republic and Bulgaria. These countries have each lost around 6.5% of their relative wage cost advantage. In absolute terms, too, the wage gap with the DACH region only increased by around EUR 1,000. A short-term trend reversal towards a decreasing wage gap, also in absolute terms, appears to be imminent in the future.

This development has already taken place in the Baltic states of Latvia, Estonia and Lithuania, which is why these countries are no longer attractive enough for most industrial companies.

Differences in unemployment rates and wage costs reflect the level of economic development and general conditions. Poland, Hungary and Slovakia impress with stable labor markets but high wage costs. In contrast, the Balkan states offer lower wage costs despite structural labor market problems and are therefore attractive for labor-intensive production. Take advantage of proven advice to ensure the success of your project.