European Trade Union Institute, ETUI.

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Slovakia

5 July 2017

Slovakia: economic structure bears risk of single-side orientation on automotive sector

Slovakia has in recent years become the worldwide number 1 in car production per capita and the trade unions in the sector have been rather successful in their bargaining. On the other hand, industrial observers notice the vulnerability of an economic structure that is depending on one economic sector.

In 2016, the three main carmakers, Volkswagen Slovakia, Kia Motors Slovakia and PSA Groupe Slovakia, produced more than 1.04 million cars. The companies pay their workers significantly above the average monthly wage. In consecutive years, 2015 and 2016, automotive belonged to the sectors with the highest wage increases, ranking in the top five of best paid sectors (in a report of PWC). The average wage increase in the automotive sector in 2016 was 4.3%. For 2017, it is the sector with the highest growth expectations. Besides the three main car producers, another 310 subcontractors are located in the country. Jaguar started production in 2015 and Mitsubishi plans to start production lines as well.

In the meantime, the trade unions still have an argument for wage improvements. The industry is producing high quality, luxury cars and operates with a substantial level of labour productivity. Compared to other Western European countries the wage level is still considerably low. The bargaining rounds are, therefore, becoming more complicated. For instance, at Volkswagen SK the first ever strike has started in June 2017. Workers and trade unions rejected an offer to increase salaries by 4.5% in 2017 and by another 4.2% in 2018. The union is seeking a pay increase of 16% over the two years.

Experts warned already years ago that a single-sided orientation on automotive brings severe risks to the economy. The automotive share of the total industrial production was 45% in 2016, with a strong dependency on export. The sector has never been risk-free; overcapacity and sensitivity to economic fluctuations have in recent decades led to massive restructurings in several European countries. The plants are manufacturing and assembling foreign brands, with the real decision-making centre abroad. At the moment, the country is lacking skilled workers, partly because workers moved abroad in their search for better life and career chances in last two decades. Production companies (in automotive, and also in electronics) rely in their search for labour work more and more on agencies who deliver foreign workers for production sites, with even the risk that they enter into the undeclared or grey-area. This can easily lead to distortion of competition and social dumping practices. The country needs more investment in research and development in order to keep pace with the innovation that takes place in the sector (shift to electric cars, which are much more simple in construction; further automation and technology that makes the sector less labour-intensive).

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