<abstract xmlns="http://www.w3.org/1999/xhtml">

<p>The recent development in the Slovak economy erased a significant competitive advantage of manufacturing – low labour cost. The paper analyses the driving factors of rising unit labour costs in the manufacturing sector. The paper aims to explain why the unexpectedly rapid loss of traditional competitive advantage took place in the group of V4 countries and why this phenomenon was particularly pronounced in Slovakia. The paper identifies the driving factors that caused a strong increase in labour costs in addition to factors that also caused a slowdown in productivity growth. The decomposition of ULC dynamics has shown that the primary problem in the case of Slovakia is a very significant slowdown in labour productivity growth. Especially, from a marginal perspective, the components of gross value added developed strongly in favour of increasing compensations of employees. The decrease in the working-age population represented a significant driving force of increasing labour cost (wages) along with a halt in productivity growth caused by relatively low investment rate and absence of convergence in capital-to-labour ratio. Such development was identified in all V4 countries; however, the least favourable trend took place in Slovakia.</p>
</abstract>

The recent development in the Slovak economy erased a significant competitive advantage of manufacturing – low labour cost. The paper analyses the driving factors of rising unit labour costs in the manufacturing sector. The paper aims to explain why the unexpectedly rapid loss of traditional competitive advantage took place in the group of V4 countries and why this phenomenon was particularly pronounced in Slovakia. The paper identifies the driving factors that caused a strong increase in labour costs in addition to factors that also caused a slowdown in productivity growth. The decomposition of ULC dynamics has shown that the primary problem in the case of Slovakia is a very significant slowdown in labour productivity growth. Especially, from a marginal perspective, the components of gross value added developed strongly in favour of increasing compensations of employees. The decrease in the working-age population represented a significant driving force of increasing labour cost (wages) along with a halt in productivity growth caused by relatively low investment rate and absence of convergence in capital-to-labour ratio. Such development was identified in all V4 countries; however, the least favourable trend took place in Slovakia.

Acceleration of Labour Cost Along with Deceleration of Productivity: How the Slovak Manufacturing Lost the Advantage of Low Unit Labour Cost

DANUBE

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 3.0 License.

The recent development in the Slovak economy erased a significant competitive advantage of manufacturing – low labour cost. The paper analyses the driving...

Acceleration of Labour Cost Along with Deceleration of Productivity: How the Slovak Manufacturing Lost the Advantage of Low Unit Labour Cost

Published Online: Oct 16, 2021

Page range: 183 - 196

DOI: https://doi.org/10.2478/danb-2021-0012

Keywords
Unit Labour Cost, Slovakia, Labour Productivity, Capital-to-labour

© 2021 Karol Morvay et al., published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 3.0 License.

Acceleration of Labour Cost Along with Deceleration of Productivity: How the Slovak Manufacturing Lost the Advantage of Low Unit Labour Cost

Published Online: Oct 16, 2021

Page range: 183 - 196

DOI: https://doi.org/10.2478/danb-2021-0012

KeywordsUnit Labour Cost, Slovakia, Labour Productivity, Capital-to-labour

© 2021 Karol Morvay et al., published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 3.0 License.

Keywords
Unit Labour Cost, Slovakia, Labour Productivity, Capital-to-labour