Romania is now one of the hottest building markets in Europe as it has the money for its construction projects but not enough people to complete them due to labor shortage, according to a Bloomberg analysis.
In northern Bucharest, a crew led by Vasile Kocori scrambles to lash hundreds of steel reinforcement bars for the next section of yet another high rise that will grace the skyline of Bucharest.
They work at Skanska Property Romania’s EUR 37 million Equilibrium project comprising two 11-story office towers. According to the author, one of Kocori’s main challenges was to find the workers who could actually do it in the first place. Kocori ended up culling the most skilled from other projects and then directing the less experienced ones to other building sites across the Romanian capital.
“Half the guys I have can do the job, while the other half need more training,” Kocori explains.
Another major project is located in mid-town Bucharest, where Israeli group Hagag Development Europe is transforming a former oil company headquarters into a modern seven-floor office building with an EUR 8 million rehabilitation – with 35 workers onsite.
Project manager Alexandru Draghici said that the crew, all Romanians, may change as a decline in skill levels is exacerbated by an unwillingness to do “dirty and unappealing” labor.
“There still are enough workers, but I don’t know for how much longer,” said Draghici. “Construction is getting bigger and bigger and the workers are going away from the country,” he added.
This situation becomes prevalent across eastern Europe as the labor shortage now threatens to put the brakes on the continent’s fastest growing construction market with potentially damaging repercussions for economies. Workers have been migrating west for years from Romania or Poland in search of better pay even as money has flooded east and transformed former communist metropolises like Bucharest, Budapest and Warsaw, Bloomberg notes.
The exodus since the European Union started expanding into the former eastern bloc in 2004 totals more than 5 million for Romania and Poland alone and made their builders ubiquitous in cities like London, Berlin and Madrid.
Huge pay gap
The relative poverty gap between Europe’s east and west remains stark.
According to the World Bank, gross domestic product (GDP) per capita in Poland and Hungary remain significantly below half the EU average before adjustments for the cost of living.
The average take-home annual salary in Romania is about 20 percent of the EU average and 35 percent in Poland, based on the latest Eurostat figures.
At the current trajectory, it would take 59 years for Polish salaries to catch up, a report by consulting company Grant Thornton recently said.
The challenge is to be able to meet labor demands while keeping wages under control, said Thomas Birtel, CEO of Vienna-based builder Strabag. His company counts on central and eastern Europe for 22 percent of its business.
“The biggest stress we see is in Poland, but there are also signs of a drought in the labor market in Hungary and Romania,” said Birtel.
“What we have been seeing in all of the countries is a sharp increase in wages, not just the overall increases because of labor unions,” he added.