EUROPEAN DISUNION

A company can hire almost a dozen Bulgarians for the cost of one Dane

The average cost of employing a worker in Bulgaria runs at just €3.80 ($4.11) per hour, less than a tenth of the cost in Denmark, according to recently released data (pdf) from the EU’s statistics agency.

Of course, this crude comparison doesn’t take into account the vastly different cost of living in these countries nor the relative industriousness of their workforces. But it is a telling illustration of the huge disparities in the development of economies across the EU, and how far from a true “United States of Europe” the bloc remains.

Average-labor-cost-per-hour-selected-EU-countries-2008-2014-Growth-2008-14_chartbuilder-(1)

Given the big gaps in pay, it’s no surprise that large numbers of Bulgarians are moving elsewhere in the EU, taking advantage of their ability to live and work freely across member states. Even though average labor costs in Bulgaria have risen by nearly 50% since 2008, the fastest rate in the EU over this period, it will take a long time for local salaries to catch up with the rest of the bloc.

Here’s another way of looking at the gap in labor costs:

Average-hourly-labor-cost-per-worker-2014_chartbuilder (1)

In theory, the free movement of labor and an open market for cross-border services should, over time, iron out the differences in what it costs to employ workers across the EU. (Bulgarians and Romanians have only been free to work anywhere in the EU since the beginning of last year.) In the US, the average hourly wage in bottom-ranked Mississippi ($17.67) is much closer to top-ranked Massachusetts ($27.70) than Bulgaria is to Denmark, or the UK is to equally advanced Belgium. But language barriers, administrative obstacles, and simple inertia means that intra-EU mobility isn’t as great as economics alone would suggest.

Big differences in non-wage costs for employers—mainly taxes and social security costs—also make labor costs less flexible across countries. These payments account for a third of the cost of labor for employers in France, versus a fifth in Germany. That means that it costs more for a company to take on a new worker in Paris than in Frankfurt, but the average German employee takes home more in wages.

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