PAPA, Hungary (Reuters) – Plant supervisor Gabor Kiraly remembers the assembly a few years in the past when he and his Austrian bosses learnt how extreme the employee scarcity in Hungary was about to change into – it was, he mentioned, a “stunning realization”.

The unemployment fee within the western Hungarian city of Papa, the place Hirtenberger Automotive Security employs 725 individuals making merchandise comparable to seat belt pre-tensioners, was approaching just about zero. Excessive turnover was already an enormous downside.

Enter the robots. Hirtenberger has since spent 2.5 million euros automating two manufacturing items on the manufacturing unit to satisfy surging demand from the likes of BMW, Mercedes, Volkswagen and Audi. And it’s not alone.

Firms throughout japanese Europe are ramping up funding in automation to deal with a labor scarcity that began after the 2008 monetary disaster and after last curbs had been lifted in 2011 on employee flows to richer international locations within the European Union.

Whereas policymakers and economists in lots of components of the world fear in regards to the potential social negatives of robots displacing people, right here automation is a godsend for corporations that need to keep away from shedding market share.

The adjustments point out a shift within the labor-intensive mannequin of the previous Communist satellite tv for pc states, which have attracted international funding with tax incentives and labor prices that pale compared to these within the West.

Whereas corporations have jacked up wages considerably, it hasn’t been sufficient to influence younger individuals to remain, or to make up for demographic traits that point out a shrinking, growing older inhabitants.

If low fertility charges persist, the mixed inhabitants of Poland, the Czech Republic, Slovakia and Hungary will fall by greater than eight million to 56 million by 2050, in line with a 2017 U.N. report.

“Earlier than the disaster, there was not sufficient capital obtainable, whereas labor was very low-cost and ample,” mentioned Attila Godi, chief government at Hungarian roof tile maker Terran Tetocserep, which spent 900,000 euros final 12 months to put in robots and ancillary tools at its southern unit.

“This development has now reversed. Capital is offered and this must be invested into fashionable, functioning know-how, whereas the price of labor has elevated,” Godi mentioned.

Economists warn the labor scarcity might have a crippling impact on a few of japanese Europe’s economies earlier than the top of this decade, at a time when corporations within the west are additionally complaining in regards to the shortage of staff, together with in Germany, the Netherlands, France and Britain.

“Whereas the gradual tightening of labor markets has been evident for no less than three years, 2018 could also be a tipping level, with labor shortages beginning to weigh on financial progress,” analysts at UniCredit mentioned in a word.

Firms might also begin to consider relocating.

Kiraly mentioned that was not one of many choices mentioned on the assembly at Hirtenberger’s headquarters due to the investments made in Papa, a “strategic base” for the agency.

“That’s the reason we’ve got opted for automation as our technique. As a result of if we automate, the labor market impact shall be much less important,” he mentioned. However he added Hirtenberger was additionally contemplating a brand new plant nearer to the supply of demand, with out giving particulars.

Hungary faces the most important shortages however Czech, Slovak and Polish corporations have additionally been affected, a survey by Austrian Erste Group Financial institution confirmed final month.

ORDERS TURNED DOWN

An Ipsos survey of 100 Czech corporations discovered that almost a 3rd needed to flip down orders final 12 months due to the labor scarcity, and one in 4 Czech companies had been planning to speed up their automation plans.

Vesz-Mont 2000 builds robotized manufacturing items however has struggled to maintain up with demand as a result of it is also affected by the labor scarcity.

Launched in a barn 19 years in the past, the corporate went from constructing fitness center tools to items for automotive suppliers and different corporations and now employs 170 individuals.

An worker assembles a customized manufacturing unit automation system on the Hungarian Vesz-Mont 2000 plant in Nemesvamos, Hungary, January 23, 2018. REUTERS/Bernadett Szabo

“The array of duties we’ve got robotized (for our shoppers) greater than tripled over the previous 12 months,” Chief Govt Tibor Zentai mentioned.

Revenues rose by about 10 p.c final 12 months and the corporate goals to double robotic gross sales this 12 months, he mentioned.

“It might have been loads increased based mostly on the demand, however we might barely sustain with the market,” Zentai mentioned.

The Frankfurt-based Worldwide Federation of Robotics (IFR) estimates that 9,900 robots had been put in in central and japanese Europe final 12 months, up 28 p.c from the 12 months earlier than.

The IFR tasks a 21-percent compound annual progress fee in robotic shipments to the area by the top of this decade, practically double the European common.

Robotic density, a measure of multipurpose industrial robots per 10,000 staff within the manufacturing sector, was the best in Slovakia at 135, adopted by 101 within the Czech Republic, 57 in Hungary and 32 in Poland, in line with IFR figures in 2016.

Poland’s quantity is low because of the greater than 1,000,000 staff from neighboring Ukraine, which has an analogous tradition and language, on work permits which can be comparatively straightforward to acquire. Jakub Gontarek, an knowledgeable at a Polish employers’ union, mentioned it was nonetheless cheaper for Polish corporations to rent them or to pay greater than to automate.

Micro fuel mills are seen on the Hirtenberger Automotive Security manufacturing unit in Papa, Hungary, January 19, 2018. REUTERS/Bernadett Szabo

Austria-based Engel, which equipped plastic overmolding machines to Hirtenberger, mentioned whereas two-thirds of the machines it offered in Hungary had been automated in 2017, that proportion has risen to greater than 75 p.c for brand new orders.

Engel additionally automates present machines, the chief government of its Hungarian unit, Albert Vincze, mentioned.

“Proper now we’re putting in and launching 4 such robots at our shoppers and we’re in talks with one other consumer in regards to the after-sales set up of three robots the place the acquisition is clearly pushed by the necessity to substitute human labor,” he mentioned.

Automation brings new challenges, nonetheless. Vincze famous that programming, upkeep and servicing of the machines require extremely expert staff, that are additionally in brief provide.

Engel is attempting to rent secondary college and college graduates proper out of faculty, providing a Three-5-year coaching program and sufficiently enticing circumstances in order that they re-think plans to go overseas.

“We function in the identical atmosphere (as our shoppers), and we’ve got simply as a lot issue discovering certified professionals as anybody else,” Vincze mentioned.

PRODUCTIVITY

Total labor productiveness within the area falls wanting the EU common based mostly on knowledge from the Organisation for Financial Co-operation and Growth (OECD), however increased spending on equipment and automation has led to modest positive aspects.

Capital depth relative to hours labored rose by 2.9 p.c in Poland between 2000 and 2014, adopted by 2.2 p.c in Hungary and 1.7 p.c within the Czech Republic, OECD knowledge confirmed. The numbers evaluate to zero.7 p.c and zero.Three p.c progress over the identical interval in Germany and France.

Banks lively in Hungary, comparable to Ok&H, the native unit of Belgian KBC, Austrian Raiffeisen Financial institution Worldwide and OTP Financial institution, instructed Reuters they count on increased funding into automation to proceed.

Dinax, which sells water therapy merchandise to Hungarian wellness motels and swimming swimming pools, employs simply 30 individuals however was pressured to automate after struggling to seek out college students for short-term summer time work, even after mountain climbing wages by as much as 20 p.c in 2016 and 15 p.c final 12 months.

After shopping for $18,000 value of programmable weight controllers and pumps from Wisconsin-based Rice Lake Weighing Methods and Jacksonville, Florida-based Stenner Pumps, Dinax can now fill 50 p.c extra of its liquid product into plastic containers, saving the work of two individuals per day.

It plans an extra $20,000 funding to automate the identical course of for powdered chemical compounds.

“We hit two birds with one stone: on the one hand, we will enhance our capacities. However, we don’t want to rent extra individuals,” mentioned enterprise supervisor Tibor John.

Further reporting by Michael Kahn in PRAGUE and Marcin Goettig in WARSAW; Modifying by Sonya Hepinstall

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