Similar transformations are taking place on production lines across the eastern wing of the European Union, as rising wage bills undermine the region's reputation as a cheap base for production.

Factory owners from Hungary to the Czech Republic and Poland, if they want to remain competitive, find themselves with little choice but to invest in automating their manufacturing processes.

"Not only in the car sector ... but also in the steel and machinery industries."In these sectors, such investments can already be seen, leading to job losses.

While Hungary's economy has grown nearly 5% last year and manufacturing investment has risen at the fastest pace in three years, the sector is shedding nearly 23,000 jobs, ending a six-year annual growth in jobs.

In the third quarter of 2019, Czech data showed a year-on-year loss of nearly a thousand manufacturing jobs, suggesting employment in the sector could have declined over the full year for the first time since 2013.

Looking to expand output but pressured by rising wages and falling prices, all the company's recent investment of 1 billion forint was spent on automation.

The company has not cut any of its 400 jobs so far, finding other positions for those whose work has been replaced by robots, but after a 50% jump in operator wages over the past three years, it intends to automate its remaining manual labor.

JOB LOSSES Although the automation process has been a gradual process so far, Josef Stredula, head of the Czech-Moravian Confederation of Trade Unions, said that up to 10% of jobs could disappear based on various estimates.

Staffing company Hays HAYS.L recently noted that the average annual wage increase of around 10% in the Czech Republic, Poland and Hungary was far higher than in many Western countries and estimated that nearly 5% of Hungarian jobs, or 200,000 roles, could be fully automated in the next decade.

Last year Hu recorded a 11% drop in job posts from the manufacturing sector.

Grafton Recruitment has seen a similar drop in the Czech Republic, while consultancy Deloitte has estimated that about half of current jobs could be replaced with machines.

LPP LPP.WA, Poland's largest clothing retailer, plans to invest in logistics and automation in a bid to improve margins and tackle higher labor costs.

Judit Kovacs, manager at the human resources company Randstad RAND.AS, said factories with high capacity utilization in western Hungary had begun to reduce headcount by attrition over the past year, while new plants in eastern Hungary were planned with a high degree of automation as investors sought to curb their exposure to the labor market.

Not only is manufacturing falling into the machines, for example, the ALVG.DE Hungarian unit of insurance company Allianz is automating data processing to offset rising salary costs.

The International Robotics Federation expects robot sales to rise through 2022 in major Eastern European economies, but while recognizing that some jobs will disappear, it does not foresee a major net impact on employment.

"I don't invest in manual labor or automation," IFR Secretary-General Susanne Bieller said, explaining that automation could help businesses maintain a competitive edge over cheaper production hubs elsewhere.

Read the original article "Robots enter as cheap labour in Eastern Europe dries up" at https://uk.reuters.com/article/us-easteurope-automation/robots-step-in-as-cheap-labor-dries-up-in-eastern-europe-idUKKBN20W10K