As regular readers will know I occasionally through out some caveats about affordability in the Romanian property market and the number of professionals who can potentially create a new middle class to underpin it.

The article below appeared in today’s edition of Ziarul Financiar and comments on projected increases in salaries and wages. These are national projections which will have local variations with Cluj and Bucharest having by far the highest demand for management and highly skilled professionals not to mention skilled labour.

Being a bit of a 1960s socialist and assuming that prices, including property will go up by at least as much, I have to ask where this leaves unskilled labour in the housing market not to mention the 45% or so of the population working in subsistence agriculture in the countryside.

Whilst on the subject I thought I would tell you one more story. A Romanian social worker, Ana we will call her, who has been working in the UK for five years and earns in excess of £30,000 year gross, showed her pay slips to her sister, Alina, who happens to be my accountant and is employed by a Swedish company here in Cluj Napoca. Alina concluded that her own disposable income (after the 16% tax etc) was twice that of poor Ana’s who was giving far too much money to Gordon Brown!

So what’s the lesson in all this? Talented and skilled Romanians must come back from low skilled – no any – employment in western Europe. If I was the Romanian PM I would offer zero tax for two years to any Romanian coming back from abroad who sustained continuous employment in Romania and brought back into the country 20,000 Euro which was invested in a company or other assets within Romania for that two year period. That would both address the skill shortage and underpin the property market for sure!

Charles Bell


How much will managers earn this year?
Autor: Alina Pahoncia | Data: 07 Ian 2008
Managers' salaries are expected to increase by 9 to 15% this year, thus slowing down the recent growth, when the market average stood at 30-40%, and even doubled for certain positions and fields.

Considering a general manager earned an average gross salary of 12,000 euros per month in 2007, and the salary increase for this position is put at 9.3 to 12%, the heads of organisations could earn up to 13,500 euros on average in 2008, according to the forecasts by the experts of human resources consultancy Mercer.

Mihaela Damian, partner and associate of executive search firm Stanton Chase Romania believes the increase margins for the top management positions will range between 10-15%.


She adds that factory manager salaries should go up, too, because the managers in the manufacturing field have been neglected when it comes to salary increases over the last few years.

At the same time, the middle management salaries will increase at about the same rate, so that a sales & marketing manager will make 6,300 euros on average per month, while a chief financial officer will make more than 6,000 euros. However, considering that the base salary is complemented by the compensation and benefits package, the total income of a person on a managerial position may end up much higher. The biggest bonuses are awarded to the heads of organisations, and amount to approximately 30% of the base salary. The senior management category on the domestic market gets up to 25% of its base salary as bonuses, while the average bonus amounts to 15% of the base salary.

The salaries of the heads of organisations will increase by 9% to 12%, those of executives will rise by up to 11%, while the employees that fill other management positions and specialists will receive up to 12% higher salaries, Mercer officials say.

Although the increases in managers' incomes were significant in 2007, the gap between salaries and those of their counterparts working in Western Europe is still quite wide. Whereas a middle manager that works in a multinational present on the Romanian market earns a net amount of 2,820 euros per month, their Austrian counterpart earns 5,230 euros, 128.8% more, whilst a German makes 5,846 euros, 146.6% more. Romanian managers have left Bulgarian managers behind in terms of salaries, and registered 37.4% higher incomes in 2007. A Romanian middle manager also earns more than their Hungarian or Czech counterparts when it comes to net salary-15.6% and 3.9% more. On the other hand, the situation is completely different when analysing the gross salary, with middle managers in multinationals in Romania lagging behind their Hungarian and Czech counterparts.

At the other end of the hierarchy, wages for unskilled positions are expected to go up by 25% this year as a result of the increase in the minimum wage. In 2007, the minimum wage stood at 390 RON (115 euros), and the Government decided to raise it to 500 RON (150 euros) at the beginning of this year. A second raise is considered for the second half of the year, if the macroeconomic parameters maintain within the boundaries set in the budget.

Charles , there is another layer you have to add in to this viz: how much the employer pays the state in employee taxes. I was advised it amounts to around 65% of the gross salary! ( please correct me if this is not right). Thus these stealth taxes in Romania may make the effective tax rate for employees far higer than one would initially think. This gives 2 conclusions:-

1. Effective tax contribution of employing staff whether paid by employer or employee is is quite high in Romania - not a bad thing it shows good fiscal policy.

2. The only sensible way to compare salaries across different countries in EU is to look at take home pay. As per your comments , Charles, this is far smaller than one might initially think ( in fact zero in your example !).

The upside for property appreciation is therefore even stronger.

Another factor when it comes to disposable income, as we saw in the recent posts about Poland, is the repatriation of wages from overseas.

Some countries have a big tradition in this department and, for some, this money – effectively exports – is highly significant.

That’s definitely the case with Romania, whose repatriated funds dwarfed those of the Poles’ £3 billion ( €4 billion at current €1.34 to £1 exchange rate) last year.

The World Bank estimates that Romanians sent home €7 billion during 2007, and a whopping €2 billion of that was sent to Romania in December.

Obviously, a great deal of money sent home by the hundreds of thousands of Romanians mainly working in Spain and Italy, is extremely hard to trace - much of it doesn't travel by BACS! And this figure is, if anything, an underestimate.

And more important than the spending power this €7 billion represents is the fact that it makes a significant contribution to reducing the country’s large current account deficit – about 40% of the way, in fact.