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There is however a range of risks associated with setting up new operations in the European Union as well. One is the substantially high wage rates that labor would have to be paid inEuropebecause of the minimum wage regulations. This poses problems in terms of managing costs which can go up coupled with the mandatory employee welfare provision policies in the European Union as well as severance payments.
The induction of some East European countries into the bloc has raised possibilities of getting labor as a lower rate (Taylor, Murphey, 2004). However, that region poses a separate set of problems. The potential profitability and the returns that can be extracted are lower than what can be achieved at the European mainland which may bring into question the viability of the venture in the first place.