Last week, a group of major employers argued that an agreement on next year’s increase to the minimum wage should be delayed because of uncertainty caused by the pandemic at a meeting of the VKF, a forum of employers, unions, and government representatives.
After the meeting, Ferenc Rolek, deputy head of business association MGYOSZ (Confederation of Hungarian Employers and Industrialists), told national news agency MTI that it “isn’t practical” to raise the minimum wage from January 1 because of the current degree of uncertainty.
Employers do not believe a raise would be realistic at that time. They propose talks on the issue should be postponed until the outlook for 2021 becomes clearer, he added.
The statutory minimum wage was raised by 8% in both 2019 and 2020. The government has mostly cut taxes and contributions in tandem with increases to the minimum wage over the past few years.
Accordingly, employers calculated that the increase agreed on for this year would be offset by inflation, increased productivity, and a reduction in the payroll tax. While the payroll tax was cut by 2% and inflation was around 3%, productivity declined five percentage points.
This suggests that this year, employers actually paid higher wages to employees per productive work hour in real terms. It is unknown whether there are any payroll tax cuts planned this time around.
Rolek said the ongoing wage talks are “important and difficult”, noting that Innovation and Technology Minister László Palkovics sat in on the talks on Tuesday, and indicated he would join talks to follow.
Imre Palkovics, head of unions association Munkástanácsok (MOSZ – National Federation of Workers’ Councils), said unions are proposing a 10% minimum wage raise for next year. The VKF will meet again next week.
Wages in Hungary
At present, the gross monthly minimum wage for skilled laborers is HUF 210,600 (EUR 585). Although some factors can influence this, that is typically around HUF 140,000 (EUR 390) net. The minimum wage for unskilled laborers is HUF 161,000 forints (EUR 450), which usually means around HUF 107,000 (EUR 300) net.
In nominal terms, the minimum wage in Hungary is the third-lowest in the EU. In real terms, on the basis of purchasing power, they are the fifth-lowest.
Wage growth in Hungary overall reached 9.9 percent year-on-year between January-August, the latest data from the Central Statistical Office (KSH) shows. Real wage growth, consequently, was around 5%.
In terms of purchasing-power-adjusted household disposable incomes, Hungary had the fourth lowest in the EU in 2019, after Croatia, Latvia, and Greece.
Featured photo illustration by Tamás Vasvári/MTI