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Wage outflows in the Hungarian economy may remain strong, with the expected increase in the minimum wage firmly supporting double-digit wage growth. It is almost certain that the domestic minimum wage will rise above 10% in 2025, after 15% this year, writes Világgazdaság.
Raising the guaranteed minimum wage is a more difficult question, as it affects many more workers and firms, but the two wage elements are expected to continue to push the overall wage scale ahead of themselves, directly affecting the earnings of nearly 2 million workers.
This has also led to double-digit average earnings growth in recent years, and on current trends there is a strong chance that this will continue.
Average gross earnings rose by 13.3% in the latest quarter, the lowest level this year but still better than previously expected. At the end of last year, the government, the central bank and analysts had all predicted a single-digit wage growth rate, but the almost 15% wage dynamics in May came as a surprise. This certainly cannot be sustained for long, as it is not healthy for the economy in the longer term. Thus, a rate of between 9 and 10% is more realistic.
Világgazdaság pointed out that it is very difficult to give an accurate estimate of the expected dynamics, as there are huge fluctuations within the year: while, for example, there is no visible surge in the first two months of the year, in the market sector, wage increases are usually only made in March, and are often topped up with various bonuses in certain sectors in the spring months. Wage outflows slow down somewhat in the summer, only to be boosted by year-end bonuses in the last two months of the year.
Based on the statistics of the past few years, it can be concluded that with a 9% increase,
the average gross salary would be HUF 717,000 (EUR 1,805) compared to the average gross salary of HUF 658,000 (EUR 1,656), which would increase to HUF 476,000 (EUR 1,198) net from the current HUF 427,000 (EUR 1,075).
This means that the average net salary in Hungary would be close to HUF 500,000 (EUR 1,259).
The formula is not so simple, however, as the government plans to increase the amount of the family tax allowance in 2025, resulting in higher net salaries for families with children, thus people would see a bigger increase in net salaries than in gross wages. In addition, wage growth could also be supported by public sector pay rises, as teachers’ salaries will continue to rise from January 1, with an average increase of 21%. As this is a large group, some 140,000 people, their pay rise could give a big boost to wage dynamics.
Of course, not everyone will earn this much, as it is only the average, so it is worth looking at the median. The median gross wage was HUF 518,800 (EUR 1,306) last time.
If there were a 10% increase, the net of HUF 570,000 (EUR 1,435) would be HUF 379,000 (EUR 954), hence half of the workers would take home less and half more.
It is important to add that median wages have already risen by a few percentage points more than average wages this year, therefore there has been a stronger wage outflow in the lower earnings bands in the recent period.
Via Világgazdaság; Featured image via Pixabay
