As part of a spending spree ahead of the 2022 parliamentary elections, the Orbán-led government has announced a series of measures to provide financial support to many social groups in Hungary. The announcements include wage hikes in certain sectors, income-tax rebates for families, waiving income tax for workers under the age of 25, and certain home renovation grants. Hungary’s 2.5 million pensioners will also receive considerable sums early this year.
The Orbán administration in the past months made a number of announcements, including the promise of generous support for various social groups in Hungary. Prime Minister Viktor Orbán claims the substantial budgetary expenditure is possible because the Hungarian economy has over-performed in 2021. However, GDP-wise the country will only be at approx. the same level as it was two years ago before the pandemic broke out, so there are not more resources to distribute than in late 2019. Even though Viktor Orbán strongly denied it several times, at least some of the current measures are likely to be connected to the general elections due in 2022, which according to analysts will be closely contested.
Tax rebates for families
As Prime Minister Viktor Orbán announced back in June, all working parents will be entitled to receive a rebate next February on their 2021 personal income tax up to the tax level of the average wage. The measure will cover 1.9 million parents getting support in form of a tax rebate worth a total of 600 billion forints (EUR 1.6bn).
Earlier, the government also announced that people younger than 25 will not have to pay personal income tax from 2022. There are roughly one million young adults who will be affected by the measure.
A new scheme for subsidizing home renovations carried out by households with at least one child will launch as well this January. According to this program, half of the renovation costs up to a maximum of 3 million forints (EUR 8,400) per renovation will be covered by the state.
13th month pension, pension premium
The government has also decided to increase pensions for a third time this year in response to record high inflation. Several weeks of payments of the 13th month pension will also be distributed among Hungary’s elders, in addition to a uniform pension bonus of 80,000 forints (EUR 223). Also, the government has recently decided that they will reintroduce the full 13th-month pension and not only half of it, as they previously said (according to the government’s original plan, the 13th-month pension would have been reintroduced gradually, with pensioners receiving one week more pension every year over four years).
Increased minimum wage and wages in various sectors
Additionally, Hungary’s minimum wage is set to increase by almost 20 percent, while a significant wage hike in numerous sectors is also on the horizon.
Starting from January 1, 2022 the monthly minimum wage for unskilled workers and skilled laborers has been risen to 200,000 forints (EUR 557) and 260,000 forints (EUR 724), respectively.
The number of workers directly having their salaries raised by the hike is around 200-250,000 in Hungary, but the decision is set to affect nearly one million people, as many other benefits are linked to the lowest legal remuneration.
The wages of public workers are also raised to HUF 100,000 (EUR 270) gross monthly, exactly 50% of the regular minimum wage as of January.
The government also decided to raise the wages of soldiers and police officers by 10%, and in addtion, they will receive a bonus of six months’ pay.
In an effort to ease the burden on employers in light of its policy of raising the minimum wage, the government is also set to reduce the social contribution tax of businesses by 4 percent.
Workers of the healthcare sector were also promised a salary increase for 2022. Nurses will receive a wage hike of 21 percent from January, while daycare workers and employees in the social and cultural sectors will see their salaries rise by 20 percent, the prime minister announced at the beginning of October.
The average monthly wage in the social sector was around 306,073 forints (EUR 836) in 2021; with the 20 percent wage increase it will rise to 370,000 forints (EUR 1010) in 2022. The 21 percent wage hike for nurses, which will affect more than 85,000 healthcare workers, is the final step in the government’s wage increase program that was launched in 2019.
In early December, Viktor Orbán also announced a 10 percent pay raise for law enforcement officers as well as Hungarian soldiers for 2022.
Teachers discontented with new wage promise
Although teachers are not left out of the salary hike as the government already made the promise to increase their salaries by 10% in 2022 through a professional wage supplement, educators are calling the offer unacceptable for being set so low.
However, the heated reaction is not surprising, because today, a teacher’s salary in Hungary is humiliatingly low. The base salary of those working in the sector with 3-5 years of professional experience does not exceed the level of payment of the monthly minimum wage for skilled workers.
The situation in the sector is so bleak that in 2019, the salaries of entry-level teachers with bachelor’s degrees (BA/BS) had to be supplemented after the monthly minimum wage for skilled workers exceeded their payment. (Under current legislation in Hungary it is forbidden for someone with an academic degree to have a lower salary than the guaranteed minimum wage of skilled workers).
Can the Hungarian economy withstand such hikes?
Regardless of the exact reason why the government has decided to propose a host of subsidies and pay raises in several sectors, most Hungarians will probably welcome the pay increases. Especially if we consider that inflation in Hungary has recently hit a 14-year high. However, it should be noted that the above-mentioned alarmingly high inflation tohether with the higher salaries could easily lead to a wage-price spiral, as well as the fact that it is not clear how the budget will cover the extra spending.
Featured photo by Szilárd Koszticsák/MTI