Romanian minimum wage higher than Hungarian?

The Hungarian minimum wage has risen up to 149,000 Hungarian Forints gross (463 Euros)  – 99,085 HUF in net price (308 EUR). If we compare it with the regional countries’ minimum wage, is it relatively a high amount or not? What if we compare the region’s increase rates? Lot of questions to be answered below.

The question was risen if Romania surpasses Hungarian wages or not in October 2018. The question was answered thoroughly in index.hu’s article, from various point of examination.

In October 2018, we have written about Romania’s rise in minimum wage that had the chance to exceed Hungary’s. See the article here.

If we look at the region (Czech Republic, Slovakia, Poland, Romania and Hungary) the typical wage increase rate were about seven and nine percent in the whole. In this context Hungary is in the middle. Although Poland, Czech Republic, Slovakia and Hungary had similar tempo in minimum wage increase rate, Romania’s wages increased on volume by far. Meaning, Romanian wages grew faster than the other regional countries, yet it is quite questionable, if this pace is sustainable.

Examining gross amounts, the highest gross wages are in Czech Republic, then Slovakia, Poland, Hungary and Romania. Net scores however, are highest in Slovakia, thirdly Poland (because of higher tax rates) and Hungary in the fourth place.

Next figure shows regional Purchasing Power Parity in gross (Eurostat data). Yet Romanian gross minimum wage was higher than Hungarian, only for a short period of time. In 2018 and 2019 Hungarian wages are higher, yet below Polish, Czech and Slovak wages.

Regional monthly minimum wage and 2019 gross increase in HUF:

So in 2019 Hungary’s minimum wage is 99,000 HUF (307 EUR), Romania’s is 88,000 HUF (273 EUR) when net prices.

Salary comparison however, are delusive if we include comparing prices in these countries. Prices in Romania are the lowest, Hungary in the middle and the higheest in Czech Republic. So one can buy the most out of Romanian net minimum wage salaries, in Czech Republic the least from minimum payments and Hungary is again in the middle in this comparison.

When studying minimum wage changes in the long term, from 2008 to 2018, Poland leads by far, Romania got up to second place with a recognisable tempo, Hungary is the third, fourth is Slovakia and fifth is Czech Republic. What really needs to be pointed out is the heavy uprise in Romanian minimum wages compared to itself.

Rate of minimum wage compared to average salary by countries in %

The graph above shows the rate of minimum wages compared to average salary by country. It is visible that from 2009 to 2017,

Romania has improved from 33.3% to 44.6%, but Poland and Hungary are still the first and second on this statistics with 47.4 and 45.9 %.

Aside of the significant rises in Romania, the country’s economic policy should be examined. The government, besides of raising minimum wage, was also reducing tax rates and increasing government expenses to boost consumption. On the other hand, these policies caused higher rates of inflation region’s other countries. As a consequence, wage’s purchasing power might be decreased, which can cause a limited economic growth and unsustainability of raising Romanian salaries.

Source: index