Hungary has the second-lowest minimum wage in the EU

The European Union’s statistical office, Eurostat, worked with surprisingly up-to-date data in January 2021 when compiling Member States’ minimum wage statistics.

Qubit summed up the figures published on Friday, which showed that Hungary has the second-lowest nominal minimum wage, after Bulgaria. The situation is not so bad in terms of purchasing power parity, which also takes into account the price level, as four other countries, Bulgaria, Lithuania, Estonia, and Slovakia, have it worse.

The Hungarian position got significantly worse compared to the situation a year ago, when the Hungarian minimum wage was higher than the Romanian and Latvian ones, in addition to the Bulgarian one.

Only 21 of the 27 Member States have a set minimum wage; Denmark, Italy, Cyprus, Austria, Finland, and Sweden are the exceptions. In general, a minimum monthly wage of less than €700 is typical of the eastern Member States, and over €1,500 is expected for the north-western Member States. Eurostat divided the countries into three groups.

Ten Member States have a particularly low minimum wage.

These are €332 in Bulgaria, €442 in Hungary, €452 in Romania, €500 in Latvia, €563 in Croatia, €579 in Estonia, €584 in Poland, €623 in Slovakia, and €642 in Lithuania. The mid-level minimum wage is more common in the southern EU Member States: €758 in Greece, €776 in Portugal, €785 in Malta, €1,024 in Slovenia, and €1,108 in Spain. Interestingly, the United States would also fall into this group, with exactly the same federal minimum wage of €1,024 as it is in Slovenia.

In the other six welfare states, the minimum wage level is above €1,500: the minimum monthly wage is €1,555 in France, €1,614 in Germany, €1,626 in Belgium, €1,685 in the Netherlands, €1,724 in Ireland, and €2,202 in Luxembourg.

In Hungary, the minimum wage will increase by 4 per cent in 2021. After the increase, the gross amount will be HUF 167.4 thousand while the net will be HUF 111.3 thousand (EUR 312).

As the increase will be revealed only towards the end of January this year, it can be assumed that Eurostat calculated with the previous year’s gross amount of HUF 161 thousand. The eastern and western minimum wage differences, which illustrate the EU’s income inequality, will be reduced if consumption is taken into account, meaning that Luxembourg’s PPS will be only 2.7 times as high as Bulgaria’s PPS.

The statistics include an interesting segment of how minimum wages fare as a percentage of median wages and, based on this, Hungary is in the upper-middle category, which is not good news because it means that the second-lowest minimum wage in the EU equals 58% of the last known Hungarian median wage, from 2018.

Why is the median wage important? Because

while the average wage is a simple average of the earnings and the number of earners, the median wage shows that if a hundred people are paid, how much of it is earned by the person who is right in the middle, in the fiftieth place.

Thus, it cannot happen that the earnings of a small but extremely well-paid group significantly raise the average while the majority of people take home a much lower amount. The Hungarian state has not published median wages for the third year in a row.

Thus, the gross minimum wage of 161 thousand forints is a significant portion of the Hungarian median wage, which, unlike the average wage, expresses how many or how few people are poor, in an EU comparison as well. This means that there may be many who can only take home a monthly amount close to the minimum wage.

• The Hungarian minimum wage has been rising sharply but still lags behind Europe
• Deal reached to hike minimum wage by 4 pc to 450 euros in Hungary

Source: Qubit