By 2027, the Orbán government intends to raise Hungary’s minimum wage to 50% of the average wage. According to analysis, this ambition would require a significant rise in the minimum wage over the next three years.
Portfolio has analysed the government’s plans regarding the future of the minimum wage and outlined the steps necessary to achieve this goal. It argues that meeting the 2027 target would demand a sharp increase in the minimum wage over the coming years, while average wage growth would need to be considerably more moderate.
Ambitious government plans for 2027
Over the past decade, Hungary’s minimum wage has remained relatively stable at around 40% of the average wage. Despite periodic economic fluctuations, there has been no consistent, rapid increase in the minimum wage relative to the average. However, the Orbán government now appears committed to a more sustained upward trajectory, according to Portfolio, citing statements from Gergely Gulyás, the Head of the Prime Minister’s Office, and Márton Nagy, the Minister for National Economy.
Gergely Gulyás at the press conference at the Prime Minister’s Office on 22 August 2024.
Photo: MTI/Soós Lajos
Gulyás posited on Thursday that a swift and significant rise in the minimum wage would benefit the country. He noted that such a change would involve dialogue between employers and employees, with the government acting as a mediator. Ideally, Gulyás envisions a three-year agreement between the parties, which could lead to a convergence of wages for both degree and non-degree holders, while also bringing the median wage closer to the average.
In a separate statement the day before, Nagy remarked that “it is essential to raise the minimum wage to 50% of the average wage, albeit gradually, but by 2027 at the latest.”
The need for a rapid wage increase
The government’s proposal implies a significant annual rise in the minimum wage. Assuming stable annual wage growth in the coming years, the average salary is expected to reach around HUF 860,000 (EUR 2,183) gross by 2027. This would necessitate a minimum wage of HUF 430,000 (EUR 1,091) to fulfil the government’s 50% target.
For context, the current minimum wage in Hungary is HUF 266,800 (EUR 677). Achieving the HUF 430,000 target would require annual increases of around 17-18%, while average wage growth would need to be limited to no more than 10% per annum. Overall, the minimum wage would need to rise by roughly 60% over the next three years.
However, even this rate of growth is not without its challenges, Portfolio warns. A substantial increase in the minimum wage could lead to upward pressure on other wage categories to prevent wage displacement. Additionally, with the country facing increasing labour shortages, wage demands across various sectors are likely to rise, potentially resulting in further wage inflation.
Bold plans, but rapid growth brings risks
While such a rapid rise in the minimum wage is feasible, sustaining it over time is crucial to ensure the convergence is not temporary. Even after 2027, the minimum wage would need to continue growing at least as quickly as the national average wage to maintain parity.
Moreover, such a sharp rise in minimum wages carries risks for the Hungarian economy. Smaller businesses, in particular, could struggle to afford the sudden increase in wage bills. Some economists argue that labour shortages could help alleviate this issue; if less efficient firms fail, workers may more easily find employment elsewhere, potentially boosting overall economic efficiency.
However, rapid wage increases can drive up consumer prices, leading to inflation. To cover the rising wage costs, businesses raise their prices, which in turn prompts workers to demand higher wages. This issue can become particularly problematic if increases in the minimum wage remain substantial, as planned, over several years. Such a scenario could trigger a price-wage spiral, causing both the minimum and average wages to rise rapidly. Consequently, those earning within either wage bracket may see little real benefit from the changes in practice.
Read also:
- Orbán cabinet promises wage hike amidst labour shortage crisis in Hungary’s education – UPDATED
- Hungary preceding Romania, Slovakia, Czechia etc. in this wage type, says ministry
Source: Portfolio
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2 Comments
The Real Person!
The Real Person!
Affordability.
Propaganda – Lunacy.
It WORSEN’s – it’s nadir of DECLINE, the Economic & Financial, the POLITICAL Picture of Hungary that factually we are FIGHTING for our Survival.
Gergely Gulyas – he has HISTORY of communication “not of truth” – speaking muchly, like this article, on matters that are NOT “in tune” with his “supposed” Academic Qualifications.
Gergely Gulyas – statement the HORRIFIC doubtable / un-certainty CONTAINED in it, from his mouth, “signed off” by Victor Mihaly. Orban – Prime Minister of Hungary and the “Dud” of a Minister for Finance of the Orban – Fidesz Government – Mihaly Varga – DESPICABLE.
Present time we live in Hungary.
ANY form of looking into the “crystal ball” of our FUTURE under the Orban – Fidez “regime” Government – is FRAUGHT with humongous DANGERS.
Government created DEBT – the debt of the tax payers NOW exploding increasing as I commentate – this Fidez Minister – Gergely Gulyas – a “Gofer” of Victor Mihaly. Orban – would KNOW, possible doesn’t UNDERSTAND it’s “Nail” impact on Hungary, is – APPALLING.
Growth of an Economy, in the case of Hungary, it’s current position, that is thought to be of an INSOLEVENT Government, the question, that would be BEYOND his comprehension to answer and give a reply of CANDOUR from Gergely Gulyas – need of accumulated DEBT retirement, remember INTEREST daily charges from the European Union and China – need to INVEST continuous of a Governments responsibility, to the NEEDS of it’s Hungarian citizens, the WORD of GROWTH, the expansion of the Hungarian Economy is the complete OPPOSITE of a Zanadu.
Forints – very sought after currency – haha.
Hungary – we deepen in our CHALLENGES and this FALSEIFICATION of talk, propaganda deceit & Lies, coming out of this Fidesz Minister – Gergely Gulyas – AGAIN – is Heinous.
The Real Person!
The Real Person!
It’ll never happen because below regional average wages are one of the key reasons that Hungary is managing to attract high levels of FDI in recent years, which in turn is the only reason why the country hasn’t gone bankrupt. Working its people cheaply makes the life of the government much easier and they’ll seek to keep it that way. Its domestic industries are suffering from poor levels of investment, growth and productivity, leading to a cycle of low wages which, combined with high taxes on employment mean that domestic employers will be unable to pay even the elevated minimum while remaining profitable.