Wages: SME sector will fall behind without reforms

Many jobs and wages depend on the achievement of small and medium enterprises (SME sector) in Hungary. In fact, they employ 2/3^rd of the people working in the private sector. As a result, they are crucial for the labour market, but their economic achievement fell significantly behind bigger companies’. To be specific, the added value of an employee working in the SME sector is only 38pc compared to his/her colleague working for a big company. Also, SME sector fell behind most regarding investments. 24.hu’s summary.

SME sector companies do not want to invest

According to the Hungarian Central Statistical Office (HCSO), there are vast differences between SME sector and big corporations. Though

99pc of the Hungarian companies belong to the SME sector, their share regarding Gross Value Added (GVA) was only 43pc in 2016.

On the other hand, they received 42pc of the total net revenue.

In fact, SME sector fell behind mostly regarding investments in 2016. Their share was only 34pc regarding the investments of the companies and 27pc regarding the total amount of investment. This is partly because

their willingness to invest their hardly won profit is significantly low.

Furthermore, most of these Hungarian-owned businesses are less profitable. Therefore, the amount of investable money is insufficient. In contrast, bigger companies are mostly multinational ones meaning a higher amount of available and investable capital. Finally, low willingness regarding investment in SME sector is in strong connection with the flat rate of expected return.

Increasing wages are a huge challenge for small and medium enterprises

According to the report, the investment value per one small or medium enterprise was 2.2M HUF (EUR 7,068) in 2014, 2.1M HUF (EUR 7,750) in 2015 and 2M HUF (EUR 6,425) in 2016. However, according to HCSO

the decreasing numbers does not indicate a trend in this regard.

In fact, in some spheres of the national economy like construction industry and agriculture investments of SME sector are fundamental.

All in all, achievement of the SME sector falls behind bigger companies not only in investments but also regarding productivity. This explains the differences in wages, as well. Clearly,

only those companies can pay higher salaries which have the ability to renew and increase.

In fact, wages increased considerably last year in Hungary. Undoubtedly, this will force SME sector to improve efficiency and innovation unless they want to lose their employees. However,

SME sector needs governmental encouragement and support

to do so. This is because small and medium enterprises are not as strong as their multinational counterparts.

Jobbik started a European citizen’s initiative and collected signatures to bring the issue to European Commission’s table, which could be a solution to this issue. However, the government does not support Jobbik’s wage union initiative.

Source: 24.hu, Daily News Hungary