Nightmare becomes reality: living standards of Hungarians decline amid destructive spiral

Earnings rose by 16.8% yr/yr in November 2022, according to the latest figures from the Central Statistical Office (KSH), a slowdown compared to the rate of wage growth in recent months. The average gross earnings of full-time employees were HUF 563,600, while the average net earnings excluding discounts reached HUF 374,800.

However, this is related to the fact that wage growth in the public sector has decelerated significantly, while the opposite is true for the business sector, where the price-wage spiral has further accelerated the pace of wage growth.

In the corporate sector, in the context of tight labour market conditions, firms are also trying to adapt wages to inflation that keeps on rising. In the business sector, wages have increased by 18.7%, meaning that workers' salaries get raised several times a year, a clear sign of the price-wage spiral in the economy.

Evolution of median wages
Since the "average person" does not get the average wage, but the median (wages are sorted from lowest to highest, with the middle being the median), it is worth taking a look at this too. Median gross earnings reached HUF 441,800, up 17.6% from a year earlier. Median net earnings after discounts were HUF 305,800.

Regular earnings (excluding premiums, bonuses and one-month allowance) increased by 20.2%, which shows that companies are forced to give not only one-off compensation, but also multiple increases over the course of a year. According to the stats office's statement, "the increase in average earnings was mainly driven by the increase in the minimum wage and guaranteed wage minimum implemented in 2022, as well as by the already scheduled and additional wage increases". In other words, it was in fact last year's 20% increase in the minimum wage and the minimum wage for skilled workers before the elections that ignited the price-wage spiral, fuelled by the inflation shock during the year.

However, even accelerating wage dynamics have not kept pace with the rise in consumer price seen in the second half of the year. Inflation was already 22.5% in November last year, so real wages fell by 4.7% on average across the country.

The decline in purchasing power of earnings was 3% in the competitive sector and nearly 10% in the public sector.

Such adverse trends have not been seen in Hungary in the past decade, with the decline in the purchasing power of wages as significant as when a country is hit by a major crisis. In the light of recent real wage data, it is not surprising that food consumption in the final months of last year showed a fall in consumption not seen since 2009-2010.

Workers will not be happy in the coming months, either. After a 24.5% increase in consumer prices in December, real earnings are set to show a substantial fall in December. The big question is how fast earnings will grow this year, with forecasts ranging from 14% to 18%, but unfortunately inflation could rise at a similar rate of between 16% and 19%, according to analysts. Against this backdrop, real wage growth is not really expected for this year as a whole.

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