Economy 18 June 2024, 10:28am

Hungarian wage boom still on, but country no longer in EU Top3

Portfolio

Labour costs in Hungary rose at the fifth highest rate in the European Union in the first quarter of 2024 compared to the same period last year, according to a recent survey by Eurostat, the statistical office of the EU.

In the first quarter of 2024 the hourly labour costs rose by 5.5% in the EU, compared with the same quarter of the previous year, Eurostat reported. Of the two components of wage costs, the costs of hourly wages & salaries increased by 5.8% and the non-wage component (employers’ social contributions plus employment taxes) increased by 4.8%.

the highest increases in hourly wage costs for the whole economy were recorded in Romania (+16.4%), Bulgaria (+15.8%), Croatia (+15.3%), Poland (+14.1%) and Hungary (+13.7%), i.e. the fifth highest growth rate in the bloc. Two more EU Member States recorded an increase above 10%, namely: Latvia (+12.7%) and Lithuania (+11.1%).

Non-wage labour costs in Hungary rose by 14.1% (the sixth highest increase in the EU).

Looking at sectoral data, wages in Hungary's industry increased by 13.1% in the first three months of 2024 compared to the first quarter of 2023 (the sixth highest increase), compared to an average increase of 5.7% in the EU.

In construction, Hungarian wages rose by 16.9% in Q1 (6.1% in the EU), while in services by 13.4% (5.5% in the EU).

In both sectors, this is the third highest increase in the EU.

In the last quarter of 2023, Hungarian wages still grew at the second highest annual rate in the EU (16.4%), surpassed only by the Romanian figure (16.9%).

And less than a year ago, in the second quarter of 2023, wages in Hungary grew the fastest year-on-year (17.3%), which was not surprising given that Hungary had the highest inflation in the period under review.

According to the latest data by the Hungarian Central Statistical Office (KSH), gross earnings were 13.9% higher in March than a year earlier. This indicates that the rapid pace of wage growth of 14.6% seen at the beginning of the year is continuing, meaning that for the time being, companies that did not raise wages during the minimum wage hike last December or the general wage adjustment period in January this year are still raising wages substantially.

And if we compare the amount of wages in euros between EU member states, we see that according to Eurostat data for 2023,

the average hourly wage in Hungary was €11, the fourth lowest in the EU.

Hourly wages were lower only in Bulgaria (€8.1), Romania (€10.4) and Latvia (€10.7). As for hourly labour costs, Hungary's €12.8 last year was the third lowest in the EU, with only Bulgaria (€9.3) and Romania (€11) having lower hourly labour costs.

Overall, therefore, wages in the Eastern European region tend to grow faster than the EU average, but still lag far behind wage levels and labour costs in Western countries.