Wage boom looms in Hungary that would be hard to bear

This is a great opportunity to reach the 300,000 minimum wage,

which would be an increase of more than 12%, Róbert Zlati, president of the Hungarian Trade Union Confederation (MSzSz), told Portfolio. The significant raise is needed because we have not managed to improve our position in the EU ranking even by double-digit increases, so a significant hike is justified, he explained, arguing for a larger wage increase than inflation.

In order to maintain real earnings growth of 5-6% with inflation at around 5%, gross wage growth of around 10% would be needed by 2025,

argued in favour of a double-digit hike Imre Palkovics, President of the National Association of Workers' Councils (MOSZ).

Employers' representatives have not yet formulated a concrete proposal for wage increases, nor have they mentioned anything concrete in response to Portfolio's question, only that

despite falling inflation, this year's wage negotiations may be more difficult than last year's.

"Negotiations have only just started, so it is not yet time to reveal specific figures. What is already clear is that we will implement a significant wage increase this year, supported by the increase in minimum wage rates introduced last December," said László Perlusz, secretary general of the National Association of Entrepreneurs and Employers (VOSZ).

"The minimum wage has risen by 15%, the guaranteed wage minimum by 10% and average wage growth is closer to 15%, while inflation is hovering around 4%. So we can expect massive real wage growth this year, which is significant even taking into account the offsetting effect of last year's small decline in real wages," he explained.

his places a very heavy - in many cases unbearable - burden on businesses, especially as demand and orders are still waiting to pick up more strongly,

said Perlusz. He added that revenues are below the level hoped for. "We also see no major improvement in labour productivity," he said, arguing for smaller wage increases." So wage costs are rising more than either revenues or productivity would justify. Company closures in retail are part of this process," he said.

The conditions of a high-pressure economy are expected to persist, so great care must be taken when setting the minimum wage requirements for next year to prevent mass company and job losses,

Perlusz argued for a tamed wage increase.

According to Imre Palkovics, President of the National Association of Workers' Councils (MOSZ), it is unlikely that minimum wages in Hungary will approach Western European levels for some time. This is not an expectation of the EU.

When setting minimum wages and bringing them closer to average wages, the incomes attainable in Hungary should be taken into account. "As we expect real wages to rise in the coming years, this means that by 2027 the minimum mandatory wage should be between HUF 320,000 and HUF 360,000 gross," said Palkovics, detailing the expected hike to wages due to the EU wage guidelines.

Since employers are obliged to pay the minimum wage for unskilled workers and the guaranteed wage minimum for skilled workers for eight hours of work a day, the big question is how the lowest wage will be calculated from 2027 onwards, compared to the average and median wages.

One of the proposals is to increase the minimum wage more than the guaranteed wage minimum, and to merge the two minimum wage items by 2027.

Of course, this would certainly be to the detriment of those employed on the guaranteed wage minimum, which is why trade unions are not really enthusiastic about the solution.

A significantly greater increase to the minimum wage is also needed to bring it closer to the requirements of the EU minimum wage directive. We have never supported the merging of the two minimum wages,

said Róbert Zlati, president of the Hungarian Trade Union Confederation (MSzSz).

"The EU directive leaves it up to member states to set the adequacy value of minimum wages, but proposes so-called benchmarks. The minimum wage should be 50% of the average wage or 60% of the median wage. We would not reach these benchmarks by 2025 with the HUF 300,000 gross, but only with further, more intensive increases over two to three years," he said.

Negotiations have started, and we are currently working on clarifying the framework conditions and the legal environment. Further data, impact assessments and clarification of conditions are needed for the national adaptation of the EU directive, and we are at the beginning of this work,

said László Perlusz.

"The minimum wage directive gives member states a great deal of freedom to set minimum rates. We have the opportunity to create a truly tailor-made set of conditions - the one best suited to the development of the Hungarian economy - which is not constrained by short-term interests, but after thorough negotiations, is aimed at Hungary's long-term competitiveness," he said.

"We are in favour of simpler and more transparent systems, but many believe that the guaranteed wage minimum is a valuable tradition and an important tool for the recognition of qualifications in our country," he added.

Further steps should also take into account that, in addition to the 250,000 to 300,000 workers on the minimum wage, 600,000 to 700,000 are working for the significantly higher guaranteed wage minimum, so the treatment of the two wage rates requires careful analysis and coordination,

Perlusz mentioned some crucial considerations.

The EU directive also has an objective that 80% of wages should be determined on the basis of collective agreements.

This is not easy because different sectors of the economy can generate different levels of wages. We are still a long way from this target in Hungary, where barely 18% of contracts are covered by collective agreements.

Unfortunately, the functioning of the sectoral dialogue committees and with it the system of sectoral collective agreements has not been implemented, despite the intention expressed at the time of our accession to the EU, and has not been established even today,

stressed Róbert Zlati.

"There have been some sectoral collective agreements, but only one exists today, in the electricity industry. Support for trade unions has also been waning recently and employer representation has not been achieved. So changes are needed on both sides."

The union leader also noted that the directive must be transposed into Hungarian law by 15 November this year.

This would mean first designating a forum where the social partners negotiate the minimum wage. In addition to the current mandate in principle, the government would also provide a legal framework for this through the Permanent Consultation Forum of the Business Sector and the Government (VKF), where wage negotiations take place in any case. However, there does not seem to be much willingness on the part of the government to negotiate different wage agreements in the various industries in so-called sectoral dialogue committees.  

Employers' representatives are not completely opposed to sectoral dialogue, but argue that the VKF has always been the right arena for wage bargaining.

"Wage negotiations have been taking place for 12 years in the VKF, and the results so far have served the country's development excellently. Therefore, I can say with well-founded optimism that on this basis - with the right joint action and support from economic policy - there is a chance to achieve significant progress, even at sectoral level", concluded László Perlusz.

Employers argue that setting a higher minimum wage than is possible will result in the disappearance of businesses and jobs, and the emergence of a grey or black economy.

In any case, the EU directive requires governments, together with the social partners, to draw up an action plan on the steps needed to achieve 80% collective agreement coverage. In addition, governments are required to report to the European Commission every two years on the level of minimum wages and the implementation of the action plan. The action plan must be reviewed at least every five years in all circumstances.

The National Federation of Workers' Councils (MOSZ) has developed a package of proposals for further negotiations. This includes their position that the guaranteed wage minimum should be the new minimum wage, even from 2026.

they believe there could be exceptions downwards, e.g. in the absence of appropriate qualifications, for certain (sub)sectors or even for certain jobs.

However, the "downward deviation" would have to be justified by the employer. And the Hungarian Chamber of Commerce and Industry (HCCI or MKIK) would be involved in the collective agreement process, with a specific right to conclude contracts, while at the same time setting out the parties' obligation to negotiate.

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