Hungarian wage agreement at risk as government intervention looms

Business representatives and employee organisations have been saying for months that next year's 13% minimum wage increase is unfeasible due to Hungary's worse-than-expected economic situation. The Permanent Consultation Forum of the Competition Sector and the Government signed a three-year wage agreement last year, based on the assumption that wages could increase significantly alongside dynamic GDP growth.

However, the first quarter proved disappointing, and the second quarter also showed weak GDP figures. Instead of the previously expected 2-3%, GDP growth this year might remain well below 1%. As a result, companies will be unable to implement substantial wage increases.

Although the government long maintained that no changes were needed to the wage agreement, they now see the need for intervention. Following several meetings at the Ministry of National Economy last week, it was revealed that the social contribution tax might be reduced by 1 percentage point.

Minister of National Economy Márton Nagy announced on his social media page that an industrial and job protection action plan is being prepared, following discussions with the leaders of the Hungarian Chamber of Commerce and Industry. The announcement revealed that several specific proposals were made to support domestic companies.

Following today's wage data, the Ministry of National Economy issued another statement: "The European Union's flawed customs agreement is causing serious damage to both Hungarian and EU businesses,

threatening industry, jobs, and the implementation of the three-year wage agreement.

The government has therefore immediately begun developing an industry and job protection action plan to protect the Hungarian economy, jobs, and wage increases."

The statement continues: "During the development of the industrial and job protection action plan, the Ministry of Economic Development held discussions with the Hungarian Chamber of Commerce and Industry and the Permanent Consultation Forum of the Competition Sector and the Government. The Government is open to further negotiations and ready to take all necessary measures to protect wages, jobs and Hungarian industry." This suggests that government interventions may be forthcoming to maintain the rapid wage dynamics in the coming period.

Cover photo (for illustration purposes only): Getty Images