Economy 25 September 2025, 4:25pm

Even workers are feeling the effects of Hungary's economic problems

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According to the latest quarterly Inflation Report by the National Bank of Hungary (MNB), the Hungarian labour market is already showing signs of adapting to the prolonged weak domestic economy persistently subdued external demand. Companies are not hiring new staff, are reducing the number of advertised vacancies and are often not filling positions left vacant by retirees or for other reasons. Some companies have already laid off staff and wage growth is slowing.

Labour market adjustment to the prolonged period of more subdued economic activity can already be observed at the level of employment in the national economy as well,

the MNB states in its Inflation Report.

At present, one key labour market issue is how employment levels will respond to the cyclically weak performance of the real economy. Signs of adjustments on the intensive margin can already be seen since the end of 2023, when the number of hours worked fell and labour capacity utilisation slackened, due to the decline in output. Due to low capacity utilisation,

companies are not recruiting new staff, they advertise less job vacancies, often do not fill the positions of employees leaving for retirement or other reasons, and there were already layoffs at some companies.

As a result, labour market tightness has eased.

"In addition to manufacturing, the decline in employment now also being seen in the market services sector. Until recently, adjustment on the extensive margin, in the form of a reduction in employment, was seen only in certain sectors (primarily in manufacturing), but in the second quarter of this year domestic employment fell by 49,000 on an annual basis, driven by developments in a broader range of sectors.

"The manufacturing sector saw an annual decline in employment in 2024, as this sector was impacted the most by slack international economic activity and uncertainty about global trade. In the second quarter, signs of declining labour demand were seen in the market services sector as well. According to the latest data, the number of employed did not continue to fall in July, but the figure remains 30,000 lower versus the same period of last year.

In parallel with the easing of labour market tightness, wage growth continued to decelerate in the private sector.

"Private sector wage growth has been slowing since May 2025, with an increase of 9.0% registered for the first seven months of this year, compared to annual average growth of 12.0% in 2024. In manufacturing, wages have increased less on average this year than in market services, meaning that companies’ adjustment can be seen in wage increases.

Around 5% of employees earn the minimum wage and
9% earn the guaranteed minimum wage;
including those with earnings in between, the share of employees directly affected by the increase in the mandatory minimum wages amounts to 17%.

"However, the increase in regulated wages may also affect higher earning groups, due to efforts to avoid wage tensions arising as a result of wage compression; according to the MNB's estimate, this may influence of the development of wages up to the average wage. The exact level of the increase in the guaranteed minimum wage in 2026 and 2027, affecting a larger group of employees, was not agreed last November, but according to the text of the agreement it will be determined based on developments in productivity and inflation."

Although the body responsible for setting the minimum wage and the minimum wage for skilled workers met last week, negotiations are still far from over. At the Permanent Consultation Forum between the Competitive Sector and the Government (VKF), employers and employees assessed each other's positions. However, it is clear that they are far apart. Based on these negotiations, the proposed 13% increase to the minimum wage is in jeopardy due to the poor performance of the economy.

"The increase in regulated wages may primarily place a greater burden on the SME sector and manufacturing. Large corporates are less exposed to minimum wage increases because of their higher average wage levels. The number of people earning the minimum wage and guaranteed minimum wage is highest in manufacturing. Thus, raising regulated wages may be a major challenge for manufacturing, which is the most affected by external trade uncertainties and the weak performance of the European economy."

The number of minimum wage earners is also high in trade, construction and agriculture, while
the number of people earning the guaranteed wage minimum is significant in trade, healthcare and construction.

"Raising minimum statutory wages in excess of the economic fundamentals may also cause difficulties in branches of the market services sector where the number of minimum statutory wage earners is high and where there is already adjustment along the extensive margin to the real economic cycle (e.g. accommodation and food services; administrative and support service activities). An increase in labour costs outpacing productivity may pose a risk to companies’ financial management also in light of the labour hoarding phenomenon observed in several sectors," the MNB staff concluded.

Cover image (for illustration purposes only): Getty Images