Hungarian gov't, employers, unions, sign accord on record minimum wage hikes

Representatives of Hungary's government, employers and unions signed an agreement here on Thursday granting record minimum wage hikes in 2017 and 2018 along with cuts in taxes and social contributions.

Prime Minister Viktor Orban addressed the gathering, saying that with the new salaries not only were there jobs available, but it would be worthwhile for people to work.

Noting that the salary increases were the result of actual economic performance, he pointed out that nowadays there were plenty of jobs as opposed to six years ago when the struggle was to prevent the economy from collapsing.

Current economic policy, he said, rests on the presumption that if they have enough work, they have everything. Granted, Orban said, not everyone can get the job they want, or even work in the profession they studied for, but anyone who really wants to work will find employment.

The prime minister noted that employers were granted payroll and other tax cuts in exchange for the wage hikes. Small and medium sized enterprises (SMEs) will find the cuts to be substantial, he added.

Meanwhile, he said the world was on the brink of a technological revolution, or as he put it, a new industrial revolution.

The technological changes underway will change many things in Hungary and elsewhere, and knowledge of this is what shapes Hungary's new economic policy, Orban said. The current agreement sets the conditions for entering the new industrial revolution and making sure Hungary has a chance to keep up.

Economy Minister Mihaly Varga called the move an exceptional, one-of-a-kind move, since it actually covered a six-year framework. This agreement, he said, was the first document of a new era in which no one knows exactly what to expect.

Peter Lakatos, vice president of the Confederation of Hungarian Employers and Industrialists, warned that the numbers were calculated based on a far more efficient economy than existed at present, and it would require efforts on the part of the government, employers, and employees alike to achieve it.

He pointed out that there had not been enough time for modeling the changes, so exactly how they would affect small businesses, multinationals, Hungarian big business and services was not yet clear.

He worried that some employers might choose to hire workers "off the books" and that the efficiency gap between Hungarian and foreign business might widen.

Imre Palkovics, president of the National Federation of Workers' Councils said that for the first time, salaries were becoming a market factor in Hungary. But he also warned that a great deal of effort would be required to boost the real value of wages and salaries by 30 to 40 percent over the next six years as envisaged.

Palkovics also pointed out that while Hungary's gross domestic product (GDP) was 60 percent of the European Union (EU) average, current wages and salaries were far below that. At the same time he applauded the fact that with the wage hikes, the net minimum wage would finally equal the minimum subsistence level.

Under the agreement, in 2017 the minimum wage will go up by 15 percent, while the wage minimum for work requiring at least a secondary education will rise by 25 percent, with further increases of 8 and 12 percent in 2018. Employer payroll on salaries will decline by five percentage points in 2017 and a further two percentage points in 2018. Endit