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Government proposes wage hikes

November 16th, 2016

A conservative commentator welcomes the government’s announcement of a six year massive wage hike cycle. He believes that this programme will increase Hungary’s competitiveness and increase the added value produced in the country.

Mihály Varga, Minister of National Economy announced that the government plans to raise the minimum wage by 12 per cent for unqualified workers and by 25 per cent for employees with secondary education. The government is also proposing to cut employers welfare contributions by 4 per cent. Minister Varga said that incremental minimum wage hikes and contribution cuts are to continue for six years as a result of which real incomes may rise by a total of 40 per cent by 2022.

Magyar Hírlap’s Csaba Szajlai welcomes the government’s decision to increase the minimum wage. The conservative business analyst remarks that in today’s Hungary economic growth is jeopardized by shortage of manpower  (see BudaPost August 17). Szajlai writes that, in the absence of strong unions, the government needs to take an active role in increasing wages. As the Hungarian economy is in good shape, the deficit is low and Hungary has been upgraded to investment grade by all three major credit rating companies, the announced wage hike does not threaten the budget or economic output. Szajlai thinks that higher wages can kick start structural change in the economy by giving companies an incentive to look for more qualified employees rather than try to profit from cheap labour. This, Szajlai believes, will increase Hungary’s competitiveness as well as the added value produced in the country.

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