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Minimum wage raised by 8 per cent

January 4th, 2020

A left-wing columnist thinks that, due to the higher than expected growth rate, the government should have raised wages by more than originally scheduled. He warns, nonetheless, that steady wage increases may hurt Hungary’s competitiveness.

In Népszava, Miklós Bonta lambasts the government for confining minimum wage hikes to the rate agreed with the trade unions and the employers’ organisations a year ago, although GDP growth has been higher than forecast at that time. The minimum wage was  raised by 8 per cent and amounts now to 161,000  Forints, 45 per cent higher than four years ago. This equals less than half (46 per cent) of the average wage nationwide. While reproaching the government its “insensitivity towards employees who have also contributed to the almost 5 per cent annual GDP growth”, Bonta remarks nevertheless that the steady wage hikes over the past four years have exposed the fragility of Hungary’s development structures. Foreign-owned assembly plants are a core factor in the Hungarian economy and one key reason why they are in Hungary is the relatively cheap manpower. As wages slowly approach western levels, that advantage will gradually diminish, while Hungarians working abroad might be lured back to find jobs at home. Bonta calls that “the trap of intermediate level wages”.

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