Wages increase by 14% in Hungary, with inflation at only 2.3%

Hungarians are seeing a major increase in their wages, with the average gross monthly salary now standing at 297,000 forints, or US$1,154. This represents a 14.4% increase compared to 2016 figures released by the Central Statistical Office (KSH). Inflation in Hungary is at just 2.3%. The bulk of the increase is connected to the 15% to 25% rise in the minimum wage, in large part within the public sector. But an equally important factor is the acute labour shortage in Hungary, which has necessitated wage increases in many areas of the economy, including in the service and hospitality sectors. Mihály Varga, Minister of the National Economy, predicts that it is realistic to expect wages to increase by an additional 40% over the next six years.

Due to the acute labour shortage, the Budapest Transportation Company has had to post ads on all of its buses, informing passengers of the benefits they can count on and a net starting salary of 200,000 forints if they decide to become a bus driver.

Hungarians employed in the financial sector, as well as in the fields of insurance, earn the highest incomes. The average monthly wage in these sectors is now at 574,000 forints, or US$2,226. The lowest earners, however, are those employed in humanities or social sciences research, in health care and education. In these areas, the average monthly salary is merely 179,800 forints, or US$697. Those who work for NGOs earn below average wages as well, currently standing at 250,000, or US$970.

Péter Virovácz, an analyst with ING, predicted that marked increases in the average wage will not only continue for the remainder of the year, but they are likely to exceed current predictions. He suggests that the increasingly acute labour shortage is the most important factor driving up wages to this extent. András Horváth, an analyst with Takarékbank, predicts that wages will continue to rise at current rates in 2018, thanks in large part to an additional 8% to 12% increase in the minimum wage, as well as the labour shortage.

That said, some analysts, including Gergely Ürmössy of Erste Bank, predict that inflation will rise in 2018 to 3.4%. Much of this will be due to a surge in consumer spending, due to rapidly increasing wages in many sectors, as well as the higher cost of producing goods and offering services.

There is little question that for the foreseeable future, Hungarian employees and professionals have the upper hand when it comes to competing job offers and negotiating with their employer.

3 Comments

  1. Miklos Bánfi says:

    Very good:) But why am I a bit sceptical and afraid as an economist when I am hearing that the productivity is in a very low level.

  2. This may cause intense pain to all those who zealously oppose Hungary’s current government, but fact is that in 2010 Hungary was an economic mess, with huge debt piles at government and consumer levels. To make it worse, it was denominated in FX, making it toxic to the economy. Fact is that the current government did pull it back from the brink and set Hungary’s economy back on the right track. Wages are rising at a robust pace, employment is up significantly, even when factoring out fostered workers. The debt/GDP continues to gradually decline, and there is no new consumer debt bubble forming. When looking at the 2010 starting point, Hungary’s current recovery has been impressive. I honestly did not believe that it will easily recover, especially given the overall European and global economic environment.

  3. Stranded in Sopron says:

    “There is little question that for the foreseeable future, Hungarian employees and professionals have the upper hand when it comes to competing job offers and negotiating with their employer.”

    Hurrah! Welcome to the Free Market, one of the indirect effects of EU membership.
    Very little to do with the regime`s economic policy, although to be honest the more of Hungary`s capable and intelligent, the better for Orban because “capable and intelligent” is not the characteristic associated with the Fidesz target vote.

    Where there is a danger is in the health and education sector and I am not sure any government could solve the increasingly speedy collapse of those areas.

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