BUDAPEST: Hungary will raise its minimum wage levels sharply but cut back on employers’ payroll taxes under a deal reached on Tuesday between government and employers designed to combat a severe labour shortage.
The state news agency MTI quoted Economy Minister Mihaly Varga as saying the minimum wage will increase by 15 per cent in 2017 and another 8 per cent in 2018. The payroll tax paid by employers will be cut by 5 and 2 per centage points at the same time. For skilled workers the guaranteed minimum wage, a higher wage category, will increase by 25 per cent in 2017, and another 12 per cent in 2018.
The higher wages are designed to attract workers who have left the country back to Hungary. The government also wants to make it easier to bring in foreign workers from neighbouring countries with Hungarian-speaking populations, such as Ukraine. Peter Virovacz, analyst of ING Bank, said the move was a step in the right direction, but may have come too late.
“This will not make many more people appear in the labour market,” he said. “For that, a modernisation of education and changes in public employment are needed.”
Wage growth has been fairly high in Hungary at a time of no inflation. The unemployment rate has plummeted with the economic recovery sucking up any available labour and workers leaving for higher wages in Western Europe. In September, annual gross wage growth was 6.7 per cent. Unemployment came in at 4.9 per cent.
If gross wage growth in the first nine months of next year exceeds 11 per cent, another 0.5 per centage point reduction in payroll taxes kicks in, Varga said.
