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Hungarian Wages Outpace Inflation by Sven R. Larson

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Hungarian Wages Outpace Inflation

As inflation continues to rise in most European countries, Hungarian workers can also look forward to rising wages.

The Budapest Business Journal, BBJ, reports:

The average gross hourly pay rate for skilled and unskilled blue-collar workers in Hungary climbed 10.4% … in the first quarter from the same period a year earlier.

In the southwest part of the country, where wages are lower than the national average, wages grew by 16% year over year. 

Part of the reason for the wage increase, the BBJ explains, is a rise in the statutory minimum wage, which according to the journal has risen 19% since the start of the year. TradingEconomics reports a rise in the monthly minimum wage by 13.8% since the third quarter of 2021.

In addition to statutory changes, wages in the Hungarian labor market are also affected by strong demand for labor. According to Eurostat, Hungary is one of only six European countries with an unemployment rate below 4%. With an unemployment rate at 3.7%, Hungary is just ahead of the 3.8% rate for the United States. 

The other five European countries with sub-4% unemployment are: Czechia (2.4%), Poland (3.0%), Germany and Malta (3.1%), and the Netherlands (3.4%). 

Unemployment for the 27-member European Union as a whole was 6.2%, compared to 6.8% for the 19-member euro zone.

The reported growth rates in Hungarian wages put worker earnings ahead of inflation. According to Eurostat’s HICP inflation index, consumer-price inflation was 8.3% in the first quarter of 2022. For the workforce category cited by BBJ, this means a real-wage increase by 2.1 percentage points. 

The outlook for real wages in Hungary is strong, as inflation appears to be stabilizing. In the last six months of 2021, inflation accelerated from 5.3% in June to 7.4% in December, but has climbed only modestly since then. By contrast, the euro zone has almost caught up with Hungary, exhibiting an inflation rate of 7.4% in March 2022. This is up from 5% in December.

Sven R. Larson is a political economist and author. He received a Ph.D. in Economics from Roskilde University, Denmark. Originally from Sweden, he lives in America where for the past 16 years he has worked in politics and public policy. He has written several books, including Democracy or Socialism: The Fateful Question for America in 2024.