© Reuters. FILE PHOTO: Construction workers at the site of a renovated housing project in Budapest, Hungary, March 31, 2017. REUTERS/Bernadette Szabo
BUDAPEST (Reuters) – Hungary’s government and private sector employers have agreed on key terms for a nearly 20 percent increase in the minimum wage and the payment of wages to skilled workers in the 2022 elections, the Ministry of Innovation and Technology said on Wednesday.
The wage increases are part of Prime Minister Viktor Orban’s pre-election measures to boost economic growth and consumer spending at a time when inflation is rising, eroding some of the steep wage gains of the past few years.
Faced with the prospect of a close election next year, Orbán has showered voters with grants, including a $2 billion deduction in income tax for families, abolishing the entry-level income tax for careers and the payment of retirement benefits.
Under the agreement, the minimum monthly wage will rise to 200,000 fort ($645.72) from 167,400 fort from January, while the minimum wage for skilled workers will rise to 260,000 fort from 219,000, the government said.
“Tax cuts of more than 660 billion forints combined can help compensate employers adequately, which local businesses can use to raise wages,” the Ministry of Innovation and Technology said in a statement. She added that the wage agreement is likely to be signed by the middle of this month.
Economists at Takarik Bank said wage increases and tax cuts could lead to a more than 10% increase in net real wages next year. Employers are also under pressure due to a growing labor shortage in the wake of the coronavirus pandemic.
His chief economic aide said Orban’s fiscal stimulus measures would equal about 15% of GDP during the fourth quarter of this year and the first quarter of 2022.
The central bank, led by Urban ally Giorgi Matulci, has criticized the 2022 budget for being inflationary and adding unnecessary risks to the economy, which has already exceeded the level of production it had before the pandemic.
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