Wage deal reached

Budapest, November 22 (MTI) – Minimum wages for unskilled workers will be raised by 15 percent and for skilled workers by 25 percent in 2017, according to an agreement the government reached in talks with social partners, the economy minister announced on Tuesday.

Mihály Varga said that in 2018 the minimum wages will be increased by a further 8 and 12 percent, respectively. In 2017 payroll taxes will be cut by 5 percent and by a further 2 percentage points the following year.

The payroll tax could be reduced by a further half percentage point in 2018 if gross wage growth exceeds 11 percent in January-September of next year.

Speaking after the meeting, Varga noted that the government had also committed to cutting the corporate tax rate to 9 percent next year.

The corporate tax rate now stands at 10 percent on a tax base up to 500 million forints and 19 percent above that.

Varga said the government’s measures to improve competitiveness and raise wages provided a foundation to achieve stronger economic growth over the 2-3 percent rate at present.

László Kordás, the head of unions association MaSzSz, said today’s agreement would raise the minimum wage to the subsistence level by 2018. Unions want to see wage growth for pay categories over the minimum wage in the double digits, too, he added.

Péter Futó, chairman of employers’ association MGyOSz, said the minimum wage increases would be a big burden for businesses, but added that they would contribute to improving the country’s competitiveness as well as preserving the pool of skilled labourers.

Varga said the government hoped to submit a bill on Wednesday to cement the deal into law. Parliament is expected to fast-track the bill, he added.

He acknowledged that the measures would require a recalculation of inflation forecasts, but said those, as well as other macroeconomic parameters that need adjusting, would not be changed in next year’s budget. The government can amend the projections next March, if necessary, he added.

The National Bank of Hungary said in its latest quarterly Inflation Report, released in September, that inflationary pressure from rising household consumption resulting from higher wage growth would “remain moderate”, according to the baseline project. However, the NBH also considered an alternative scenario in which pay rises are higher and add to household spending. In this scenario, achieving the 3 percent medium-term inflation target would be “ensured by a monetary policy that is tighter than projected in the baseline scenario”, the central bank said.