How many forints is the net gross minimum wage of HUF 200,000?

In recent days, the amount of the minimum wage in 2022 has once again come into focus. Most recently, after the consultation between Mihály Varga, Minister of Finance, and László Parragh, President of the Hungarian Chamber of Commerce and Industry, more and more people came to the conclusion that it has essentially almost decided that the minimum wage will be HUF 200,000 gross next year.

If, on the other hand, we accept that from 2022 the amount of the gross minimum wage will be around HUF 200,000, then

logically, the question may arise in many: how much of all of this remains net?

Hundreds of thousands of people are directly interested in the answer, because, as the Portfolio wrote earlier: in Hungary, more than 850,000 employees in the corporate sector are affected by the issue of the minimum wage and the guaranteed minimum wage. The issue of a regular increase in the minimum wage is therefore significant in itself in this respect as well. This also means that the increase of the minimum wage and the guaranteed minimum wage directly affects 34% of those employed in the corporate sector, ie every third employee of the companies receives the lowest salary in Hungary. (There is no mention yet of what will happen to the guaranteed minimum wage in connection with the 2022 increase in the minimum wage.) It is important to note that this only covers the corporate sector (it is worth looking at what the minimum wage earners look on the map by county), there may also be hundreds of thousands in the public sector who receive the lowest wages. In total, we estimate that the earnings of 1 million people are directly determined by the outcome of a process of conciliation between employers, employees and the government. And then the indirect, potentially spill-over effect of the increase in the minimum wage was not even mentioned.

Calculating the currently known tax rules, if the gross minimum wage is HUF 200,000 next year, then its (calculated without the effect of the family tax credit)

the net amount will be 133 thousand forints.

In other words, an employee earning the minimum wage may earn HUF 21,700 better per month on a net basis next year, so his income may be HUF 260,400 higher annually than this year.

However, the largest trade union interest representation no longer formulated a gross minimum wage expectation of HUF 200,000, but a gross minimum wage of HUF 225,000. This would correspond to an annual increase of 34.4% and in this case the net monthly earnings of the employees (calculated without discounts) would be HUF 149,625. In other words, in this case, there would be HUF 38,325 more per month in the pockets of the minimum wage workers (compared to the figures of 2020), which could mean an increase of HUF 460 thousand on an annual basis compared to this year.

Development of the amount of the minimum wage
Pace of raising the minimum wage Gross minimum wage amount (thousand HUF) Net minimum wage amount (thousand HUF) Net minimum wage increase (thousand HUF, year / year)
2018 8% 138 92 7
2019 8% 149 99 7
2020 8% 161 107 8
2021 4% 167,4 111,3 4,4
2022* 19,5% 200,0 133,0 21,7
Source: Portfolio; * assumption

The wait is huge

This time, if it can be said, greater than ever anticipation and excitement precedes the first round of deliberations, as the minimum wage of HUF 200,000 will be discussed, which has generated huge debates not only between the various sides, but also within the employer side. Unsurprisingly, the Tuesday conference organized by the National Association of Workers’ Councils revealed that the fault lines between VKF actors still exist on the issue.

As is well known, most recently László Parragh, President of the Hungarian Chamber of Commerce and Industry (with whom Prime Minister Viktor Orbán regularly discusses economic issues) dropped the bomb when he told the Portfolio that the Hungarian economy could withstand gross the minimum wage should increase to one thousand forints. Parragh believes we need to break with the thinking of the last 30 years that cheap labor is the key to competitiveness and move to a European path that looks at the issue of wages from several perspectives – efficiency, productivity, well-being. According to him, the formation of the minimum wage should not be seen as a cost element, but as a tool for economic development.

László Parragh’s proposal resonated. In an interview with Portfolio, for example, Ferenc Rolek, the vice-president of the organization, drew attention to the fact that if the gross minimum wage of HUF 200,000 is achieved without a very significant socio-key reduction, many companies will find themselves in a difficult situation. may result in bankruptcies.

Subsequently, the ÁFEOSZ-COOP Association, MGYOSZ and VOSZ issued a joint statement stressing that a possible forced wage increase (in terms of minimum wages), detached from economic realities, would disrupt the economic equilibrium, break the growth path and it would lead to a deterioration in the employment situation, which would ultimately jeopardize social inclusion and the level of welfare already achieved. The successful agreements of previous years prove that, although the diverse views of many actors in the economy are important, formal wage negotiations should continue to take place on the platform (VKF) set up for this purpose with the exclusive participation of employers ‘and workers’ representatives and the government. The representative employers’ representatives – the ÁFEOSZ-COOP Association, MGYOSZ and VOSZ – appreciate the consensual results of the previous tripartite consultations with the trade unions and the government, and want to continue the wage negotiations with the usual, high-quality and professional basis. We consider the unprofessional, politically and power-driven, unprofessional manifestations of employers’ organizations to be harmful, the ÁFEOSZ-COOP Association, MGYOSZ and VOSZ said – sending a message to the president of the chamber.

By Tuesday morning, it was revealed that, based on the national consultation that had just ended, it was over 90% in favor of a minimum wage of 200,000, a PIT refund and an extension of the credit moratorium.

Hungarian macroeconomic analysts also explained their position on the high minimum wage increase in detail at the conference of the National Association of Workers’ Councils. In a panel discussion at the conference, economists believed that a 20% increase in the minimum wage would blow inflation. The majority of experts explain the poor Hungarian productivity that it is not possible to raise the minimum wage so quickly.

In this heightened mood, according to our information, the first meeting of the VKF on the issue of the 2022 minimum wage will take place on 14 September.

Cover image source: Getty Images


Source: Portfolio.hu – Gazdaság by www.portfolio.hu.

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