The historic wage deal concluded between the Government and negotiation partners is not only about increasing wages, but also about boosting efficiency and competitiveness – steps that have not been taken in the past twenty-six years, Minister for National Economy Mihály Varga said at the National Assembly, during a debate on a Government proposal concerning the agreement.

Presenting details of the proposal on amending certain financial regulations, Mihály Varga stressed that the motion has been built upon the achievements of recent years and the opportunities of years ahead.

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Being aware of a solid economic performance and stable public finances, participants of the negotiations with employer and employee organizations were aiming for a wage agreement of a longer time frame, of at least six years, which could address the issue of not only wages but efficiency and productivity as well.

The outcome of talks was a six-year wage agreement, a decision to reduce employer burdens by cutting the corporate income tax rate and employer payroll contributions, he noted.  The rate of corporate income tax is to be reduced from the current 10 percent and 19 percent to a flat rate of 9 percent, from which both SMEs and large enterprises can benefit. As Mihály Varga pointed out, the reduction of this tax rate will leave HUF 30bn more at SMEs, and even more at large enterprises.

The rate of social contributions is also to be lowered from the current 27 percent to 22 percent next year and to 20 percent by 2020, the Minister said.

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The Government also undertook to further reduce this rate by 0.5 percentage points, to 19.5 percent, provided gross wages in the private sector rise by at least 11 percent in 2017 compared to the previous year.

Speaking of wage hikes, the Minister said that the minimum wage was to rise by 15 percent in 2017 and by another 8 percent in 2018, while the guaranteed minimum wage was set to increase by 25 percent in 2017 and by another 12 percent in 2018. This is going to enable an overall real wage increase of 40 percent, he added.

In his overview of economic processes in recent years, the Minister said that the Hungarian economy had emerged from the crisis in 2013 and it was after that placed on an ascending growth path; public finances have been consolidated, the budget deficit has been reduced to below 3 percent of GDP and the rate of government debt has also been cut step by step. Economic expansion, he stated, has increased the number of jobs. The number of people in employment is now 695 thousand higher than it was six years ago, and the unemployment rate has fallen from 12 percent to below 5 percent. This year, net wages rose by 7.6 percent “without any Government meddling,” Mihály Varga said.

(Ministry for National Economy)