Solid increases in the minimum wage, minimal inflation – will 2014 finally be the year where private consumption drives growth?
Next to a re-industrialisation of the country, the economic policy of the Orbán government focuses on private consumption to stimulate growth. They didn’t find the instruments for this in the
arsenal of the neo-liberals, who claim that Hungary’s small economy cannot be compared with markets like Poland or Germany, which are able to get through crises with the support of domestic demand. Fidesz, on the other hand, is banking on a rising (minimum) wage, whose negative side-effects on the country’s competitiveness should be compensated for by the devaluation of the forint.
For the year 2013 the Central Statistics Office (KSH) reported an average gross wage of HUF 230,700 (about EUR 775) per month in Hungary. This amounted to net earnings of HUF 151,000, with white-collar workers bringing in about double as much as ordinary workers. With inflation hovering around zero and the number of employed at a high, this 3-5% wage increase must finally end up having some impact on private consumption.
That’s why it’s important to look behind the wage statistics. The KSH has drawn up separate statistics with and without fostered workers. Prime Minister Viktor Orbán has put an army of hundreds of thousands to service, sending them to take care of municipalities or back to school over the winter. This is the only way to reinsert people who have been without work or training for years into the primary labour market. Without these low earners (on average about HUF 77,000 gross) the average wage in the Hungarian economy would amount to about HUF 238,000 gross. This leaves about HUF 5,000 more of average net income every month.
If one makes a cross-section of society, it is health and social workers, as well as those working in the hospitality and forestry industries, who are among the most poorly paid (with HUF 150,000 gross monthly). Agriculture, celebrated by Fidesz as an engine of growth, is at about the same place as the construction industry, with about HUF 170-180,000. Commerce, education and logistics lie just under the average income, while industrial work and administration are slightly above it. Employees in the energy, IT and financial sectors are practically living in another world, earning well over HUF 400,000. These are only average values, however, and sociologists point out that about 60% of professional groups lie under the average.
Whoever is a full-time worker in Hungary today (for the most part this means more than eight -hour days and about 20 to 30 more working days than in Germany!), brings home between HUF 100,000 and HUF 300,000, according to sector – for an average of HUF 150,000, or less than EUR 500.
Thus, a Hungarian can only rarely afford to travel abroad for vacation, and a new car or home ownership remain utopian dreams for most. According to KSH, only 7,300 single family homes were purchased across the country in 2013. That private consumption has still not taken off as much as suggested by the percentage gain in average wages might have something to do with the brutal redistribution of incomes that followed the 2008 financial crisis. How and whether Viktor Orbán will come to terms with this dilemma will only be seen after the 6 April elections.