Surprise Surge in Hungarian Net Wages

As more and more endebted governments find out that most of their expenses are wages paid to civil servants, public employees and a wage cost base for state owned enterprises, it is rather surprising to see that Hungarian net wages have grown in these sectors dramatically. Net wages are up by 4.2% in the private sector and 8.9% in the public sector after netting for some one-off payments.

Most of the net wage surge is do to a personal income tax reduction by the outgoing government, which was performed despite the dire state of the national budget in order to improve tax paying discipline. The public worker pay is up by 11.9 on a year-on-year basis but only because the government rescheduled some items from 2009.

If the government was right and the surge would be due to an increased tax base (i.e. non-tax paying illegal work shifted towards legalized income) the statistics would be most welcome. However, as such effects are unlikely to happen within the public institutions (well, who knows?) it is more likely that the wage increase will bite into the competitiveness of the national economy.