Perhaps few people remember that in 2022 the average salary increased by more than 17%. This is no wonder, since the inflationary crisis began that year, which made life increasingly difficult for many. The next year’s wage increase of over 14% did not cover inflation, so despite the large increase in average earnings, the real wages of workers fell. The year 2024 brought the turning point in terms of monetary deterioration, when inflation fell in addition to high nominal wage dynamics.
This year brought such a large increase in real wages, which has hardly been seen in recent decades.
As can be seen in the figure below, it is really rare that the purchasing power of earnings increases by 8-10%. The purchasing power of earnings last increased at a similarly high rate in 2017, and before that in 2002-03.
The problem now, however, is that consumer confidence is still extremely low, despite the fact that the real wage has increased a lot. This is largely due to the fact that the previous year brought a decline in terms of real wages, the price level remained high, so the population feels little about the improvement in their situation. In addition, there are large differences behind the national average. Almost 20% of people will see their real wages fall again this year, and the purchasing power of more than 10% of people will barely increase.
according to most prognoses, in 2025 the nominal wage dynamics of more than 10%, which lasted for many years, will also come to an end.
According to the consensus of Portfolio’s analysts, the average gross salary in Hungary may increase by 8.5% next year, while expert forecasts range between 7.2 and 10%. Experts believe that a 9% increase in the minimum wage and a 7% increase in the guaranteed minimum wage will have a big impact on the development of the median and average wages.
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Meanwhile, the number of vacant positions is no longer as high as it was before (the labor shortage has therefore decreased somewhat), so this factor may have a somewhat smaller wage-inflating effect.
If the expectations that the big factories will start (BMW, CATL, BYD) are real, then they can have a very serious wage-increasing effect, especially among blue-collar workers
he told Portfolio earlier Péter Virovácz, ING Bank chief economist.
“Furthermore, historical experience shows that in the case of a labor shortage, the increase in the average wage was typically around or above the minimum wage,” said Péter Virovácz. However, according to him, there is still a labor shortage in Hungary, although not as large as it was a year or two ago.
Barna Szabó, the Balance Institute according to its leading analyst, the long-standing tightness of the labor market has now significantly eased. Since the second quarter of 2022, the proportion of vacant positions has continuously decreased, from 3 percent to 2.2 percent.
This indicates that jobseekers have fewer and fewer opportunities, and the bargaining position of employees is deteriorating during wage negotiations.
he thought.
“According to the labor market data, the tightness of the labor market decreased noticeably in the previous period, there is less competition for labor force, which slows down the growth of wages. At the same time, it is worth mentioning the impact of the gradually completed industrial investments, which can create significant demand on the labor market. This effect is still quite uncertain,” he said Gábor Regős, Gránit Fund Manager chief economist.
According to the latest forecasts, inflation may be around 4% in 2025, which may be very close to this year’s rate of price increase.
In other words, there is no need to fear inflation as high as that which characterized the years 2022-23, so the purchasing power of earnings can increase. However, due to the slowdown in nominal wage dynamics, experts expect a much lower increase of around 4% by 2025 after the outstanding real wage growth this year. So the question is, at what pace consumption can grow, if the much faster real wage growth this year did not explode the turnover of the stores. At the same time, the potential decrease in the savings rate, the mood-enhancing effect of the sustained wage increase, and the high interest income at the beginning of the year (from inflation-tracking government securities) can all boost households’ willingness to spend.
The cover image is an illustration. Cover image source: Getty Images
Source: www.portfolio.hu
