Skilled Heads Still Hunted on the Hungarian Labor Market
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The fear of recession brings a thaw to the labor market. Large companies are expected to start hiring again, but the lack of skilled workers remains a consistent hurdle on the market. Inflation is not making things easier, as companies need to make more revenue to raise wages and avoid employees leaving.
Since our last edition of HR Matters, inflation has continued to exert a strong influence on the labor market, directly or indirectly. Salaries and price growth have fueled one another; according to the EU statistical agency Eurostat, average hourly wages and salaries increased by 16.4% in Hungary last year, the fastest rate in the European Union. In a regional comparison, average hourly wages and salaries rose by 4.7% in the Czech Republic, 11.7% in Poland, and 6.1% in Slovakia.
It seems, however, that employees are still not happy with their revenue growth, as between January and March this year, the number of job seeker applications posted on the job portal profession.hu increased significantly, by 44% year-on-year.
Meanwhile, the labor shortage seems to be easing on the employer side, with the volume of employer advertisements for open positions falling by 18% compared to Q1 2022. This is a median figure, and the situation regarding specific professions shows a different picture: the number of openings for jobs in law, legal consulting, education, science and sport climbed, while numbers in all other areas fell from a year earlier, profession.hu said.
The criteria for job selection confirms salary as being the main driver for searches in Hungary: 85% of employees consider this their top priority, according to a survey conducted by Randstad, the international recruitment agency. Besides salary, Hungarians also value pleasant working environments and long-term job security.
Price Rises Falling
Economic research institute GKI revealed a positive trend, which seems to have stabilized for six months now: a decreasing rate in price rises. In commerce, only a quarter of companies plan price raises in the next three months. Compared to March, this figure has shrunk by 13 percentage points, while those looking to lower prices stands at 10%, as it was in March, GKI says.
But how does this compare to salary growth? According to the Central Statistical Office (KSH), in February 2023, average wages for full-time employees were:
• gross wage: HUF 531,200, a 0.8% growth, year-on-year;
• net wage: HUF 366,400
• real value of wages: -19.6%, with inflation at 25.4%
The fall of real wages has been continuous for six months and has increased from 1.9% in September last year to 7.6% in January. The lowest salary raises were recorded in the health sector (4.3%) and in arts, recreation and entertainment (7.6%).
The decrease in real wages has also been recorded in a survey conducted in February by labor force services provider Trenkwalder. Based on data provided by 500 respondents in the private sector, 43% are unsatisfied with their salaries, and 17% are not expecting any raise at all this year.
As for what amount would be acceptable in the case of a raise, the majority indicated 20-30%. But they do not expect this to happen, and 55% of the respondents count on a deterioration of their financial situation this year compared to 2022. Despite that, two-thirds of them consider the stability of their job more important than a salary raise in line with the inflation rate.
Another figure from the same survey somewhat contradicts this finding, as 57% of the respondents said they would take another job in the case of a 30% higher salary offer. In comparison, 8% would leave their current job for just a 10% higher salary. On the other hand, the respondents do not limit themselves to money; two-thirds said they would accept for a limited time (one or two years) receiving their raise in the form of travel expenses, qualification courses, or home office.
Hard Work Pays Off
But not all categories were hit equally by real wage shrinkage. Physical workers enjoyed a higher increase in average hourly wages in Q1, by 19%, close to HUF 1,800, another Trenkwalder survey indicates. Middle managers were less fortunate; their salary saw a modest growth of 10.5%, based on data from 500 employees in Hungary.
Physical workers in Central Hungary and Budapest saw the highest raise, at 30%, compared to last year, thus reaching an amount of HUF 2,350 per hour. In other regions where the raise has been lower, such as Northern Hungary, analysts expect a further raise by mid-2023 to cope with the labor shortage.
As for middle managers, their raises of 10.5% are obviously not following the 25.4% inflation, but companies cannot grow their revenues at a pace that allows them to raise salaries accordingly, which endangers their ability to retain a skilled workforce.
Despite that, employers seem optimistic. A labor force forecast compiled by ManpowerGroup indicates that in Q2 2023, 26% of Hungarian employers plan to expand their workforce, while 22% plan to reduce it. Most of them, 49%, plan no change.
ManpowerGroup says those looking for a job should turn to energy and public utilities, finance, real estate, and IT sector companies, as these are the ones most likely to hire. This willingness to expand is mainly due to the lesser chance of an economic recession perceived by these companies.
This optimism is mainly shared by large companies with more than 250 employees. Filling open positions is still challenging, with 82% of the companies indicating this as somewhat problematic and 19% saying it causes serious setbacks. The most sought-after skills are in production, engineering and IT.
This article was first published in the Budapest Business Journal print issue of May 5, 2023.
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