Wage Expectations, Relying on mum and dad, and the end of Kata
After a summer of unprecedented turbulence, Hungarians step into an unpredictable last month of Q3 and on to Q4. Changes in taxes and prices, combined with food, water and fuel scarcity, undermine both business and consumer confidence in the medium term.
For four months in a row, business and consumer expectations continued to deteriorate in August. Compared to April, business expectations fell by around 13 points, while consumer expectations dropped by nearly 30 points, most sharply in August, according to a study released by GKI Economic Research.
This indicates a growing reluctance of the business sector to employ, which has, in turn, resulted in increasing fear of unemployment in households since April.
In addition, “households perceived their own financial situation to be significantly worse than in the previous month, and their ability to save to have been steadily deteriorating since the all-time record high in February,” GKI noted.
This perception of a fragile financial situation is sustained in other surveys too. Salaries have grown steadily in recent years, but so has inflation, most noticeably this year, which has eroded the raises.
As a result, the period that can be bridged without a wage has not increased, according to the K&H Safe Future survey. The active population of 30-59-year-olds could bridge an average of seven months without income.
However, one-third said they could only cover their expenses for a maximum of one month if they did not get paid, the financial institution said, and only 14% have enough reserves for six months. Meanwhile, a quarter of those affected cannot or do not tend to put money aside. This proportion has increased significantly, up from only 18.4% a year earlier.
Some categories, however, fair somewhat better. As of this month, soldiers’ wages will increase by an average of 26%.
As Minister of Defense Kristóf Szalay-Bobrovniczky announced, a private soldier without a high school diploma previously earned HUF 280,000, which will now increase to HUF 400,000, he said. The salary of private soldiers with a high school diploma will increase from HUF 323,000 to HUF 415,000. He added the wages of starting lieutenants would increase from HUF 468,000 to HUF 585,000.
Executive salaries have never posed many worries for bridging periods without income, but their increases accelerated recently. Analyzing the remuneration packages of 7,000 executives, Wyser, a recruitment company specializing in the sector, observed that salaries in Hungary vary between HUF 1.5 million and HUF 3 mln. Regional managers may earn up to HUF 3.4 mln.
With the depreciation of the forint, managers have increasingly been asking for their salaries in euros instead of HUF, while it is also more challenging to provide them with a company car due to long waiting lists.
Companies are expected to be more careful with layoffs, the authors of the analysis said. During the pandemic, it became clear that, despite the difficulties, it is better to keep employees than to reduce headcount and then hope to rehire workers later. Recent experience shows that the companies that responded to the challenges by hurriedly laying off staff took longer to recover, Wyser added.
Becoming an executive takes time and experience, but career starters are far from being unsure of their expectations. Two-thirds of young people starting their careers would like to receive a gross monthly salary of more than HUF 350,000, while just over 30% of those interviewed would be satisfied with a monthly salary of HUF 350,000 or less, according to the results of a survey commissioned by human resources service provider Work Force.
Some 27% of young people would require a salary between HUF 350,000-450,000, while the proportion of those who consider a salary of HUF 600,000-800,000 realistic is over 10%. Surprisingly, some (about 2.7% of respondents) expect a HUF 1 mln wage from the start. Only 10% of career starters could not say how much they would like to earn.
As careers progress, things get complicated. Another survey shows that a quarter of young Hungarian adults are not completely financially independent from their parents. Indeed, more than half of the 18-39 age group are in this situation, according to their own assessment.
In villages, 60% of young adults consider themselves completely independent from a financial point of view, while in Budapest, this ratio increases to 72%.
While the general perception is that the employees in the IT sector enjoy generous incomes, this has somewhat changed this summer. Many paid their taxes under the Itemized Tax for Small Businesses (Kata) scheme. As of September 1, the government has significantly altered the system, so much so that many have had to quit using it.
According to the No Fluff Jobs survey, this could severely affect the IT sector. More than 300 Hungarian IT professionals participated: Nearly 20% of them said that, following the termination of Kata, they were planning to leave the country, while another 30% said they were considering moving abroad. Meanwhile, 60% of them plan to continue working as an employee at a local or foreign company. Those moving abroad look for higher wages, a better quality of life and improved career opportunities.
Young Workers Choose Multinationals
Magyar Telekom Nyrt. is the most popular employer among career starters, according to an annual survey from job portal Zytern.com. OTP Bank Nyrt. ranked second, while Robert Bosch Kft. came third. Regarding the type of employer, the vast majority of respondents (59%) want to be employed by a large international company. Compared to last year, the popularity of startups and the entrepreneurial spirit of young people has decreased, based on the answers provided by 3,000 respondents.
This article was first published in the Budapest Business Journal print issue of September 9, 2022.
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