Orbán sees minimum wage raise boosting economy

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The planned raising of the minimum wage in Hungary is not expected to pose a burden to the local economy but to become a chief engine for it, making a raise in pensions also possible, Hungary’s Prime Minister Viktor Orbán said in an interview recorded Sunday and aired today on state-owned Kossuth Radio, according to Hungarian news portal index.hu.

Orbán added that the government is expected to soon reach an agreement with employers on the matter, index.hu reported. Having failed to agree on the minimum wage rise planned for next year, the Hungarian government and its partners are expected to continue negotiations this week, Minister for National Economy Mihály Varga was reported as saying on Friday. 

“I believe that the hike will have a beneficial effect on the economy,” Orbán said, according to index.hu. “As such, we now  need to make a bold government decision. I dare to get into this, as I have already done this: in 1998 the minimum wage was under HUF 20,000 and four years later we had pumped it up to HUF 50,000,” Orbán said, recalling his first period in government (1998-2002).

Orbán added that the government agrees that a higher minimum wage should not be burdened by higher taxes, therefore the government is planning to decrease the ratio of taxes on wages in six years time, index.hu reported. In the long run, Orbán expects that a 40% real wage hike “will not be impossible.”

Orbán said he hopes that a higher minimum wage will increase inflation, which is below 1% at this point, and as a result, pensions in Hungary can also grow by 1.6%, faster than the expected 0.9%, index.hu added.

In connection with the proposed wage raise, some business representatives have already voiced concerns. While big retail stores are not thought likely to be hit by the Hungarian government’s planned hike in the minimum wage, smaller retail stores may be forced to close their doors, György Vámos of the Hungarian Trade Association warned on Friday.

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