Annual wage bargaining and national summits on economic crisis

Alongside the summit meetings addressing the economic crisis, wage negotiations held in the autumn of 2008 in Hungary followed the customary pattern. Albeit increasing social and economic tensions, agreement was reached after difficult negotiations between the parties. The agreement, maintains a two-level minimum wage system, with a higher amount for skilled workers. However, it is valid for one year only, as employers rejected a longer-term agreement due to the economy’s unpredictability.

Annual wage bargaining round

Parallel to the exceptional economic crisis management meetings (HU0901019I), the National Interest Reconciliation Council (Országos Érdekegyeztető Tanács, OÉT) carried out its customary task of negotiating the national minimum wage and making recommendations for the annual wage hikes in the private sector. Between 9 October and 12 December 2008, wage bargaining was on OÉT’s agenda nine times, which indicates how extremely stretched negotiations were over time. Due to the deepening economic crisis, the government had to revise the budget proposal three times during the autumn of 2008, with its initial proposal being entirely withdrawn.

The employer side first proposed a general wage freeze in the private sector, then suggested cancelling the three-tier minimum wage system introduced in 2005 (HU0512104F) and concluding an agreement for one year only. Trade unions demanded that the minimum wage be raised to HUF 80,000 (€267 as at 3 April 2009), amounting to a 15% nominal increase compared with the then HUF 69,000 (€230) in force. They also insisted on maintaining higher wage minimums for skilled workers and indicated their support for the government’s approach to reintroducing a three-year minimum wage scheme, similar to the earlier agreement valid for 2006–2008.

Following the government’s new proposal for a 4%–5% wage increase, negotiations ended in deadlock lasting several rounds. Employers, while offering no wage increase at all, also argued in favour of the government’s other idea to postpone negotiations and implement wage increases only for the second half of 2009. Trade unions, however, insisted on their initial demands. A breakthrough in negotiations came on 14 November 2008, when the government suggested that a HUF 72,900 (€243) minimum wage would be sufficient to compensate for the expected inflation rate. Then, employer organisations indicated their acceptance of maintaining higher wage minimums for skilled workers for one more year. This also led to a rapid adjustment in trade unions’ demands.

Agreement reached

The final compromise maintains a dual minimum wage system, although the actual minimum wage increase is below the expected 4.5% inflation rate. From 1 January 2009, the national minimum wage amounts to HUF 71,500 (€239), the guaranteed wage minimum for skilled workers will be raised in two waves to HUF 87,500 (€292). OÉT recommended a 3%–5% increase for lower-level wage setting in the private sector, which, in practice, is expected to maintain the wage level in real terms. The two strongest employer organisations in Hungary – the Confederation of Hungarian Employers and Industrialists (Munkaadók és Gyáriparosok Országos Szövetsége, MGYOSZ) and the National Association of Entrepreneurs and Employers (Vállalkozók és Munkáltatók Országos Szövetsége, VOSZ) – did not hinder the conclusion of the agreement, but recorded their disagreement in a separate clause. This move encourages non-compliance among their members, implying that its members should ignore the wage recommendation set out in the agreement.

Conflict on public sector salary increase

Along with the private sector negotiations, public sector quasi-bargaining continued in the National Public Service Interest Reconciliation Council (Országos Közszolgálati Érdekegyeztető Tanács, OKÉT). Responding to the government’s plan to cancel the 13th month wage, trade unions first resumed the operation of their strike committee, then staged a mass rally on 29 November 2008. Initially, the trade unions announced that a strike would be scheduled for 12 January, although a compromise was reached on 19 December 2008 (HU0903019I). According to the ‘memorandum of understanding’ issued by the parties, there will be practically no pay increase in 2009. However, the entire amount of the 13th month remuneration will be paid to those employees who earn less than HUF 180,000 (€608 as at 5 April 2009), which is equivalent to 82% of the average pay in the sector, while the better-paid workers will receive a reduced bonus.

András Tóth, Márk Edelényi and László Neumann, Institute for Political Science, Hungarian Academy of Sciences

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