Hungary: Latest working life developments – Q2 2017

Publication of a study on the minimum wage, the introduction of pensioners’ cooperatives to reduce labour and skill shortages, and a proposal to extend working time are the main topics of interest in this article. This country update reports on the latest developments in working life in Hungary in the second quarter of 2017.

Agreement on minimum wage

The government and the national social partners concluded a biennial agreement on the national, statutory minimum wage at the end of 2016. The objective of the trade unions was to make the net minimum wage catch up with the minimum subsistence level by 1 January 2018.

A recent study (PDF) by the Hungarian Trade Union Confederation (MASZSZ) and the Policy Agenda Research Institute outlined a general picture on the minimum wage in Hungary in 2016; the Central Statistical Office (KSH) stopped calculating and publishing subsistence levels in 2015. According to the findings, 36% of the Hungarian population lived on an income lower than the subsistence minimum, with one-third of all households unable to meet their basic costs of living. Nevertheless, due to wage increases in 2015–2016, household income has risen by 4.5%, enabling more families to at least live at subsistence level.

The research revealed that, from 2018, the minimum wage could reasonably be expected meet the subsistence minimum. This is despite the fact that the gap in 2016 between the monthly net minimum wage of HUF 73,815 (€242 as at 31 July 2017) and the calculated monthly subsistence minimum of HUF 88,619 (€291) was still significant (based on recent trends and the two-yearly wage agreement).

The study also highlighted that the situation of working families with children has not improved significantly. More than half (51%) of families with at least one child are living on an income below the subsistence level, while this rate was 13% among old-age pensioners.

Pensioners’ cooperatives

On 13 June, parliament adopted Act LXXXIX of 2017 (PDF) on pensioners’ cooperatives of public interest (közérdekű nyugdíjas szövetkezet). This act would provide preferential conditions for active elderly people (similar to those enjoyed by student cooperatives) to enable them to engage in occasional work.

The government’s aim (PDF) is that the pensioners’ cooperatives will employ retired people to reduce labour shortages and to transfer their skills, professional knowledge and life experience to younger people. This would help retain community contact with the elderly, as well as serving the best interests of the general public.

According to the act, a pensioners’ cooperative is an economic enterprise, with only natural persons allowed to establish or join one; the share of old age pensioners must be at least 90% of cooperative members. The cooperative’s income is used to set up a community fund for social, health, educational and cultural services for members and their families. Work is considered as a personal contribution to the cooperative (in that it is not seen as an employment relationship, even if the cooperative places them in a third-party temporary agency position) which can be offset, for example, by food vouchers instead of wages that are tax-free up to a certain limit. When wages are paid in cash, tax relief is provided to both the cooperatives (as employers) and the pensioners. The act also requires the government to support the cooperatives at a necessary and proportionate level.

The National Association of Entrepreneurs and Employers (VOSZ) has supported the proposal, while trade unions have been reserved in their opinion. The Federation of the Chemical Energy and General Workers’ Unions (VDSZ) has openly opposed the proposal, stating that fair wages should be paid and appropriate training provided. Although experts believe pensioners’ cooperatives are likely to ease labour shortages in some sectors, regions and in time periods, they are afraid of their negative effect on wages. The first pensioners’ cooperatives are to be established in the summer, with the help of some student cooperatives.

Working time extension

A controversial proposal by the Parliamentary Committee on Economics aimed at modifying the regulation of working time has been withdrawn. The proposal was tabled without consulting the social partners and the government did not indicate its opinion. It is, however, expected that the issue of working time flexibility will remain on the agenda.

Commentary

Public sector workers continue to demand an increase in wages, which have not been raised for the past nine years. The government is willing to negotiate, but as yet there are no developments.

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