The margins and limits of wage catching-up in Hungary

From time to time, both in the literature and in the media, debates are raised about whether wages in Hungary are indeed lower than economically justified by international standards and what the impact of a significant wage increase would be. Most recently, a debate on the level of wages in Hungary has emerged in the pages of Portfolió.1 The discussion was triggered by István Madár's article (Madár 2015), which was largely based on Gábor Oblath's article in Élet és Irodalom, in which he shows that the level of wages in Hungary is in line with the productivity of the economy, i.e. the value added per hour worked (Oblath 2014/a). However, higher output is not necessarily the result of greater physical or intellectual effort, but of higher technological levels and higher capital stock (Madár 2015). However, according to Zoltán Pogátsa (2015), the share of wages and profits in the value added generated is not market-based, but determined by the wage bargain between unions and firms. Wages in Hungary are therefore low because there are no trade unions capable of effectively representing workers' interests. This is evidenced by the fact that in most Western European countries with high collective coverage, wages are higher than would be implied by productivity, and lower in Eastern Europe.