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← Overview Database of Innovative Social Policies in Europe

Increasing minimum wage

Country of implementation
Hungary
General short description of the innovation
The monthly amount of the mandatory minimum wage was raised from HUF 25,500/month to HUF 40,000 in 2001, and then to HUF 50,000 in 2002.
Target group
Total Population
Policy Field
  • wage
Type of Policy
  • public
Duration of the policy
2001
Scope of innovation
  • Scope: structural
  • Budgets: n.a.
  • Number of intended beneficiaries: 480,000 employees (17% of labour force)
  • Spatial coverage: national
General description of (intended) objectives and strategies
?Besides the changing supply and demand conditions on the product markets the government initiated minimum wage explosion. The monthly amount of the mandatory minimum wage was raised from HUF 25,500/month to HUF 40,000 in 2001, and then to HUF 50,000 in 2002. That decision affected about 480,000 employees, 17 per cent of the total labour force in the business sector, and hurt employers by increasing the wage costs. Multinational companies were not affected heavily by the minimum wage increase, as their lowest wages were typically above the new minimum wage, but the situation of numerous small and micro-businesses worsened signifi cantly. One could observe dismissals in low wage sectors/industries (textile and garment industries, working mainly for foreign companies, were heavily affected, especially after their export revenues declined as a consequence of the appreciation of the Hungarian currency). But, the factor that influenced employment even more significantly was that as a result of the minimum wage increase, many firms postponed their planned job creation.? / (http://econ.core.hu/file/download/HLM2004/TheHungarianLabourMarket_2003_onefile.pdf, pp.15) /
Nature of the innovation-short-term perspective
Minimum wage doubled between 2001-2002 generating increased wage costs in low wage sectors.
Nature of the innovation-long-term perspective
Radical change that aimed to increase labour market participation through higher incentive but instead resulted in that many firms postponed job creation.
Type of ideal-typical strategy for the innovation
  • others (activation)
Type of innovation
  • retrenchment or expansion of an existing/earlier policy
New outputs
  • wages (higher minimum wage)
Intended target group
All workforce
Working age population
  • income level (low/medium/high) (low)
  • main source of income: paid work
Actors involved in policy-making/implementation and/or evaluation
  • employers (organised or individual)
Intended output
  • wages (increased minimum wage)
Did the innovation have any outcome related to job quantity?
intended job creation of employers delayed, dismissalsintended but not increased
Intended and unintended outcomes
480,000 employees, 17 per cent of the total labour force in the business sector
Clarification of outcomes in terms of impacting resilience and labour market inclusion
Minimum wage doubled between 2001-2002, a radical change that aimed to increase labour market participation through higher incentive, but instead generating increased wage costs in low wage sectors and resulted in that many firms postponed job creation.
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