The announcement marks a significant deviation from the trajectory previously established by the state. At the beginning of November last year, the government had outlined a three-year wage agreement intended to run through 2027. Under that original framework, the minimum wage was slated to increase by 13% in 2026, reaching 328,600 forints. The new agreement, however, reduces this projected rise. The shift is not driven by a change in social policy goals, but by a stark reassessment of economic reality. Orbán noted that the original commitments were no longer tenable because economic growth had fallen well short of expectations.
At the end of 2024, the government targeted 3% GDP growth for the current year. Mid-year, the Ministry for National Economy revised this figure down to 1%. Domestic GDP has continued to grow very slowly, significantly held back by stagnation in the industrial and agricultural sectors. Orbán attributed this slowdown to the broader geopolitical environment, stating that “the shadow of war is hanging over our heads” and has a serious impact on Central Europe and the German economic zone. Consequently, the parties opted to amend the existing contract rather than pursue the previously agreed-upon higher increases.
To facilitate the agreement, the government introduced an 11-point tax reduction program. This package is designed to reduce the tax burden on small and medium-sized enterprises (SMEs) by 90 billion forints, equivalent to approximately 234 million euros, based on an exchange rate of 1 euro to 381.85 forints. Orbán emphasized that the government’s contribution includes both tax cuts and tax breaks, as agreed with the Chamber of Commerce and Industry. By offsetting the cost of higher wages with lower taxes, the administration aims to ensure that the wage increase does not stifle business activity in an already fragile economy.
Orbán framed the successful negotiation as a major achievement, highlighting that it required “much more willpower” than the initial creation of the contract. He stressed that the agreement was reached between employers and employees, rather than being imposed by the government. For nearly 20 years, the Hungarian government has strived to ensure that wage increases are determined by market participants rather than public authorities. Orbán argued that this separation allows employers and employees to view wage regulation as independent of the state, fostering a sense that the government acts as an economic policy partner rather than an interfering public authority.
The Prime Minister also addressed the current labor market dynamics. He noted that compared to 2010, one million more people are now working in Hungary. In this context, labor shortages have become a more significant challenge for the economy than unemployment. Orbán warned that jobs are ineffective if workers feel they are not paid enough for their labor, asserting that people generally believe the value of their work exceeds their current wages. This perception places constant wage pressure on both employers and the state, which is itself a major employer. The 2026 agreement is intended to address this gap, ensuring that wage growth aligns with market conditions and worker expectations.
The wage increase occurs against a backdrop of relative wage convergence within the European Union. Recent Eurostat data indicates that Hungary has surpassed Greece in average annual wages, a trend that continues to close the gap with Western European economies. However, the immediate outlook remains cautious. The government’s ability to sustain these wage increases will depend on whether economic growth can recover from the current 1% trajectory. If the “shadow of war” persists and continues to dampen industrial and agricultural output, the pressure on SMEs may intensify, testing the resilience of the newly signed agreement. For the 700,000 families affected, the next few months will be critical in determining how the combination of higher wages and tax relief translates into tangible improvements in household budgets.
