Hungary’s wage surge distorted by one-off bonus

Average wage growth in Hungary slowed only marginally in January compared to the previous month, according to the latest data from the Hungarian Central Statistical Office (HCSO).

At first glance, this may seem surprising. However, the headline year‑on‑year increase of 26.3% in January 2026 is heavily distorted by a one‑off, six‑month salary bonus (“firearms money”) paid to military and law enforcement staff. Stripping out this effect, underlying wage growth is closer to 8.3%.

The bonus is expected to lift average annual wage growth by around 1.5ppt in 2026. On a monthly basis, net wages rose faster than gross wages, mainly reflecting changes to family allowances and tax benefits for mothers introduced at the start of January.

As the average wage was more distorted than usual in January this year, changes in the median wage are particularly important. As expected, the increase in the median wage corresponded to the 11% increase in the minimum wage. This clearly indicates that the minimum wage increase caused wage compression in the lower income brackets, a situation that companies sought to address. Due to the aforementioned tax changes, the net median wage was 12.5% higher than a year ago. Inflation-adjusted real wages – even excluding one-off payments – grew well above the historical average at the start of 2026.

All of these figures are consistent with the data we have already seen for this year. Retail sales began the year with unexpectedly strong growth, fuelled by a combination of one-off benefits, tax changes, and increased real purchasing power. Recent statistics clearly indicate mounting wage pressure on the corporate side. Examining the number of employed individuals reveals that employment is expanding across the economy as a whole, which contradicts trends observed in statistics based on self-reporting (known as the Labour Force Survey). This may be explained by the shrinking shadow economy caused by the increase in the minimum wage. As the official minimum wage increases, more and more people will earn that amount on paper, while money paid under the table will probably decrease. Consequently, the actual disposable income of these households may remain unchanged.

This phenomenon is particularly evident given that the increase in registered employees was primarily in low-wage sectors such as accommodation, food services, other services, and administrative services.

In addition, the composition effect may have pushed wages up, given that the agricultural and construction workforces shrank while the financial, insurance, and information and communication workforces grew, and the latter sectors pay the highest average wages. Lastly, the data clearly show industrial rationalisation, with the number of manufacturing sector employees falling by almost 2% compared to the first month of last year. Consequently, with just below 721,000 employees, the manufacturing workforce is the lowest it has been in many years.

The 11% and 7% increases in the minimum and guaranteed minimum wages, respectively, which were scheduled for January 2026, will clearly have a significant impact on this year's annual wage dynamics, as will the payment of "firearms money". In terms of structural trends, with an increasing number of companies hoarding labour in Hungary and unfavourable demographic trends from a labour market perspective, we expect annual average wage growth of around 9-10% in 2026.

The biggest question is how companies will respond to cost shocks caused by the war in the Middle East, rising labour costs, and weaker expected economic growth. Given the significant deterioration in the outlook, passing on wage costs may become more difficult. Consequently, we increasingly expect companies to respond with significant workforce reductions, which would pose a further negative risk to Hungary's already gloomy growth outlook.