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Monday, November 13, 2006

Wages, The Other Side of the Coin

Obviously part of the 'recovery path' in Hungary will involve trying to hold wages steady while prices 'burn off' the impact of the forint drop. Clearly Hungarian workers and their unions are non too happy about this. This policy has a name: deflation. Unfortunately given the gravity of Hungary's present situation there is little alternative, although quite how all this is going to work out in practice is anyone's guess. I think we are all a bit short on real policy options at this point.

Public sector unions protested plans by the government to raise wages just 0.2% in 2007 in a letter to Prime Minister Ferenc Gyurcsány on Thursday.

The unions argued that public sector workers would take home 10% less in real terms with the nominal wage rise, given the rise in taxes and the projected upsurge of inflation. They urged the government to raise wages by an extent that would cause real wages to fall no more than the average for both public and private sector workers.

The unions will take legal steps if the prime minister fails to respond to the letter by November 14.

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