Rising Challenges in the Processing Industry: Minimum Wage Isn't an Issue</strong>"</p>”>Wage Hikes Threaten Businesses
The processing industry is facing hurdles in achieving their pricing goals, particularly for suppliers who are expected to lower prices by foreign buyers, while on the other hand, wages must inevitably rise. The Chamber of Commerce (KvV) has notified chambers that retaining employees remains a key issue, prompting businesses to introduce new scheduling systems and unconventional employment forms rather than downsizing. Where benefits beyond pay are provided, salary frameworks can also be adjusted.
However, the employment situation varies significantly across the country. In regions near the western border and around Budapest, the minimum wage is not a viable payment option, according to local business leaders. They assert that trying to compete with Austria, where wages are higher, is futile, and those unwilling to commute face wage increases due to intense competition for labor among Hungarian businesses.
In contrast, the rise in the minimum wage places additional pressure on micro and family businesses in northern Hungary and the North Great Plain region. This is due to their lower value added and efficiency, as well as the fact that many family business employees and family members are registered at the minimum wage level, with additional income coming from profit distributions.
Moreover, businesses in remote or less developed regions that have not been upgraded in a long time face challenges from mandatory wage increases that threaten their operations. While these increases may have a cleansing effect on the market, benefiting robust businesses, they could also improve the supply of skilled labor.
Rural Corner Shops Struggle with Minimum Wage Increase
The increase in the minimum wage poses a significant challenge for small shops in the retail sector. While multinational corporations pay more than the guaranteed minimum wage, labor shortages affect the entire industry. In rural areas, the statutory minimum wage is frequently applied, and its increase may lead to higher prices due to decreasing customer numbers, mainly caused by population decline and rural-urban migration. Additionally, shop owners have grappled with increased costs, including energy and transportation expenses, and face stiff competition from e-commerce platforms like Temu and others selling foreign-branded goods.
During the COVID-19 pandemic, businesses realized that sending workers home during operations stops did not pay off, as rehiring proven employees became nearly impossible due to severe labor shortages. However, introducing a hiring freeze could help a third of companies, while investment in labor-saving equipment could reportedly save another 37 percent.
