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Hungary-Wages, Salaries, and Incentives

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Hungary Index

In a traditional command economy, the government regulates each enterprise's wage fund and fixes wage scales for workers in different job classifications. Managers receive bonuses based on their ability to fulfill plan targets. The government regulates farmers' incomes by establishing prices for deliveries to the state; some farmers legally supplement their earnings by selling produce grown on private plots.

In the late 1980s, labor income was composed of wages, salaries, and profit-sharing payments. In addition to levying taxes, the government regulated wages and salaries by setting basic pay brackets depending on skill classifications and working conditions. For unskilled job categories, the highest-paid workers made 50 percent more than the lowest-paid workers; for skilled categories, the highest-paid workers made 100 percent more than the lowest-paid workers in the same category. Other regulations governed profit-sharing distributions. The government used these income regulators to counterbalance forces that tended to force incomes up and thus create inflationary pressures and widen income differentials. These forces resulted from the enterprises' monopoly over the domestic market and enterprise managers' insufficient economic interest in profitability. Wage increases and profit-sharing payments have been linked to enterprise profits since 1968, and in 1985 the government introduced a radical reform of wage and income rules that abandoned the practice of controlling incomes with a check on average wages.

Data as of September 1989

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