Populist party-producer group alliances and divergent developmentalist politics of minimum wages in Poland and Hungary

Abstract

In the advanced peripheral economies of East-Central Europe, right-wing populist parties have increasingly politicized the dualism between larger, export-competitive foreign-owned enterprises and smaller, inward-oriented and less productive domestically owned firms. By focusing on the two most-similar cases of right-wing populist governments in the region - namely Hungary and Poland, this paper documents a striking attempt by Poland's Law and Justice party to use increases in the minimum wage and social security contributions as a developmentalist tool that should force domestically owned firms to achieve greater efficiency and technological upgrading. In sharp contrast, Hungary's Fidesz party has systematically compensated minimum wage increases with cuts in employer social contributions and has refrained from assigning developmentalist aims to labor cost increases. Both parties have cultivated a cross-class electoral base and have faced electoral trade-offs in emphasizing minimum wage increases. Yet we argue - and show through a comparative historical analysis - that variation in their policy approaches stems from their distinct, electorally motivated, alliances with influential producer groups and the distinct policy quid pro quos they have struck with those groups, namely organized labor for Law and Justice and organized business for Fidesz.

Full text

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Populist party-producer group alliances and divergent developmentalist politics of
minimum wages in Poland and Hungary
Marek Naczyk, Department of Social Policy and Intervention, University of Oxford
marek.naczyk@spi.ox.ac.uk
Edgars Eihmanis, Willy Brandt Center for German and European Studies, University of
Wrocław / Johan Skytte Institute of Political Studies, University of Tartu
Forthcoming in Competition & Change, special issue on the “Politics of Growth, Stagnation
and Upgrading in Advanced Peripheral Economies”
https://doi.org/10.1177/10245294231213417
Abstract
In the advanced peripheral economies of East-Central Europe, right-wing populist parties have
increasingly politicized the dualism between larger, export-competitive foreign-owned
enterprises and smaller, inward-oriented and less productive domestically owned firms. By
focusing on the two most-similar cases of right-wing populist governments in the region –
namely Hungary and Poland, this paper documents a striking attempt by Poland’s Law and
Justice party to use increases in the minimum wage and social security contributions as a
developmentalist tool that should force domestically owned firms to achieve greater efficiency
and technological upgrading. In sharp contrast, Hungary’s Fidesz party has systematically
compensated minimum wage increases with cuts in employer social contributions and has
refrained from assigning developmentalist aims to labor cost increases. Both parties have
cultivated a cross-class electoral base and have faced electoral trade-offs in emphasizing
minimum wage increases. Yet we argue – and show through a comparative historical analysis
– that variation in their policy approaches stems from their distinct, electorally motivated,
alliances with influential producer groups and the distinct policy quid pro quos they have struck
with those groups, namely organized labor for Law and Justice and organized business for
Fidesz.
Keywords: minimum wages, non-wage labor costs, right-wing populist parties, producer
groups, developmentalism, Hungary, Poland

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We are in September 2019. Poland’s right-wing populist Law and Justice (PiS) party is
launching its campaign to win a second consecutive majority at next month’s general election.
At the campaign’s first husting, the party’s founder and long-time leader, Jarosław Kaczyński,
proposes to build a “Polish model of the welfare state.” His very first election promise is to
increase the statutory minimum wage (MW) from 2,250 zlotys per month in 2019 to 4,000 “by
the end of 2023” (PiS, 2019: min. 42:18-44:42). In the following days, as the opposition
accuses him of wanting to drive many of Poland’s small and medium-sized enterprises (SMEs)
out of business, Kaczyński argues that, for MW increases to happen, “the Polish economy must
modernize. Here we are dealing with a causal relationship. If incomes and wages increase,
there is pressure on the economy to modernize. If the economy modernizes, workers’
productivity also increases. As a result, there are good economic grounds for wages to further
increase” (polskieradio.pl, 2019). He adds that MW increases are in the interest of employees
and of “good” employers, i.e. “those who are able to look ahead, at least a little bit, and want
to stay on the market” by modernizing themselves. Kaczyński contends that SMEs will “not
go bankrupt if they are able to function in this new reality. They have a few years to prepare.
Demand for various types of goods will also grow.”
With Poland and other East-Central European (ECE) countries having been “global
leaders” in economic liberalization in the 1990s and 2000s (Appel and Orenstein, 2018: 11),
this kind of developmentalist discourse is unprecedented. Implicitly, it defines the contours of
a wage-led growth strategy in which MW increases should drive up productivity and aggregate
demand and, ultimately, growth (Bondy et al in this special issue; Lavoie and Stockhammer,
2013; Schulten, 2012). Kaczyński’s discourse is also reminiscent of aspects of the Rehn-
Meidner model – an economic policy blueprint developed in the 1950s by two economists from
the Swedish Trade Union Confederation and subsequently adopted by the Swedish Social
Democratic Party – which posited that “solidaristic” wage compression could be used as a tool
for technological upgrading (Erixon, 2010; Meidner, 1986; Pontusson, 1992). The model
postulated that, at the bottom of the wage distribution, wage increases would squeeze the profit
margins of less efficient, typically small, firms in sheltered sectors thereby forcing them to
modernize or to go out of business. By contrast, wage restraint at the top of the wage
distribution would free up the profits of more efficient, typically larger, export-oriented firms
thereby promoting their expansion. Active labor market policies (ALMPs) would help reskill
workers and reallocate them from low-productivity towards high-productivity firms. Granted,
reforms introduced by Law and Justice have lacked other core elements of the Rehn-Meidner
model – including wage restraint for top earners and massive spending on ALMPs, but the

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party’s emphasis on MW increases as a tool of technological upgrading is remarkable in and
of itself.
PiS’s developmentalist discourse on MW has been part of the party’s broader
politicization of the Polish economy’s dualism between a predominantly foreign-controlled
segment of large, highly-efficient and export-competitive firms and a typically more inward-
oriented, less productive segment of domestically owned SMEs (Naczyk, 2022). This type of
dualism has been typical of countries at risk of experiencing the so-called “middle-income
trap” and of getting stuck in a peripheral position in global value chains (Doner and Schneider,
2016). In Europe, it has been a key feature of ECE’s advanced peripheral economies. Having
become destinations for foreign direct investment (FDI) in high value-added manufacturing
and services from the 2000s (Bohle and Greskovits, 2012), most ECE countries have
unquestionably been characterized by sustainable FDI- and export-led growth models (Baccaro
and Hadziabdic, 2023; Ban and Adăscăliţei, 2020): Czechia, Estonia, Latvia, Lithuania,
Slovakia and Slovenia graduated from “emerging” to “advanced” economy status by 2022
(IMF, 2022: 38). Yet, as they all became “dependent” on FDI, ECE countries got stuck in a
specific form of peripherality: They failed to develop a significant pool of domestically owned,
internationally competitive “national champions.” Instead, subsidiaries of foreign-owned
multinational companies (MNCs) from “core” countries have typically constituted their largest
and most productive firms (Nölke and Vliegenthart, 2009).
This economic dualism and peripherality have been most noticeably politicized by
right-wing populist parties in Hungary and Poland both of which were still considered as
“emerging” economies by 2022 (IMF, 2022: 38). As Viktor Orbán’s Fidesz returned to power
in Hungary in 2010 and Jarosław Kaczyński’s PiS did so in Poland in 2015, these parties
attempted to drive foreign capital out of strategic sectors – e.g. banking, retail, utilities and the
media – servicing the domestic market while continuing to subsidize foreign MNCs for their
FDI in export-oriented manufacturing (Bohle and Greskovits, 2019; Bohle and Regan, 2021;
Sebők and Simons, 2022). At the same time, Fidesz and PiS trumpeted their ambition of
supporting the growth and international expansion of domestically owned SMEs through
industrial policies (Naczyk, 2022; Scheiring, 2020a; Toplišek, 2020).
Given major similarities in their constitutional and economic policy reform agendas,
PiS and the Fidesz have often been considered as sister parties (Bluhm and Varga, 2019;
Buzogány and Varga, 2023; Orenstein and Bugarič, 2022). After all, Jarosław Kaczyński
vowed in 2011 to entrench “Budapest in Warsaw” when returning to power. Yet these
seemingly “most-similar” right-wing populist parties have strikingly differed in their approach

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to MW and labor cost increases – and, more generally, to tax and social policy – and in their
discursive framing of reforms. Fidesz has systematically offset MW increases with decreases
in employer social contributions thereby shielding firms – particularly SMEs – from labor cost
increases. It has primarily framed these policy moves as helping to reduce welfare dependency
in Hungary’s “work-based society” (on this concept, see Szikra, 2014: 492). By contrast, PiS
has combined more aggressive MW hikes with stable social security contributions and, in
contrast to Fidesz, it has presented labor cost increases as building blocks of the “Polish model
of the welfare state” and as a developmentalist intervention that should push domestic SMEs
to modernize.
While political economists have increasingly seen electoral politics – instead of
interactions between governments and producer groups – as the driving force behind variation
in economic policy design and growth models (Beramendi et al., 2015; Hall, 2020), we relate
these different policy mixes and different discourses to distinct quid pro quos PiS and Fidesz
have struck with organized labor and business in response to different political alliances the
two parties have historically formed with producer groups in order to better reach out to their
core electorates. Originally founded as a liberal party, Fidesz styled itself in the late 1990s as
a champion of the middle classes and, to strengthen that electoral focus, it built close links with
business groups representing small entrepreneurs while having arms-length relationships with
trade unions. By contrast, PiS emerged from the ruins of the Solidarity movement and has
therefore built privileged links with the working-class Solidarność trade union while
maintaining a distant relationship with organized business. Those different party-producer
group alliances have resulted in a different political calculus in the context of MW increases:
As it has risked seeing discontent among SMEs for MW and labor cost increases being inflated
by its allies in organized business, Fidesz has systematically agreed to introduce tax
compensations for employers. As it has been under much greater pressure to cater to its core
trade union ally, PiS has adopted a more aggressive approach to labor cost increases while its
developmentalist discourse presenting these increases as a win-win proposition for business
and labor has been functional in reducing resistance to change among SMEs and cementing a
broader, cross-class developmental alliance for Poland.
We develop our argument in the next section after briefly embedding it into an
emerging literature on the politics of minimum wages. Shifting to empirics, we trace the role
of distinct historical alliances between right-wing populist parties and producer groups in
shaping different strategies towards labor costs, and, indirectly, technological upgrading in the
two countries. The last section concludes.

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Theoretical framework
Although a huge literature exists on the employment effects of MW increases (Card
and Krueger, 1995; Manning, 2021), political economists have surprisingly paid little attention
to MW politics until recently. The most influential research has focused on the introduction of
statutory MW in “core” economies – Germany and the United Kingdom – that had so far relied
on collective bargaining to set wage floors. That research has highlighted the transformative
role of lobbying by trade unions representing low-wage workers in contexts where organized
labor has felt unable to set adequate wage floors through weakening systems of collective
bargaining (Bosch, 2018; Mabbett, 2016; Meyer, 2016). Others have also pointed out the
importance of political parties’ reactions to growing discontent among their electorates about
rising inequality and job precariousness (Marx and Starke, 2017).
In more “peripheral” ECE economies, MW increases have become an increasingly
salient political issue in the 2010s as minimum wages in the region experienced the EU’s
largest nominal and real increases (Lübker and Schulten, 2022: 14). Several factors – that we
take for granted and do not further explore – have contributed to bring MW increases on the
agenda of all ECE governments, regardless of their political orientation. Firstly, while ECE
economies traditionally drew comparative advantage from their cheap labor model
(Drahokoupil, 2016), massive emigration, falling unemployment and ensuing labor shortages
in the 2010s have created a “quasi-Kaleckian” context where ECE employers and governments
have been under pressure to grant real wage increases to employees (Ban and Adăscăliţei, 2020:
31). Secondly, the dominance of a market-oriented paradigm after the collapse of communism
prevented ECE policymakers from building strong institutions of collective bargaining (Ost,
2000): In that context, statutory minimum wages emerged as the most influential wage-setting
mechanism in the region (Kohl and Platzer, 2007). Thirdly, EU-level debates about the
Directive on adequate minimum wages – which was adopted in late 2022 and whose original
inspiration was to help ECE minimum wages catch up with Western levels – created an
additional, if latent, pressure on ECE policy-makers to use this specific policy instrument
(Drahokoupil, 2016; Schulten, 2012). Fourthly, growing evidence on the non-detrimental
employment effects of MW increases helped weaken the credibility of a low MW approach
(Wilson, 2017).
What can explain variation in two most-similar parties’ approach towards MW
increases? Two usual suspects in the context of any type of labor market reform – namely union

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strength and the strength of corporatist institutions – are unlikely to be drivers. Given a
comparatively low union density and low coverage of collective bargaining in ECE countries,
it is conventional wisdom that unions have little autonomous power in setting wages in the
region (Kohl and Platzer, 2007). And there have been no significant differences in the power
resources of Hungarian and Polish unions: Union density has been higher in Poland (16.5% in
2015) than in Hungary (11.0% in 2014), but coverage of collective bargaining has been higher
in Hungary (28.3% in 2015) than in Poland (17.3% in 2015; table A.2.1 for sources). Moreover,
in contrast to West European bipartite institutions gathering organized labor and business,
corporatist institutions in both countries have been weakened by their tripartite character, which
has given states great discretion in decision-making, particularly regarding MW increases (Ost,
2000; Kahancová and Kirov, 2021). Fidesz and PiS have, in fact, further reinforced state
influence over such institutions while in power (Olejnik, 2020).
As mentioned, ECE governments have been under growing pressure to increase wages
in the 2010s. This structural context has undoubtedly created opportunities for political parties
to benefit electorally from implementing MW increases, especially if a highly discretionary
MW-setting framework has increased their salience. In line with theoretical approaches
focused on electoral politics, it would be reasonable to assume that parties’ political calculus
in introducing MW increases should be influenced by the composition of their electorates. For
example, it has been argued that, in Southern Europe’s peripheral advanced economies with
similar class structures to those of ECE countries, parties’ willingness to deregulate labor
markets has depended on the extent to which they have represented anti-regulation small
business owners and the self-employed as opposed to pro-regulation production workers
(Afonso and Bulfone, 2019; Bulfone and Tassinari, 2021).
By emphasizing cultural issues based on nationalist, anti-establishment or religious
tropes, Fidesz and PiS have emerged as wide coalitions drawing their electoral support from
various social strata (Knutsen, 2013; Ost, 2018; Scheiring, 2020b; Stanley, 2019). Compared
to their main competitors, they have had an overrepresentation of production workers, service
workers and small business owners among their electorates (Simons, 2021). Since production
workers should favor MW increases while small business owners should oppose labor cost
increases, both parties should face electoral trade-offs for MW increases. Yet, as we will show
below, production workers have been overrepresented in Fidesz’s electorate compared to PiS
while PiS has had a greater proportion of small business owners among its voters compared to
Fidesz. A focus on the social composition of the two parties’ electorates should therefore lead

7
us to expect PiS to be more sensitive than Fidesz to potential electoral losses resulting from
MW increases.
We argue that the two parties’ political calculus when deciding to introduce MW
increases has been strongly mediated – in fact, more powerfully shaped – by the alliances the
two parties have formed with specific producer groups in earlier processes of party formation.
Although political economists have typically focused on the lobbying activities of producer
groups, such groups can also play an important role in helping parties to mobilize specific
constituencies (Allern et al, 2021). This has not only been the case of trade unions (Arndt and
Rennwald, 2016), but also of business groups representing thousands of small entrepreneurs
and managerial cadres with political parties having often played a crucial role either in creating
new business groups or in strengthening pre-existing ones both for policy and electoral
purposes (Martin and Swank, 2013; Doner and Schneider, 2020).
For a party that has forged a core alliance with organized business (Fidesz), MW
increases have helped it offer side payments to its working-class supporters, but such increases
have presented the twofold risk of antagonizing its core electoral constituency of cost-sensitive
small entrepreneurs and of undermining the credibility of the leaders of allied business groups
among a constituency that those leaders have helped mobilize on behalf of the party. In order
to avoid a double blame for the party and allied business group leaders, these two types of
actors have had strong incentives to agree on compensations for MW increases in the form of
decreases in social security contributions. Such cuts in non-wage labor costs have been
facilitated by the fact that, as a result of the same business-party alliance, spending on a number
of social protection arrangements has been reduced over time thereby requiring fewer tax
resources for their financing (Fabry, 2019; Szikra, 2014).
By contrast, for a party that has traditionally forged a core alliance with organized labor
(Law and Justice), MW increases have constituted a main deliverable to its historical
constituency of working-class supporters. Were it to fail to deliver on a politically salient
policy, the party would not only risk antagonizing that constituency, but it would also risk
undermining the credibility of the leaders of allied trade unions among that same constituency.
MW increases have thus become a requirement for preserving the party-union alliance.
Simultaneously, this alliance has resulted in the expansion of other social protection
arrangements (Lendvai‐Bainton and Szelewa, 2021; Meardi and Guardiancich, 2022; Toplišek,
2020). This in turn has created a need for the preservation, if not an expansion, of social security
contributions to help finance such arrangements. Since MW increases combined with stable or
higher social contribution rates have been likely to antagonize the party’s constituency of small

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entrepreneurs, a discourse presenting labor cost increases as an industrial policy pushing SMEs
into higher value-added activities might perhaps not help appease this constituency, but, by
pointing to benefits for business, it might reduce their resistance to change.
Empirical strategy
In the next two sections, we carry out a comparative historical analysis of the Fidesz-
and PiS-led governments’ different approaches to labor cost increases. After substantiating
systematic differences in relevant policy outcomes and discourse under these two “most-
similar” governments, we provide within-case, causal process evidence for our hypothesized
mechanism based on electorally motivated quid pro quos between parties and allied producer
groups being at play and against the main alternative hypothesis based on an unmediated
response to parties’ electoral constituencies. Our method of data analysis, process-tracing, is
underpinned by “folk”/informal Bayesian belief updating where, starting from initial degrees
of belief in a set of competing hypotheses, the analyst and the reader should, firstly, assess the
extent to which each new piece of evidence they observe either increases or decreases their
confidence in a given hypothesis and, based on that, they should update their prior beliefs into
posterior beliefs in each hypothesis (Fairfield and Charman, 2022).
In line with best practices in process tracing (Bennett and Checkel, 2015: 20-31), we
have been relentless in gathering diverse and relevant evidence for and against alternative
explanations. We screened all Hungarian (for the years 2010-23) and Polish (2015-23) news
reports made available in the Factiva database using “minimum wage(s)” as a keyword in
English, Hungarian and Polish. In addition, we systematically analyzed discourse on MW
increases in the two parties’ manifestos published since the mid-2000s and in their leaders’ –
as well as producer group leaders’ – speeches or media interviews while the parties have been
in government. Due to difficult
1
access to “illiberal” politicians in the two countries in a context
where such politicians deeply distrust “Western” universities deemed to be too “liberal” (e.g.
Enyedi, 2018), we have only conducted one interview in Poland with a PiS-appointed civil
servant. Information contained in publicly available sources has nonetheless allowed us to draw
inferences.
1
We contacted 2 PiS parliamentarians, 1 former PiS-appointed Minister, 1 former Fidesz-appointed Minister
and the representative of a Hungarian business group and never received responses.

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Please note that, due to space constraints, full references of empirical sources cited
below are available in online appendix A.1.: Such references are cited as “A.1-author, date”
while references of academic papers are available in the regular bibliography. Tables and
figures are available in online appendix A.2.
Different policy trajectories
In November 2021, Hungary’s trade unions, employers’ associations and the
government agreed to increase the regular
2
statutory MW (minimálbér) and the “guaranteed
wage minimum” for skilled jobs
3
(garantált bérminimum) by about 20 percent to 200,000
forints and 260,000 forints per month respectively from January 1st 2022. As the 2022
parliamentary election was nearing, Prime Minister Viktor Orbán gave a speech to mark the
signing of the agreement (A.1-Orbán, 2021b). The right-wing populist leader first reminded
the audience that his government’s “most important commitment was to create a work-based
economy.” He argued that work was not “punishment” and was “a good thing, provided that it
is paid fairly.” Increasing minimum wages helped to “break with the policy of offering welfare
instead of work.” Orbán highlighted that, after his return to power in 2010, the regular statutory
MW had increased by 172 percent. He labelled MW increases as “the greatest success of the
Hungarian trade union movement” but added that Hungary’s full employment was the “the
biggest success of employers” while the country’s healthy public finances – propped up by
rising wages – were the “success of the government”. With the election nearing, Viktor Orbán
concluded by expressing his “trust in the wisdom of Hungarians” and his hope that “those at
this table, those who are looking at us and ourselves [would] meet here in a year’s time.”
In 2019, Poland’s Law and Justice party had made MW increases an even more central
plank of its ultimately successful attempt to gain a parliamentary majority for a second
consecutive term. At the campaign’s first husting, Jarosław Kaczyński listed not only “respect
for human life”, “liberty”, “family”, “the nation” and the “Catholic Church”, but also
“solidarity”, “equality” and “justice” as the core principles underpinning the “unchanging value
system” of PiS (A.1-PiS, 2019a). In sharp contrast to Orbán’s conceptualization of minimum
wages as an element of a “work-based society” that would replace “the uncompetitive Western
2
In the rest of the paper, we refer to the minimálbér as the “regular statutory” MW while “minimum wages”
stands both for the minimálbér and the “guaranteed wage minimum.”
3
Such jobs require at least a secondary school qualification or vocational training. The guaranteed wage
minimum was introduced in 2006. By 2023, it affected circa 741,000 wage-earners versus 223,000 for the
regular statutory MW (A.1-kormany.hu, 2023).

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type of welfare state” (2012 speech by Orbán cited in Vidra, 2018: 73; see also Szikra, 2014:
492), Kaczyński made minimum wages the first pillar of his proposal to build a “Polish model
of the welfare state”, i.e. the title of his party’s 2019 election manifesto (A.1-PiS, 2019b). That
manifesto insisted that “economic development should benefit all Poles, regardless of their
occupation, place of residence and social background” (A.1-PiS, 2019b: 210). Highly striking
and reminiscent of elements of the Rehn-Meidner model was PiS politicians’ developmentalist
discourse on proposed MW increases. Like Kaczyński, Prime Minister Mateusz Morawiecki,
a former banker, contented that MW hikes would “push up productivity and work efficiency”
and would “also be profitable to employers” (A.1-TVP, 2019). He talked about “a fundamental
change in the economic model.”
No similar utterances could be heard from Fidesz politicians. The only exception was
when, before the 2021 negotiations over minimum wages, László Parragh, the president of the
Hungarian Chamber of Commerce and Industry (MKIK) and a key Orbán ally (see paper’s
next section), came out in support of the 200,000 forint target for the regular statutory MW and
declared that “in Europe, the minimum wage is increasingly viewed not as a cost element, but
as an economic development tool. By raising the minimum wage which affects the entire wage
scale, efficiency goes up and productivity improves. Anyone who is unable to fulfil this will
simply drop out of the market. (…) I know it is strange to hear this from a chamber president,
but the Hungarian minimum wage is one of the lowest in the European Union” (A.1-Hornyák,
2021).
Fidesz-allied elites had perhaps started taking a leaf out of PiS’s discursive playbook,
but, in practice, policies introduced by the two right-wing populist governments had divergent
distributive and economic implications. As such, minimum wages in the two countries grew at
a similar rate both in nominal and in real terms (Tables A.2.2 and A.2.3). Yet MW hikes
decided by PiS had different distributive consequences for several reasons. Firstly, having
inherited a statutory MW with a significantly higher “bite” – i.e. MW level relative to the
median or average wage (51% and 41% respectively in Poland in 2015) – than the Fidesz had
in Hungary (47% and 35% in 2010 respectively), PiS maintained that bite and even increased
it to 55% and 45% by 2021, after implementing the MW hikes it promised in 2019 (Table
A.2.2). By contrast, Fidesz let the regular statutory MW drop to 45% of the median wage and
back to 35% of the average wage by 2021. This is even though the average wage increased at
a similar rate in the two countries between 2010 and 2021, namely 67.3 percent in nominal
terms in Hungary vs. 63.4% in Poland and 19.4% in real terms in Hungary vs. 31.6% in Poland
(own calculations based on figures reported in Table A.2.4).

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The lower bite of Hungary’s regular statutory MW partly had to do with that minimum
wage’s co-existence with the higher “guaranteed wage minimum” for skilled jobs. Yet it also
had to do with the Fidesz’s own, less egalitarian, approach towards wage-setting. Thus, after
letting the guaranteed wage minimum dwindle to 116.1% of the regular statutory MW in 2012,
the Orbán government consistently increased it to circa 130% from 2018 (Table A.2.3).
Moreover, in 2011, it introduced a subminimum wage for participants in its high-profile Public
Works Scheme (on that workfare program, see Vidra, 2018; Szombati, 2021) and let its value
erode from 77% of the regular statutory MW in 2013 to about 50% from 2020 (Table A.2.3).
Hungary’s more inegalitarian trajectory was further evidenced by the fact that, despite being
lower in Hungary than in Poland when PiS started governing Poland in 2015, the incidence of
low pay and inter-decile ratios of gross earnings (P90/P10 and P50/P10) all ended up being
significantly lower in Poland than in Hungary by 2020, i.e. after only five years of rule by PiS
(Table A.2.4).
Crucially, the Fidesz-led and PiS-led governments adopted widely divergent
approaches towards (not) compensating employers for MW increases through reductions in
non-wage labor costs. In 2021, Viktor Orbán crisply summarized his government’s approach:
“Each wage agreement entails not only an increase in minimum wages, but also a reduction in
taxes and contributions for employers. (…) Our philosophy is extremely simple. We are saying
that, if we cut taxes, entrepreneurs can give this money to workers” (A.1-Orbán, 2021b). While
the level of Hungarian employee social contributions was kept stable at 18.5% of gross pay
since 2010, the effort focused on the reduction of employer social contributions. Indeed, the
employer rate dropped from 28.5% of gross pay in 2011 to 13% by 2022. The government
started reduced it for the employment of vulnerable groups – youths under 25, workers aged
55+, etc. – through a 2012 “job protection action plan” that was negotiated separately from
MW increases, but was “linked” to them (A.1-Orbán, 2012). In 2016, a six-year “wage and tax
agreement” negotiated between the government and the social partners combined MW
increases with across-the-board decreases in the employer rate by 5 percentage points in 2017
and 2.5 percentage points in 2018 with promises of further reductions by 2 percentage points
per year if real wage growth reached 6%. The 2016 agreement led revenue from social security
contributions to drop from 13.2% of GDP in 2016 to 10.1% in 2021 (Figure A.2.1).
No such compensations were introduced by PiS in Poland: Employee and employer
social contributions remained stable at 22.71% of gross pay and 19.21%-22.41%
4
respectively.
4
The employer rate varies because its accident insurance component differs by business sector.

12
Granted, temporary exemptions from social contribution payments were implemented during
the Covid-19 pandemic resulting in revenue from such payments to drop from 13.5% of GDP
in 2020 to 13.0% in 2021, but, before that, this revenue had steadily increased under right-wing
populist rule from 12.4% in 2015 (Figure A.2.1). In fact, there was widespread suspicion that
PiS might be tempted to increase social security contributions. When the party pledged to
increase the MW to 4,000 zlotys by 2023, opposition politicians and media tried to sow fear
among SMEs by citing a passage of a speech Jarosław Kaczyński had made two years earlier
at a conference on Entrepreneurs’ Responsibility for Poland: “If somebody is unable to run a
firm in such conditions [of high labor costs], it means that they are simply not suitable for
business” (A.1-Kalisz, 2019). It is also noteworthy that, from 2019, the PiS-led government
effectively increased Polish firms’ non-wage labor costs by gradually forcing all Polish
employers automatically to enrol all of their workers, and to pay an employer contribution of
at least 1.5%, into a new type of private pension plans called “employee capital plans” (Naczyk,
2018).
We now turn to demonstrating the impact of the two right-wing populist parties’ distinct
alliances with producer groups on their contrasting approaches to labor cost increases.
Different party-group alliances
MW increases have emerged as a salient issue on which Fidesz and PiS have tried to
capitalize electorally. Polls suggest that most Hungarians and Poles have supported such
increases. For example, after the Hungarian government proposed to increase the regular
statutory MW by 15 percent and to reduce employers’ contributions by 4 percent in 2017,
surveys conducted by Századvég – a political foundation allied with Fidesz – showed that 93
percent of respondents agreed with the proposal (A.1-Napi.hu, 2016). In Poland, independent
polls revealed that half to two-thirds of respondents were in favor of increases of the size
promised by PiS during the 2019 election campaign (A.1-Super Express, 2019; A.1-Business
Insider Polska, 2020). However, those same polls gave an indication of where political risks
might lie: In Poland, only 34 percent of entrepreneurs supported significant MW increases
while 44 percent opposed them (A.1-Business Insider Polska, 2020). Even in Hungary where
the Orbán government has combined MW increases with contribution cuts, only 69 percent of
surveyed companies agreed with this approach (A.1-Napi.hu, 2016), which suggests that many
of them remained unconvinced by MW increases.

13
MW increases have represented both an opportunity and a risk for Fidesz and PiS
because both parties have relied on extensive cross-class coalitions with small business owners,
production workers and service workers being overrepresented – versus managers being
underrepresented – in their own electorates compared to the electorates of their most direct
opponents, namely the social-liberal MSZP-SZDSZ coalition in Hungary and the liberal-
conservative Civic Platform in Poland (see data on the share of different occupational groups
in main parties’ electorates in Tables A.2.5 and A.2.6 based on Simons, 2021). Yet, if the policy
positions of Fidesz and PiS were to be purely shaped by the social composition of their
electorates, one should expect Fidesz to be more pro-labor than PiS and PiS to be more pro-
business than Fidesz. Indeed, production workers and service workers – who should be winners
from MW increases – have represented a greater part of the Fidesz’s electorate (about 60% in
the late 2000s and early 2010s – see Table A.2.5) than they have in the case of PiS (about 41%-
43% - Table A.2.6). By contrast, small business owners – who should be losers from labor cost
increases – have been overrepresented in PiS’s electorate (about 18.1%-20.9%) compared to
that of Fidesz (4.7% to 8.7%). Only a consideration of party-producer group linkages can
explain why Fidesz has systematically offered more tax concessions to business than PiS has.
Fidesz’s alliance with the chambers of commerce
The electoral risks associated with MW increases have clearly preyed on Viktor
Orbán’s mind. As the 2016 agreement was being negotiated, Orbán reminded public radio
listeners that, in 1998-2002, he had raised the regular statutory MW from “less than 20,000”
forint to “50,000 partly through personal decisions, because I was dealing with this issue even
then” (A.1-kormany.hu, 2016). He immediately added that “according to some, this contributed
to the election defeat, because it was too much for the entrepreneurs. We do not know whether
this is true, but I have acquired experience that shows that, if we raise the minimum wage
stepwise, it will have a beneficial economic effect. And we also know how to do it because we
have done it once. So, what I want to say is that raising the minimum wage is now possible,
but entrepreneurs are also right in that payroll taxes they pay are too high, the tax burden is too
high.” Similarly, in a 2021 public radio interview, he observed that, after the 1998-2002 MW
increases, “we lost the [2002] election regardless, so raising the minimum wage alone does not
bring political success” (A.1-Miniszterelnok.hu, 2021).
Back in the early 2000s, employers’ associations complained that the Orbán
government did not offer sufficient compensations for MW increases (A.1-MTI-ECO, 2001b).

14
Those complaints and Orbán’s 2002 electoral defeat pushed Fidesz to reduce its emphasis on
MW increases in its electoral campaigns: Although its 2002 manifesto clearly highlighted its
support for such increases (A.1-Fidesz-MDF, 2002: 5), the 2006 and 2010 manifestos no longer
mentioned minimum wages and called for a “radical reduction of tax and contribution burdens”
paid by employers (A.1-Fidesz, 2006: 4; 2010: 11). The 2010 Orbán government’s official
“program of national cooperation” also failed to mention minimum wages, but, importantly, it
featured two “cooperation agreements” signed with the Hungarian Chamber of Commerce and
Industry (MKIK) and the National Association of Entrepreneurs and Employers (VOSZ)
respectively both of which mentioned tax reductions as a major priority for the new government
(A.1-Országgyűlés Hivatala 2010: 41-42).
The VOSZ’s head, Sándor Demján
5
–, openly called on Hungarians to vote for Fidesz
in the 2010 election (A.1-Fidesz.hu, 2010), but the relationship between Demján and Orbán
subsequently deteriorated (A.1-Zsidai, 2013). Among organized business, the Fidesz’s most
stable ally has been the MKIK, which has been headed uninterruptedly since 2000 by László
Parragh. Orbán and Parragh concluded their first “cooperation agreement” in 2001 (A.1-MTI-
ECO, 2001a; see also Scheiring, 2020a: 234-237) and signed similar agreements in the run-up
to the 2010, 2014, 2018 and 2022 parliamentary elections (A.1-MKIK, 2022). The MKIK thus
played an important role both in mobilizing small entrepreneurs to vote for Fidesz (see also
Parragh’s manifesto statement in A.1-Fidesz, 2010: 14) and in supplying policy ideas to the
Orbán government with the Chamber describing itself as the government’s “most important
partner in economic policy” (A.1-MKIK, 2013) and with Orbán regularly praising its “brilliant
proposals” (A.1-Miniszterelnok.hu, 2021).
Fidesz never developed such links with organized labor. The MSZOSZ/MASZSZ,
Hungary’s historically largest union confederation, has always been allied with the Hungarian
Socialist Party (e.g. Labanino, 2020: 98). From 2010, the Orbán government increasingly
favored two other confederations – the LIGA and MOSZ – in policy consultations (Olejnik,
2020: 187-188). Fidesz has had the greatest affinities with MOSZ (National Federation of
Workers’ Councils), a union that has increasingly emphasized its defense of “Christian values”
and has started advocating a “new type of trade union mentality” based on the maintenance of
“labor peace” (A.1-Nagy, 2019; A.1-Munkasztanascok.hu, 2023). Yet, in contrast to his
“cooperation agreements” with MKIK and VOSZ, Viktor Orbán never signed any agreements
with MOSZ or any other union.
5
Demján was a real estate developer and one of Hungary’s largest fortunes (Scheiring, 2020a: 245).

15
Orbán has had a clear tendency to bypass corporatist institutions and to politicize
negotiations over MW increases so that his party and his allies in organized business could
claim credit for the compromises they have struck. Thus, in 2011, his government replaced the
tripartite National Interest Reconciliation Council (OÉT) – where minimum wages used to be
negotiated by trade unions, employers’ associations (not including chambers of commerce
gathered within the MKIK) and the state – with a National Economic and Social Council
(NGTT). The NGTT enlarged its membership to NGOs, churches, artists and chambers of
commerce and would no longer have negotiations over minimum wages within its remit
thereby leaving the government fully responsible for setting them. After union protests, the
government created a new tripartite Permanent Consultation Forum (VKF) which only
gathered social partners representing the private sector thereby excluding potentially more
radical public-sector unions and, again, not including the MKIK as a social partner. After the
VFK reached an agreement over MW increases in 2012, Viktor Orbán felt compelled to insist
that “this agreement was not brokered by the government, but by unions and employers” and
that he did “not want to take away this right [of setting minimum wages] from the negotiating
parties” (A.1-Orbán, 2012). But he also emphasized how his government facilitated the
agreement by implementing the “unusual solution” of a government “undertaking a budget
expenditure [in the form of social contribution cuts] in order to establish a minimum wage
agreement.”
When sustained growth in the following years opened greater space for MW increases,
Fidesz resumed politicizing the MW-setting process so as to claim credit for itself and its
business group allies for wage-tax agreements. As the 2016 multi-year “wage and tax”
agreement was being negotiated within the VKF, Orbán catered to his working-class electoral
constituency and proposed a higher increase of the regular statutory MW than that advocated
by trade unions. He argued that Hungary’s “lower middle class” needed to receive “higher
recognition, more respect” and that “what is needed here is a government intervention, a bold,
a brave decision that exceeds even the imagination of the trade unions and says that, people, it
is possible to significantly increase the minimum wage” (A.1-kormany.hu, 2016). At the same
time, both Orbán and László Parragh highlighted the MKIK’s – which was not a party to MW
negotiations – own input in agreeing payroll tax compensations for MW increases. During the
negotiations, Parragh claimed that “the government's recommendation is the same as the
chamber’s previous proposal, which called for the reduction of public burdens and the
catching-up of wages” (A.1-Napi Gazdaság, 2016). Once an agreement was struck in the VKF,
Orbán declared that “there is a community here that is not represented [at the VKF] and that

16
will receive a very serious tax cut starting next year. These are small and medium-sized
entrepreneurs. (…) it is a world whose voice is rarely heard because there is no association of
industrialists to represent them. The Chamber [MKIK] might do this instead (…) we rarely talk
about that stratum of over a hundred thousand people (…) I would like them to know that we
were thinking of them” (A.1-Orbán, 2016).
The MKIK and the Orbán government bypassed the VKF even more openly in 2021.
At a June 2021 event, Parragh himself suggested a significant increase in the regular statutory
MW (A.1-Tóth, 2021). At that event, Orbán replied that “the HUF 200,000 minimum wage is
on my horizon. In one or two steps, we will negotiate this with the chamber and the trade
unions. Obviously, small and medium-sized enterprises need help for us to pay a high minimum
wage. We can provide this in a single form, with a perceptible reduction in the taxes they bear.
(…) So, I suggest to President Parragh that we take up the thread” (A.1-Orbán, 2021a; own
emphasis). On the public radio, Orbán further insisted that “if a business cannot manage the
burdens, including wage burdens, then it will lay off. So good intentions can easily lead to the
opposite result. Therefore (…) an agreement must be made again with the Chamber of
Commerce and Industry” (A.1-Miniszterelnok.hu, 2021). The government subsequently
organized a “national consultation” survey where 94 percent of respondents supported the
200,000-forint MW thereby giving it greater popular legitimacy (A.1-kormany.hu, 2021).
Before negotiations in the VKF even started, Parragh and Finance Minister Mihály Varga held
a bilateral meeting and announced they agreed that SMEs should be supported with new tax
compensations (A.1-Kiss, 2021b). VKF members vehemently denounced Parragh’s role in
pushing for MW increases (A.1-Kiss, 2021a). By November, Orbán presented the official
agreement struck in the VKF as the “success” of trade unions, employers’ associations and the
government and, in the pre-2022-election context, he expressed his “trust in the wisdom of
Hungarians” (A.1-Orbán, 2021b).
PiS’s alliance with Solidarność
Law and Justice was founded in 2001 after the collapse of Solidarity Electoral Action
(AWS) – a coalition of Christian parties with roots in the Solidarity movement – that governed
Poland together with the liberal Union of Liberty (UW) in 1997-2001. While the Fidesz had
struck up its alliance with the MKIK in 2001, PiS only started actively wooing Poland’s
business community from the early 2010s. It established personal relationships with various
elite entrepreneurs and managers with the help of a PiS-allied think tank – the Sobieski Institute

17
– and of Mateusz Morawiecki – a top banker who became Minister of Development in 2015
and Prime Minister in 2017 (Naczyk, 2022). Yet PiS failed to link up with a business group in
the way the Fidesz has with the MKIK. In fact, it struggled to shed its reputation as an anti-
business party. During the 2015 election campaign, PiS’s candidate for Prime Minister, Beata
Szydło, had to insist that it was a “stereotype that PiS does not like business” (A.1-Osiecki,
2015).
Two years earlier, Jarosław Kaczyński had made damaging comments in a high-profile
interview (A.1-Jabłoński et al., 2013). PiS’s staunchly anti-communist leader declared that “in
no small part, large and medium-sized businesses, but also small businesses have been a haven
for people of the old [communist] system” and that this led many entrepreneurs to be
“absolutely un-innovative” and to “live off the exploitation of workers.” Kaczyński called for
the state to “force” employers to increase wages and said that there were “many methods” to
achieve that, including minimum wages and “penalty taxes.” Kaczynski argued that “Poles
earn too little, given the economic position of our country. They should earn more to increase
demand and their quality of life. And believe me, this will translate into growth.”
The business group that has been closest to becoming an ally of PiS has been the
“Federation of Polish Entrepreneurs” (FPP - Federacja Przedsiębiorców Polskich). The group
was founded in 2015 largely at the initiative of Zbigniew Jagiełło (author interview with
bureaucrat in the Ministry of Development, 11 July 2020), at the time chief executive officer
of state-controlled PKO Bank Polski – Poland’s largest bank – and a long-time
6
friend of
Mateusz Morawiecki. The FPP joined the tripartite Council of Social Dialogue (RDS) in early
2021, but, strikingly, it regularly signaled its “moderate”, if not pro-labor, stance on various
policy issues from the mid-2010s. For example, in 2018, together with trade union NSZZ
Solidarność, FPP issued a common statement calling for a labor market reform that would,
among other things, make earnings from all so-called “junk contracts” – civil law contracts
leading to bogus self-employment – subject to social security contributions (A.1-FPP, 2018).
In 2019, FPP also called on other employers’ associations to start participating in hitherto
totally inexistent sectoral collective bargaining (A.1-FPP, 2019) – a key demand of trade
unions, especially Solidarność (A.1-Solidarność, 2015; A.1-tysol.pl, 2017).
Yet, even here, FPP has at times had tense relationships with PiS. One good example
was when the PiS-led Morawiecki government was preparing its post-COVID-19 “Polish
6
Jagiełło and Morawiecki were both active in the 1980s in Fighting Solidarity (Solidarność Walcząca), a radical
splinter group – founded by Morawiecki’s father – of the Solidarity trade union.

18
Deal” (Polski Ład) reconstruction program as part of which it increased the progressivity of
Poland’s tax system – while Orbán introduced a flat tax in 2010 – and promised to increase
public spending on an underfunded healthcare system to 7% of GDP (A.1-gov.pl, 2023).
Noticeably, the Polish Deal hit the self-employed and small entrepreneurs by prohibiting them
from deducting their own health contribution payments from their income taxes. During the
program’s preparation, the government also signaled its intention to lift a cap on social security
contributions for high-income earners although that intention ultimately failed to materialize.
As employer associations were complaining about tax increases, Kaczyński publicly stated that
“cunning” employers tempted by tax optimization could “really lose out” with the Polish Deal
while “the vast majority will gain, but such changes require money, so I would not reduce state
revenues” (A.1-rmf24.pl, 2021). In response, the FPP stated that “Jarosław Kaczyński’s
statement dividing entrepreneurs into those who are honest and those who ‘live from cunning’
is both dangerous and harmful to hundreds of thousands of small and medium-sized Polish
entrepreneurs. It is also unfair to foreign entrepreneurs who have invested in our country and
have created hundreds of thousands of jobs” (A.1-FPP, 2021). So much for an alliance between
PiS and organized business.
Historically, PiS’s closest ally among producer groups has been NSZZ Solidarność.
That alliance has always had electoral undertones. Having emerged bruised from its direct
involvement in Solidarity Electoral Action (AWS) until 2001 (Ost, 2005: ch. 6), Solidarność
subsequently insisted it should remain independent from political parties. Yet, from 2004-2005,
it informally allied itself with PiS after a 2004 internal survey of the union showed that 75
percent of its members felt programmatic affinities with PiS and many activists insisted that it
should have representatives in Parliament (A.1-Rzeczpospolita, 2004). Since 2005,
Solidarność has seen many of its activists elected in Parliament via PiS’s electoral lists even
though the confederation never officially supported the party for parliamentary elections.
However, Solidarność’s regional bodies have regularly signaled their support for PiS. In
addition, the confederation itself officially supported PiS’s candidates for the presidential
election – including Lech Kaczyński in 2007 and Andrzej Duda in 2015 and 2020 – after
signing “programmatic agreements” with the latter (A.1-Solidarność, 2015; 2020).
Solidarność has also often influenced the content of PiS’s electoral manifestos with
MW increases being systematically mentioned because of Solidarność pressuring its party ally.
PiS’s first manifesto did not mention minimum wages (A.1-PiS, 2005), but the next one boasted
about MW increases introduced by the first 2005-2007 PiS-led government (A.1-PiS, 2007:
41-42). That government and Solidarność agreed MW increases bilaterally, i.e. outside of

19
regular corporatist dialogue, after the union threatened to call a general strike (A.1-Gazeta
Wyborcza 2007a). Other unions and employers’ associations denounced a “breach of the
principles of social dialogue” (A.1-Gazeta Wyborcza, 2007b; 2007c). The next 2011 election
manifesto only mentioned MW increases for specific professions (A.1-PiS, 2011: 168; 181),
but this was at a time when Solidarność submitted its own citizen bill
7
on the issue to Parliament
(A.1-Guza, 2011). The bill aimed for the statutory MW to reach 50% of the average wage via
an automatic, over-proportional indexation of the MW in case of high growth. PiS supported
Solidarność’s bill, but, once it became clear that the liberal-conservative Tusk government
would not pass it, PiS’s next manifesto promised to “aim for” the MW to reach 50% of the
average wage (A.1-PiS, 2014: 114). So did Presidential candidate Andrzej Duda in his 2015
programmatic agreement with Solidarność.
Although it has not initiated all of PiS’s social policy initiatives – e.g. universal family
benefits 500+ or a “thirteenth” and “fourteenth” pension payment for retirees (Lendvai-Bainton
and Szelewa, 2021; Meardi and Guardiancich, 2022), Solidarność has been highly supportive
of them and has, for example, mentioned them in its programmatic agreements with Andrzej
Duda (A.1-Solidarność, 2015; 2020). The need to finance such social policy initiatives also
explains why PiS has had much less leeway to offer Fidesz-like tax compensations for MW
increases. Solidarność’s friendly, but firm, pressure on PiS was also an important factor in
leading the party to focus its 2019 election campaign on the “Polish model of the welfare state.”
Indeed, when in early 2019 PiS prepared new social policy proposals for the 2019 campaign,
Solidarność signaled that they were insufficient and that it would “hit hard” and even dismiss
its leader, Piotr Duda, if PiS failed to up them (A.1-Fakt, 2019). With Solidarność and other
unions having proposed during negotiations in the corporatist Council of Social Dialogue
(RDS) to increase the MW to 2,520 zlotys in 2020 (A.1-Rozwadowska, 2019), Kaczyński
undoubtedly catered to its core trade union ally when he unexpectedly promised in September
2019 to increase the MW to 4,000 zlotys by 2023 and, in the meantime, to 2,600 zlotys in 2020.
Something for something before an important election.
As the 2023 general election neared, Prime Minister Morawiecki met with Piotr Duda
and agreed to increase the statutory MW to 3,600 zlotys (below the 4,000 that had been
promised in 2019), Morawiecki declared that “this was NSZZ Solidarność’s proposal. I can
say that today” and he insisted that “we have solidarity in our blood, in our DNA” (A.1.-
Kancelaria Premiera, 2022).
7
Polish citizens have a right of initiative if they gather support of 100,000 petitioners.

20
Conclusion
Although Fidesz and PiS have been typically seen as sister parties, they have parted
ways on a significant issue – labor cost increases – that has been at the intersection of several
policy areas, namely minimum wages, tax policy and social policy. PiS has systematically
adopted a more aggressive, worked-friendly approach than Fidesz has and has couched it in a
developmentalist discourse on the modernizing effects of labor cost increases for Polish SMEs.
We have related this divergence to the two right-wing populist parties’ need to strike distinct
quid pro quos with organized interests because of their having forged widely divergent
historical alliances with such groups when defining and consolidating their core electoral focus.
With comparative political economy having become increasingly polarized between an
electoral politics and a producer group perspective (see also Hacker at al., 2022), the study of
electorally motivated party-group alliances should help solve research puzzles in other
geographical contexts and help bridge the divide between these two research foci.
For students of ECE’s advanced peripheral growth models, a focus on party-group
alliances certainly helps clarify a conceptual issue that has arisen in recent literature on the
social policy-making and growth strategies of the PiS-led and Fidesz-led governments. Studies
of PiS’s policies have documented significant, albeit familialist, social policy expansions
implemented by the party (Lendvai‐Bainton and Szelewa, 2021; Meardi and Guardiancich,
2022) and have labelled its growth strategy as “developmentalist” (Naczyk, 2022) and as
putting Poland “in a better position to upgrade and climb up the ladders of global value chains”
than Hungary (Toplišek, 2020: 398). By contrast, students of Fidesz have clearly documented
the party’s workfare-focused social policy paradigm (Szikra, 2014; Szombati, 2021; Vidra,
2018) and have highlighted its continuation of neoliberalism in economic policy, its
institutionalization of corruption and crony capitalism as well as its lack of a developmental
strategy for domestic SMEs (Ban et al., 2023; Bohle and Greskovits, 2019; Fabry, 2019;
Scheiring, 2020a). This broader contrast in the social policies and growth strategies pursued by
PiS and Fidesz undoubtedly has to do with the divergent coalitions the two parties have forged
with organized labor and organized business.
With its emphasis on “solidarity” as a core value, PiS’s Warsaw has at times felt closer
to 1960s-style social-democratic Stockholm than to Orbán’s “bourgeois” Budapest (Scheiring,
2020a). One should nonetheless be cautious not to overstate the contrast in the two countries’
reform trajectories. For example, PiS has failed to deliver on a key demand of Solidarność,

21
namely the promotion of sector-wide collective bargaining. The lack of wage coordination in
Poland prevents domestic unions to institutionalize Rehn-Meidner-style “solidaristic” wage
compression and to become true agents of technology upgrading through Nordic-style “creative
corporatism” (Ornston, 2013). Paradoxically, the strongest push for such coordination may
come from the 2022 EU Directive on adequate minimum wages that the Eurosceptic Fidesz-
and PiS-led governments both opposed and that requests EU members states to achieve 80%
coverage of collective bargaining (Natili and Ronchi, 2023).
One should also not brush aside the possibility that reforms introduced by Fidesz in
response to its “cooperation agreements” with the MKIK are “developmentalist” in spirit and
might lead to technological upgrading and greater export competitiveness of Hungarian SMEs.
Like the Erdoğan regime in Turkey (Doner and Schneider, 2020), Fidesz has given a prominent
place to chambers of commerce in the skill formation system – an important ingredient of
upgrading. With Parragh having been a director of the Hungarian Export-Import Bank since
2002, the MKIK has also closely cooperated with Hungary’s development finance institutions
(e.g. A.1-MTI, 2020). Subsidies from such institutions have most likely benefited Orbán’s
cronies, but, after all, authoritarianism and systemic corruption did not prevent Korea from
becoming a “developmental state” (Kang, 2002). Although democratic backsliding has been a
tragedy for ECE citizenries, there is a real need for further, perhaps more detached, inquiries
into the capacity of ECE countries’ institutional ecosystems to upgrade and de-peripheralize
domestic businesses.

22
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Appendices
Appendix A.1 – References of empirical sources ....................................................................... 27
Appendix A.2 – Figures and Tables .......................................................................................... 31
Figure A.2.1 – General government spending on social protection and revenue from social
security contributions as % of GDP in Hungary and Poland since 2007 ..................................... 31
Table A.2.1 – Collective bargaining coverage and density of trade unions and employer
organizations (as % of employees) in Hungary and Poland in the 2010s ............................... 32
Table A.2.2 – The evolution of minimum wages in Hungary and Poland since 2010 .............. 32
Table A.2.3 – Minimum wages and consumer price inflation in Poland and Hungary since
2010....................................................................................................................................... 33
Table A.2.4 – Average annual wages and decile ratios of gross earnings in Hungary and
Poland since 2010 .................................................................................................................. 34
Table A.2.5 – Share of different occupational groups in main parties’ electorates in Hungary
.............................................................................................................................................. 34
Table A.2.6 – Share of different occupational groups in main parties’ electorates in Poland . 34

27
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31
Appendix A.2 – Figures and Tables
Figure A.2.1 – General government spending on social protection and revenue from social security
contributions as % of GDP in Hungary and Poland since 2007
Source: OECD Data
8.0%
10.0%
12.0%
14.0%
16.0%
18.0%
20.0%
HU - social protection
PL - social protection
HU - social security
contributions
PL - social security
contributions

32
Table A.2.1 – Collective bargaining coverage and density of trade unions and employer
organizations (as % of employees) in Hungary and Poland in the 2010s
2010
2015
2020
Collective bargaining
coverage
Hungary
27.3
28.3
21.8
Poland
18.6
17.3
13.4 2019
Trade union density
Hungary
15.3 2008
11.0 2014
8.3 2018
Poland
17.4
16.5
13.4 2017
Employer organization
density in the private
sector
Hungary
40 2008
40 2012
--
Poland
34.7
40.5 2012
46.2 2018
Source: OECD/AIAS ICTWSS
Note: Numbers in small print in cells indicate year of data point if it differs from year in the column
Table A.2.2 – The evolution of minimum wages in Hungary and Poland since 2010
Year
annual growth rate in
nominal MW (in %)
real hourly MW (in
2021 US dollars at
PPP)
MW relative to
median wage of full-
time workers (in %)
MW relative to
average wage of full-
time workers (in %)
Hungary
Poland
Hungary
Poland
Hungary
Poland
Hungary
Poland
2010
2.8
3.2
3.3
4.8
47
45
35
37
2011
6.1
5.2
3.2
4.8
49
45
36
37
2012
19.2
8.2
3.3
5.0
54
48
40
39
2013
5.4
6.7
3.7
5.3
54
50
40
40
2014
3.6
5.0
3.9
5.6
54
51
40
41
2015
3.4
4.2
4.0
5.9
53
51
40
41
2016
5.7
5.7
4.1
6.2
51
53
39
43
2017
15.0
8.1
4.4
6.6
52
54
40
44
2018
8.1
5.0
4.8
6.8
51
51
40
42
2019
8.0
7.1
5.1
7.1
49
51
38
42
2020
8.1
15.6
5.4
8.0
48
56
37
45
2021
3.3
7.7
5.6
8.2
45
55
35
45
2022
20.2
7.5
2023
16.0
19.6
Notes: 1) MW = minimum wage; PPP = purchasing power parity
2) Number in italics reflect decisions made by governments not led by right-wing populist parties
3) Dashed horizontal lines help separate MWs as set before and after a parliamentary election (e.g., after Hungary’s 2010 parliamentary
election, the first MW set by the Fidesz-KDNP government is implemented in 2011)
Source: OECD Stat

33
Table A.2.3 – Minimum wages and consumer price inflation in Poland and Hungary since
2010
Year
Poland
Hungary
Consumer
price
inflation
(in %)
annual
growth
rate in
nominal
MW (in
%)
Consumer
price
inflation
(in %)
annual
growth
rate in
regular
MW (in
%)
annual
growth
rate in
guarantee
d wage
minimum
(in %)
annual
growth
rate in
public
works
wage
minimum
(in %)
Guarantee
d wage
minimum
relative to
regular
MW (in
%)
Public
works
wage
minimum
relative to
regular
MW (in
%)
2006
1.0
5.9
3.9
9.6
105.0
2007
2.5
4.1
8.0
4.8
9.8
110.0
2008
4.2
20.3
6.0
5.3
14.9
120.0
2009
3.5
13.3
4.2
3.6
5.7
122.4
2010
2.6
3.2
4.9
2.8
2.3
121.8
2011
4.3
5.2
3.9
6.1
5.0
120.5
73.1
2012
3.7
8.2
5.7
19.2
14.9
26.0
116.1
77.2
2013
0.9
6.7
1.7
5.4
5.6
5.2
116.3
77.0
2014
-0.0
5.0
-0.2
3.6
3.5
2.4
116.3
76.2
2015
-0.9
4.2
-0.1
3.4
3.4
2.4
116.2
75.4
2016
-0.6
5.7
0.4
5.7
5.7
0.0
116.2
71.3
2017
2.0
8.1
2.3
15.0
24.8
3.0
126.3
63.9
2018
1.7
5.0
2.9
8.1
12.1
0.0
130.8
59.1
2019
2.3
7.1
3.3
8.0
8.0
0.0
130.9
54.7
2020
3.4
15.6
3.3
8.1
8.0
0.0
130.8
50.6
2021
5.1
7.7
5.1
4.0
4.0
4.3
130.8
50.8
2022
14.3
7.5
14.6
19.5
18.7
17.6
130.0
50.0
2023
(13.1)
19.6
(17.25)
16.0
14.0
16.0
127.8
50.0
Notes: 1) MW = minimum wage
2) Number in italics reflect decisions made by governments not led by right-wing populist parties
3) Dashed horizontal lines help separate MWs as set before and after parliamentary election and arrival of new government
4) Consumer price inflation data for 2023 are central bank projections (NBP Inflation and GDP projection, November 2022; MNB
Inflation Report, December 2022)
Source: OECD Stat and Hungarian Central Statistical Office (KSH)

34
Table A.2.4 – Average annual wages and decile ratios of gross earnings in Hungary and
Poland since 2010
Year
Average annual
wage in current
prices
Average annual
wage in 2021
constant prices at
2021 USD PPPs
Inter-decile ratio
P90/P10
Inter-decile ratio
P50/P10
Low pay incidence
Hungary
(forint)
Poland
(zloty)
Hungary
Poland
Hungary
Poland
Hungary
Poland
Hungary
Poland
2010
2,726,482
40,484
21,991
25,512
4.25
3.96
1.78
1.97
21.00
22.69
2011
2,855,169
42,453
22,276
25,481
4.10
..
1.73
..
19.99
..
2012
2,916,720
43,428
21,534
25,218
3.76
4.10
1.60
1.95
17.39
22.40
2013
2,936,661
44,084
21,311
25,486
3.69
..
1.60
..
16.81
..
2014
2,936,455
44,960
21,031
26,026
3.67
4.03
1.61
1.92
18.65
22.60
2015
2,974,991
45,665
21,194
26,710
3.72
..
1.64
..
19.78
..
2016
3,031,742
47,758
21,386
28,051
3.73
3.81
1.68
1.86
19.55
21.67
2017
3,358,916
50,781
22,933
29,236
3.30
..
1.52
..
15.72
..
2018
3,640,672
55,120
24,056
31,213
3.22
3.70
1.52
1.84
15.97
21.11
2019
3,933,189
59,115
24,853
32,695
4.02
..
1.85
..
20.26
..
2020
4,130,446
62,296
25,275
33,330
4.00
3.45
1.85
1.73
19.85
18.80
2021
4,562,584
66,153
26,268
33,566
..
..
..
..
..
..
Source: OECD.Stat
Table A.2.5 – Share of different occupational groups in main parties’ electorates in Hungary
Population
distribution
in ESS4
Fidesz-KDNP
MSZP-SZDSZ
2006
2010
2014
2008
2010
20141
Managers
9.9
8.0
9.4
6.9
11.7
15.7
20.4
Clerks
9.9
8.7
9.8
9.9
9.8
15.0
8.1
Self-employed professionals
1.0
0.7
1.7
0.4
1.1
0.0
0.0
Small business owners
6.1
8.7
8.7
4.7
4.7
5.5
4.3
Technical professionals
5.6
5.9
3.1
4.0
6.1
0.7
11.1
Production workers
39.0
40.2
36.7
39.3
37.6
33.6
21.1
Service workers
20.4
17.4
22.7
23.4
20.9
21.9
11.1
Sociocultural professionals
8.2
10.5
7.9
9.3
8.1
7.6
10.4
Note: 1For the 2014 election, support is for MSZP only (no longer in combination with SZDSZ, which ceased
to exist in 2013).
Source: own calculations based on ESS4, ESS5 and ESS8 data reported in Simons 2021
Table A.2.6 – Share of different occupational groups in main parties’ electorates in Poland
Population
distribution
in ESS4
Law and Justice
Civic Platform
2007
2011
2015
2007
2011
2015
Managers
18.1
17.5
13.1
14.8
27.0
25.0
20.4
Clerks
7.9
9.2
6.6
5.5
8.1
8.3
8.1
Self-employed professionals
1.3
0.4
1.3
0.9
2.8
2.0
1.8
Small business owners
16.2
20.9
18.1
20.1
12.3
16.3
15.9
Technical professionals
3.8
3.8
10.3
8.7
5.1
10.5
11.1
Production workers
29.0
25.7
28.0
25.5
20.0
16.5
21.1
Service workers
16.3
14.0
15.6
16.6
15.1
12.9
11.1
Sociocultural professionals
7.5
8.6
7.1
8.0
9.8
8.7
10.4
Source: own calculations based ESS4, ESS6 and ESS8 data reported Simons 2021