Statistical overstatement of average wages and its impact on pensions: The case of Hungary

Oblath, Gábor and Simonovits, András (2024) Statistical overstatement of average wages and its impact on pensions: The case of Hungary. ACTA OECONOMICA, 74 (4). pp. 445-461. ISSN 0001-6373

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Abstract

In Hungary, initial pensions are indexed to average net wages, reported by official earnings statistics (ES). However, there is an alternative statistical source on labour income, the national accounts (NA). The latter indicate a markedly lower rate of growth in wages than the ES for the period between 2010 and 2020. We claim that the ES overstated the actual increase in wages at the national level during the 2010s, and make our own calculations regarding the path of net wages and implied (hypothetical) initial pensions. The main implications are as follows: (i) the actual increase in initial benefits was excessive; (ii) the ratio of average benefits to the revised average net wages fell much less; (iii) the accumulation of major tensions between cohorts retiring in subsequent years might have been reduced by relying on the more plausible wage statistics reported by the NA.

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