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.