Budapest has an unusually high share of employment at companies that compete through brain power and expertise, performing better than cities like Berlin, according to "The Geography of Europe’s Brain Business Jobs," a report from the European Centre for Entrepreneurship and Policy Reform (ECEPR).
The research, supported by NC Advisory AB, advisor to the Nordic Capital funds, says that the Hungarian capital is one of the continentʼs top knowledge centers, with 10.5% of the population of working age working in so-called "brain business jobs." The high percentage means that Budapest has a higher concentration of brain business jobs than Helsinki, Brussels, Cologne, Vienna, Madrid, Berlin, Sofia, Lisbon, Rome, and Warsaw.
Nearly 6% of Hungarians of working age work at highly knowledge-intensive companies, almost 1% more than the European average, the study claims. ECEPR President Nima Sanandaji says the overall trend is that Central and East European countries are catching up with Northern and Western Europe.
Hungary performs particularly well in the high-tech manufacturing sector, with the concentration of brain business jobs amounting to more than twice the European average. In the R&D field, Hungary has a more than 50% higher concentration of such jobs than the European average, making the country a top performer in this category as well. The country also posts stronger than average numbers in design and IT services.
However, in areas such as telecoms, advertising, market research, and publishing, Hungary lags behind other European countries.
The report notes that Europe is becoming an increasingly skills-based economy, with growth occurring "where the brains are." While some IT experts, engineers, and other knowledge workers from the CEE move to places like London or Zurich on completion of their college education, the capital regions of their home countries are also attractive for them, resulting in changes of the "geography of successful enterprise."
While performing well generally, there nevertheless remains a strong regional disparity in the distribution of knowledge-based jobs in Hungary. In the Central Transdanubia region, the concentration of "brain business" employment is 3.7%, compared to over 10% in the capital. The Western Transdanubia region performs even weaker at 3.5%, while the Northern Great Plain and Southern Great Plain regions register only 2.6% of such employment.
"In a time when Europe is rapidly moving towards a knowledge-intensive economy, it is important for regions to develop brain business jobs," Sanandaji explains. "These jobs are the driver for future economic well-being, and need to evolve not only in the capital region but throughout the country."
One of Hungaryʼs main advantages - compared to cities like London, Paris, and Stockholm - is its lower cost of living, as regions with higher costs of living face a disadvantage in attracting talents. As a result, companies in these cities are forced to pay higher salaries for engineers, programmers, and other knowledge workers.
The relative cheapness of life in Hungary might be used to keep the brains in the country, and maybe even to encourage the return of workers who went abroad some years ago, notes the study. The evolution of digital technology greatly facilitates cooperation across borders, lending further credibility to such possibilities.
The study finds that knowledge regions with lower costs of living and correspondingly lower wages have a competitive advantage, Sanandaji argues.
"There are three keys to success," he says. "Regions need to invest in social capital through higher education and adult learning. They need to encourage business and connectivity to the rest of Europe. And they need to keep the cost of highly skilled labor down, through tax policy and housing policy that reduces the cost of living."