Once again statistics indicate that Hungary’s population is decreasing. This trend brings along social and economic considerations for policy makers, who have to make tough decisions to avert a demographic crisis through fostering either immigration or incentive-based programs
According to recent data released by the central statistics office KSH, Hungary’s population has further shrunk by 18,000 - with immigration somewhat off-setting mortality rate - and is now at 9.968 million. At a time when the national unemployment rate is nearly 11%, having smaller competition on the job market might even look like an advantage.
However, negative consequences of a population decline are a common fact. Low fertility rate means that population gradually ages, which puts economic and social strains on younger generations. In the long run, population decline could lead to labor shortage and result in stagnation in some industries.
High emigration rates lead to a shortage of highly-qualified professionals, which, in fact, already presents a problem for Hungary in terms of the country’s medical staff.
Moreover, according to research conducted in May by pollster Tarki and the European Integration Fund, 17% of the adult population in Hungary is considering leaving the country for a shorter or longer period. A smaller population also means a smaller consumer market, which negatively affects local and foreign businesses.
On a less pessimistic note, population decline does not necessarily translate into economic decline. Smaller workforce could lead to smaller GDP. However, if population declines at a faster rate than economic growth, GDP per capita will continue to grow or remain the same.
Local or foreign babies?
It seems rather obvious that to tackle the problem of declining population a country can either increase the number of immigrants by adopting more flexible employment and citizenship frameworks or encourage internal natural growth. Most countries strive for a balance between the two.
In fact, immigration might be perceived as an easier option. Despite the population decline in industrialized countries, global trends are on the rise with an annual increase of nearly 80 million people. Since most of these people come from economically weak countries with high unemployment rates, labor shortages in industrialized countries, in theory, could be solved through this channel.
Opponents of liberal immigration policies, however, bring a valid argument of potential social and economic backlashes. Rising xenophobia across Europe as well as the rising number of outspoken right-wing conservatives provide fertile ground for heated arguments regarding immigration and multiculturalism.
Hungary, like many other European countries, is facing a dilemma of promoting and protecting women’s rights on the one hand, and encouraging families to procreate by offering economic incentives on the other. Among such incentives the government has already introduced family tax preferences, established programs to advance part-time employment opportunities, expanded children's daycare and strengthened support systems for families with children.
However, the problem persists. According to the Eurostat’s forecast, Hungary’s population will decrease by 13% in the next 50 years. As one of the solutions, the government adopted a somewhat contradictory policy direction. On the one hand, Prime Minister Victor Orbán stated earlier this year that reversing demographic trends should be the answer to declining population rather than immigration. On the other hand, over the past year the government has been pursuing an increasingly aggressive campaign of granting citizenship to ethnic Hungarians in the region.
Romania, Croatia, Slovakia, Serbia, Ukraine and Austria have large Hungarian communities and, therefore, serve as the main target for the government’s attempt to simplify citizenship procedures for ethnic Hungarians. 100,000 of Hungarian passports have already been granted. Just yesterday President Schmitt delivered a speech in Cluj, Romania, encouraging thousands of Hungarians to apply for dual citizenship. While that would be possible in Romania, some countries, like Slovakia, do not allow its citizens to hold two passports.
Moreover, dual citizenship often has more of a symbolic than practical meaning to ethnic Hungarians. Since most of them live in EU member states, having Hungarian citizenship does not all of a sudden open new economic and social opportunities, which they would otherwise be deprived of. Therefore, this policy might not be able to re-populate Hungary, once again emphasizing the need for either stronger domestic efforts to reverse the demographic trend or more flexible immigration procedures.
Although at the moment population decline might not present a serious problem for Hungary, delays in undertaking serious measures to deal with the demographic trend could result in a much bigger problem later, when reversing population shrinkage will be more difficult.
SUPPORT THE BUDAPEST BUSINESS JOURNAL
Producing journalism that is worthy of the name is a costly business. For 27 years, the publishers, editors and reporters of the Budapest Business Journal have striven to bring you business news that works, information that you can trust, that is factual, accurate and presented without fear or favor.
Newspaper organizations across the globe have struggled to find a business model that allows them to continue to excel, without compromising their ability to perform. Most recently, some have experimented with the idea of involving their most important stakeholders, their readers.
We would like to offer that same opportunity to our readers. We would like to invite you to help us deliver the quality business journalism you require. Hit our Support the BBJ button and you can choose the how much and how often you send us your contributions.