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Mihály Varga: Economic Growth Leads to ‘New Era’ in Employment

News that unemployment in Hungary had fallen to a new low of 3.8% in the fourth quarter of 2017, coupled with rising wage levels - up 12.8% in the first 11 months of the year - was greeted with predictable enthusiasm in government circles. Opposition politicians and economists unconnected to the halls of power were less enamored.

 “Every Hungarian able and willing to work can have a job now,” Mihály Varga, Minister for National Economy, said in response to the latest jobs data. According to a ministry analysis, Varga spoke of a “new era” in employment following a “positive trend reversal” on the labor market, in turn resulting from “the government’s pro-growth economic policy and steady economic expansion”.
Official unemployment numbers fell to 175,000 at the end of 2017, a decline of 30,000 year-on-year, while the number of those in jobs jumped by 36,000 to 4.45 million. This resulted in an employment rate of almost 69% for the 15-64 age group, second only to Czech Republic in regional terms, and a little above the average of the European Union.
The ministry analysis - to its credit - quietly acknowledged the roles of the “favorable global economy” and European Union funding in Hungary’s growth performance. It also argued that, with rising wages and decreasing pay roll taxes included in the recent six-year wage agreement with unions and business owners, employment trends would continue into ever more positive territory.

Less Sanguine

Government politicians, naturally, tout the latest figures as evidence for renewal of their mandates in April’s general election. Opposition figures, equally naturally, are less sanguine about both the numbers and government policy.
Gergely Karácsony, the joint Dialogue-Socialist prime ministerial candidate, accepts that the economy is expanding, but says the main beneficiaries have been “circles close to the government” while the recovery has failed to include all segments of society.
“Our job is to tell people that we can create a social and economic model that enables sustainable development to be realized without just getting money from the EU, while also ensuring that this growth includes all Hungarian society, instead of a select few,” Karácsony told foreign journalists on February 1.
In contrast to this worthy statement, András Vágó, spokesperson for the Socialist Party, was blunter.
“The [official] stats include as employees: students working while studying, citizens who have been abroad for less than a year, but not working in Hungary, and employees in public works [schemes],” he told the Budapest Business Journal. In addition, he claimed people no longer eligible for places in public work projects are effectively forced to join cooperatives.
“As a member of a cooperative, you’re an employed worker in the Hungarian statistics. The solution: change of government to see the market clearly - otherwise it’s bogus.”

Improved Significantly

In a more nuanced critique, Gábor Karsai, deputy chief executive of GKI economic research company, told the BBJ: “Hungarian unemployment has improved significantly in recent years, albeit less than the official statistical data indicates. If we regard public works participants as unemployed - which is generally customary in the international arena - then Hungarian unemployment is actually at about 7.6%, or double [the officially announced] 3.8%.”
As regards the government’s “pro-growth economic policy and steady economic expansion”, GKI’s latest report forecasts growth in both 2017 and 2018 of around 4% - in agreement with government predictions - but notes that though this is above the European Union average of just under 2.5%, it is only “moderate in the Central and Eastern European region” and has been achieved in part only by special efforts to acquire EU subsidies in the early part of the current funding period.
It warns that developments such as the near 30% growth in the construction sector in 2017 are “clearly unrepeatable” in 2018, while output from the auto sector has moderated and “poses a risk”.
“The Hungarian growth rate is extremely cyclical, and this upswing is partly due to the surge in EU transfers, and partly to pre-election revitalization [i.e. additional state spending],” Karsai said.

Roma: An Untapped Pool of Labor?

The government has of late been promoting the potential of Hungary’s under-employed Roma population as a means to overcome labor shortages - an idea that, unusual for the country, finds strong support among opposition ranks.
But economy minister Mihály Varga’s schedule presumably allows him little time to visit Roma settlements in the country, or he might refrain from making bold statements like “Every Hungarian able and willing to work can have a job now.”
That, at least, was the essential reaction from one volunteer helping Roma on hearing the minister’s recent pronouncement.
“The conditions of Roma are frightful,” the volunteer, who requested anonymity, told the Budapest Business Journal. “This [talk of getting jobs] is obviously nonsense. The whole thing sounds ignorant,” he said.
The volunteer, who has been teaching Roma families in Tápiószele, a small town 56 miles (91 km)southeast of Budapest, said that the modern economy, which requires skilled workers, is largely off limits to the Roma minority, even if their ethnicity is not held against them.
“So many jobs today need at least the eight years education, and very few Roma have even this,” he said.
In addition, the effects of long-term unemployment are devastating, he said. “People forget how to work. It’s the same in any country.”
While some Roma are employed by public works’ schemes, many others find casual work in agriculture. But such jobs largely disappear in winter and “if they come to Budapest, it’s too expensive to live,” our source said, adding: “Perhaps 15%” of the Roma in Tápiószele had regular work, the only good news being “it’s even worse further in the east.”