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Labor Market Pendulum Swings Back Thanks to COVID

HR

István Martis

Among the many changes the coronavirus has wrought, work has been much affected. And not just labor market dynamics; from the way we work to where we work to how we communicate; there is hardly a segment that has remained unaffected. Some of these changes had been in the offing, some were long overdue, while a great deal occurred earlier than expected. Overall, they required a great deal of adaptability from both companies and employees.

Perhaps the most significant change from an economic perspective is that what was very much a candidate-driven the market has swung back to a more balanced model, and in certain sectors to an employer-driven state.

“The past eight years, and in particular the last four, was about employers chasing employees,” István Martis, CEO of Profession.hu told the Budapest Business Journal. “This environment has changed drastically as in a very short amount of time tens of thousands of people appeared on the job market due to company closures, or Hungarians working abroad returning home.”

As a result, employers had the best quality workforce queuing for a job, unlike in the past where they were often forced to make comprises, and take on someone they may have felt was a less good fit for a lot more money.

In fact, COVID-19 created an opportunity for employers to let go of some the workforce they hired in need but were not satisfied with.

Administrative positions saw the biggest declines, along with jobs in tourism and hospitability, according to data by profession.hu. Unskilled manual labor and customer service positions were also badly hit.

Those who didn’t lose their jobs are more loyal than they used to. Prior to the pandemic, a slightly better offer from a rival firm was often enough for someone to change jobs; now, people are holding on to their positions more firmly. This also has to do with greater uncertainty.

At the outbreak, companies froze hiring, furloughed or laid off staff as they did not know how they business would cope. In spring, the visitor traffic of job portals dropped to 20% on average. It has now has returned to 80% of the pre-COVID level, and may return to 100% by the end of this year, Martis says.

“Companies continue to be cautious when it comes to hiring as taking on a new employee is costly,” he explains. But some have already stated they will return to the market when they see the situation is improving, he adds.

First Casualties

The first casualties of the pandemic were temps and people working under flexible working conditions. Now, with companies still hesitant about hiring full-time employees, these same positions again come to forefront.

After a dramatic drop in job ads at the beginning of 2020, during the second wave, the domestic job market was already expanding in several areas. By the fourth quarter of 2020, the number of new job advertisements was only 1% lower than in the same period last year, latest data by profession.hu reveals.

Expansion in many sectors began in the third quarter and this trend continued in the fourth, it reports. Compared to the same period in 2019, agriculture (28%), construction (25%), health and pharmaceuticals (22%), education, research and science (17%) and manufacturing (11%) saw the largest growth in Q4 2020.

In contrast, the largest declines year-on-year are in hospitality and tourism (79%), business support centers (37%), customer service (36%), business management and administration (28%) and professional work (25%).

In Q3 2020, on average 40% more people applied for advertised positions than in the same period in 2019. In the fourth quarter, however, only 27% more people applied for jobs than a year earlier.

Compared to 2019, the largest surge in applications in Q4 was in education, research and science (73%), marketing, media and public relations (51%), IT programming and development (50%), blue-collar work (47%) and skilled work (43%), while the most significant drop was in hospitality and tourism (84%), business management (44%) and agriculture (25%), according to profession.hu.

“The pandemic is not yet over; however, with the arrival of the vaccine, that time is coming into reach,” Balázs Molnár, HR consultant for people and organization at PwC Hungary told the BBJ. According to the expert, the employment rate will return to pre-COVID levels this year. With that, labor shortage experienced in recent years and growing competition for talents will also return.

Touristic Recovery

When it comes to the tourism industry, experts agree that it will be a while before it recovers. Regarding those who made a living working in the sector, opinions differ.

“The skills of workers in these two sectors are difficult to capitalize on in others, so we expect unemployment here to be a permanent phenomenon throughout 2021,” Molnár says.

But György Palásti, managing director of Grafton Recruitment, tells the BBJ he does see some hope.

“Due to their language command and other skills, some of those who worked in tourism may be sucked up by customer and business service centers,” he says. 

Shared and business services centers in Hungary could be winners of the pandemic. Although some were forced to lay off hundreds of people, in the medium term they may be able to capitalize on companies’ cost reducing efforts.

“There have been plans for bringing in new functions to some Hungarian SSCs, but they were not realized as, at the time, they may not have offered that much of a saving,” Palásti says. “Now, those plans are being dusted off as companies are looking at cost-saving options and are planning to outsource operations from more expensive locations to here,” he adds.

There are some other winners as well. While the pandemic has affected most sectors adversely, it has spared (or even gave a boost to) those where special skills and high-quality workforce are required. Here the labor shortage continues to be a problem.

Unsurprisingly IT jobs, both programing and system operators are much sought after, in part because of the forced digitization companies had to switch to. In construction and infrastructure, demand is higher than the supply. The same is true for engineers with special expertise.

György Palásti

Retain the Best

Similarly, retaining quality workforce will again be in focus in the future. Employment branding, however, has taken a back seat, at least temporarily, as companies have been kept busy applying crisis management measures. Before the pandemic, there was much emphasis on the candidate experience; companies tried very hard to show their best.

“With layoffs and restrictive measures, the focus has shifted which, at many places, also resulted in declining employee commitment,” Palásti says.

Hungary is too small a country to make generalizations even within a sector, situations vary by company, but some of the changes the coronavirus has brought about apply to all areas. One such is the work-from-home phenomenon and digital/remote solutions. Recruitment has gone online too, which requires new skills from recruiters.

“Part of the candidate experience which bears on their final decision is the impression they get upon entry at the company. The interior, how they are received, the atmosphere during the interview; these cannot be reproduced in a two-dimensional video call,” Palásti explains.

Trust is harder to gain, too, so headhunters need to adjust and make the most of the tools they have at hand.

“It takes some experience and new methods, but when done well, the outcome can be very positive,” he notes. 

Switching to digital methods may not always be smooth, but it does have its advantages. Since everyone works online and companies have adapted to enable remote work, they are no longer limited to recruiting locally. Depending on the type of work and the industry, they can recruit from abroad, and thus improve the quality of workforce.

Enterprises also report that making a business deal with foreign partners has become much easier lately, as they no longer have to travel to a location. With the pandemic, borders, in work at least, seem to have dissolved.

Low Real Wage Growth Expected

Regarding wage growth, official figures for 2020 may show a brighter picture than the reality, experts note. That is because the methodology used does not include those working on reduced hours or part time, or enterprises with less than five people. Nor does it include those on unpaid leave, whose number has also significantly grown in the past year.

It has also been fairly common for firms wishing to retain their workers but unable to pay them to give them a period of unemployment period in rotation. Also, many of those who lost their jobs belong to the lower-wage bracket, as a result, the average figure is somewhat distorted upwards. 

Gross wages rose will rose 9.5% in 2020, according to GKI (the figure being for those in full-time employment and excluding businesses with fewer than five people). In 2021, the GKI Economic Research Co. says it expects gross wages to grow by 4.5%, rising to 6% in 2022. Real wages, however, will increase 6% in 2020, 1% in 2021 and 2.5% in 2022, according to GKI.

This article was first published in the Budapest Business Journal print issue of January 15, 2021.

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