HR Trends Point to Little Expansion, Long Stagnation
Before taking a closer look at the Hungarian labor force market, let us briefly look at a new report that is apparently unrelated to jobs and HR but undeniably linked to the quality of life: The World Happiness Report.
Compiled “by a group of independent experts acting in their personal capacities,” it ranked 136 countries around the globe according to the measured happiness of their inhabitants. In the top 10, we find developed countries, including Finland, Denmark, Iceland, Israel, Netherlands, Sweden, and Norway, indicating that, at this level, happiness is very much linked to the standards of living.
In the top 20, we find Czechia and Lithuania, a newcomer in this strata. Following that, living standards do not seem to have much impact on happiness: Romania is ranked 24th, while Poland and Hungary, with a higher GDP per capita, were ranked 39th and 51st, respectively.
This discrepancy is probably related to the other five factors considered: health, having someone to count on, having a sense of freedom to make key life decisions, generosity, and the absence of corruption.
The perception of Western countries as lands of opportunity and happiness is reflected in the labor market. Neighboring Romania, a country which, like Hungary, is struggling with a labor shortage, cannot retain most workers who arrive from third countries like Bangladesh. As news portal hotnews.ro puts it, “For people in Bangladesh, the dream country is not Romania.”
Of the 35,000 workers that have arrived from Bangladesh, only 1,500 currently live in Romania. For the others, Romania is merely a transit country, and they soon leave it for Italy, Germany or the United Kingdom. In many cases, Western labor force placement agencies that officially recruit workers for Romanian companies are contributing actively to transferring them to the West, according to Romanian labor union officials.
Youthful Brain Drain?
In Hungary, the situation looks even more dramatic. Polls indicate that in the long term, even many born in Hungary plan to leave. Job search portal Zyntern studied the labor market preferences of 3,000 young (16-28) Hungarians, of which two-thirds were residents of Budapest.
The most important factor when choosing a job is the salary, expected to be, on average, HUF 379,000 monthly net, a 17% increase compared to last year. Similarly essential factors are acknowledging their performance and working in a good team. The prospects of development and career are also highly regarded by young Hungarians.
They consider the most attractive workplaces to be multinational companies; 71% of the respondents are looking for opportunities in this segment. State administration is the least attractive, with 15% seeking jobs there.
The focus on multinationals is probably related to plans to work abroad: nearly half (47%) of the respondents hope to do so in the next five years. As for what companies are regarded as the most attractive, most of the answers indicated Hungarian ones, or at least Hungarian affiliates: Robert Bosch Kft., Magyar Telekom Nyrt., OTP Bank Nyrt. Runners-up were Richter Gedeon Nyrt., MOL Nyrt., Audi Hungaria Zrt., KPMG Hungary, Aldi Magyarország Élelmiszer Bt., Egis Gyógyszergyár Nyrt.
But how about those already employed? As we have previously seen, appreciation is a crucial factor for satisfaction. The K&H Youth Index, published recently, shows that a mere 36% of those aged between 19 and 29 feel appreciated at work. This percentage has been more or less the same in the last decade, with 41% stating that their appreciation at work could be regarded as average.
Half of them consider their job stable, while up until mid-2020, this rate was higher, around 60-70%. On the other hand, contrary to the Zyntern findings, 40% are not considering leaving the country for work at all, although 32% said they might consider this a possibility.
Young employees (or future employees) may have specific expectations for salaries, but companies are not doing well currently. Intrum has polled 10,000 CEOs in 29 countries about their financial situation in Q1 of 2023. Almost half of them (48%) said their company is doing worse than a year ago, while in Hungary, this rate is somewhat higher, 51%; only 22% said their situation had improved compared to last year.
Inflation the Challenge
For most, the main challenge is inflation. High rates are hitting the cash flow hard, and supply chains have not recovered fully after the pandemic. Hungarian respondents share the general pessimism regarding inflation, namely that it will not drop significantly within two years.
Despite the grim prospects, some companies are planning to hire in the next quarter, albeit not many. According to a survey conducted by ManpowerGroup, 31% of Hungarian companies plan to expand their labor force, mainly those in the IT, logistics, auto and energy industries.
Almost half (48%) said they do not plan changes, while 18% indicated they plan to make layoffs. Across the Hungarian regions, companies in Western Hungary are planning labor force reductions, while those in Central Hungary and Budapest are considering expansion.
This is doubly bad news for those living in Western Hungary, as this is also the region where the solvency index has dropped most between Q1 2022 and Q1 2023, by 58%, according to a survey by Intrum and GKI. Solvency, an indicator of the family revenues remaining after paying utilities, food and other living expenses, shows that the financial situation deteriorated considerably within one year.
There was also a significant fall, albeit to a lesser degree, of 48% measured in Central Hungary, including Budapest, where revenues are traditionally higher, but so are expenses: utilities, rents and products.
According to Intrum sales director Judit Üveges, the decrease is caused by structural, systemic issues in the economy, like the commercial balance and the high state deficit. Since these require a long period of correction, we can expect a long stagnation and slow growth, Üveges said.
This article was first published in the Budapest Business Journal print issue of June 30, 2023.
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