Hungarian Employment Concerns Grow as Winter Approaches

Analysis

With less than two months before the end of 2022, the expectations of both employers and employees reach rarely-seen depths. Will Hungary receive the suspended European funds? Will a recession hit the economy? Will the conflict in Ukraine worsen the economic outlook? So many significant uncertainties with no answers in sight.

Both business and consumer expectations in Hungary have continued to plummet, for six months in a row, according to figures released at the end of October by the economic research institute GKI. While in previous months, the plunge was driven primarily by the consumer index, in October, it was burdened mainly by the business sector.

Now, even in industry, more companies are counting on worsening rather than improving conditions. This is true for construction, commerce and services. In October, companies were more reluctant to hire personnel, and for the first time in 18 months, employers are planning to lay off rather than hire.

The exception is industry, where the number of companies planning to expand their labor force grew slightly. However, the population is increasingly fearful of unemployment.

Meanwhile, consumers expect more inflation. Overall, the consumer expectation for improvement was at its lowest point in October since the same month in 2012. The population views its financial situation in increasingly negative terms, and the chances to save money are seen weaker every month.

Another piece of GKI research indicated that the solvency of Hungarians had reached an all-time low. Solvency, an indicator calculated from prices, salaries, and consumer debts, reached a decade-low figure in Q3 2022 of 12.6 points, a 64% drop compared to the previous quarter.

Domestic Concerns

More and more families are feeling the impact of high energy prices and inflation and have started to save what money they can. This indicates the possibility of lower domestic consumption and increases the potential for a recession next year. By way of comparison, during the most severe COVID lockdown, the solvency index dropped no lower than 18.9 points.

Other studies confirm these findings are seeping through to the employment market. A survey conducted in September by staffing company Trenkwalder revealed that almost half (49%) of employees working in the private sector are unhappy with their salaries, and more than half (52%) are planning to quit their current jobs in search of better-paid opportunities.

As for those willing to stay, 28% would be satisfied with a 20% raise (the figure in September was 20.1%), while 34% say they require a raise between 20-30%. The dissatisfaction with the current level of wages exists even if 44% of those complaining had already benefitted this year from a salary raise.

Almost two-thirds of the 500 employees questioned by Trenkwalder said that they expect a worsening of their financial security in the coming months. Unsurprisingly, 67% of the employees consider the stability of their jobs more important than salary raises proportionate with the inflation. Also, a majority of 61% said that temporarily they would accept part of their salary raise in some other form of payment, such as more home office hours, qualification courses, or travel allowances.

Layoff Trend

Indeed, it seems this unease is backed by a significant shift sweeping through the labor market in Hungary. According to the ManpowerGroup Employment Outlook Survey released in September, more than a quarter of Hungarian companies are eyeing layoffs in Q4.

For the first time since the pandemic, more companies in Hungary are planning layoffs than hirings, most of them in Budapest. Only 20% of the surveyed companies are considering expanding their staff. It seems that employees must expect more challenging times ahead.

But there is some good news, too: there are significant differences between sectors. Manufacturing will still need additional labor, while banking, credit institutions, insurance, and real estate will remain unchanged.

However, the IT, technology, telecoms, and media sectors will probably cut significant labor force. The same is true for the hospitality, restaurant, and catering sectors: More than one-third, some 39%, of hotels and restaurants are planning layoffs, the survey says.

Geographically, most layoffs can be expected in Budapest. Still, things also vary depending on the size of the company: Large firms are expected to massively reduce personnel, while micro-companies, with less than 10 employees, might actually expand their staff.

As for how much employees earn, the Central Statistical Office recently released the figures for August. Back then, the average salary of full-time employees was HUF 497,200 gross per month (HUF 342,900 net). This represents a 17% increase compared to the same period last year.

However, both August 2022 and the same month in 2021 were lower than the figures for July 2022, but not significantly: the gross salary was HUF 500,000, and the net was HUF 344,700. The sectors where wages were above average were IT and communication, energy, technology, mining, public administration and manufacturing. Below the average ranked education, commerce, transport and logistics.

Government Subsidies for Employment

Hungarian companies have submitted applications for subsidies to support the placement of 10,410 jobseekers. More than 8,300 jobseekers have already been subsidized within the program launched in mid-August by the Ministry of Technology and Industry. The grants target Hungarians under 25, career-starters between the ages of 25 and 30, people over 50, those without secondary school education, people who have been looking for work for more than six months, people who have left fostered (public) work schemes in the past three months, people living with disabilities, parents raising small children, caregivers and residents of designated small settlements.

Companies that hire people in asingle target group are eligible for subsidies covering up to half of the cost of wages and payroll contributions. The subsidy threshold for new hires in two or more of the target groups is 75%. The subsidies are capped at a monthly HUF 150,000 per full-timer for six months. Employers inBudapest and surrounding Pest County are not eligible.

This article was first published in the Budapest Business Journal print issue of November 7, 2022.

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