‘Improved productivity, increased employment and the introduction of additional groups of employees could be the basis for sustained economic growth’, said Gergely Baksay, Head of MNB Directorate for Fiscal and Competitiveness Analysis on Thursday at a professional forum organized by the Hungarian Economic Association.

The competitiveness aspects of labour market and employment was the focus of a professional forum organized by the 125 year old Hungarian Economic Association (HEA) in a series of four workshop events related to the employment proposals of the 330-point Competitiveness Programme of the National Bank of Hungary, taking place on Thursday, 11 July 2019 at the Budapest Business School. During the event an introductory presentation was delivered by Gergely Baksay, Head of MNB Directorate for Fiscal and Competitiveness Analysis. The short introduction was followed by panel discussion including: Ferenc Rolek, Vice President of the Confederation of Hungarian Employers and Industrialists; Sándor Baja, Managing Director of Randstad Hungary Kft; Sándor Czomba, former Secretary of State for Employment Policy; and Gábor Regős, Head of Macroeconomics Division, Századvég Gazdaságkutató Zrt. The panel discussion was moderated by József Hornyák, analyst of Portfolio.hu.

During the event Gergely Baksay said that convergence to Austria is the goal set by Hungary’s economy for the next decade. In recent years Hungary has been able to significantly increase the added value of domestic production thus approaching the average of the Visegrad countries, while the labour demand of the economic upturn is difficult to follow. According to his expectations the working age population aged 15 to 64 could decrease by half a million within 10 years as a result of demographic processes therefore he called for more extensive employment including near retirement age population, low-skilled individuals, women and young persons. As a further challenge, Gergely Baksay identified the wage levels falling short of the European average. In his opinion, reducing the personal income tax could be a way to increase wages. He added that by reducing the rates and taxes the pre-2010 tax wedge which at 50% was considered outstanding even by European standards could be cut to almost 30% thus ranked in the bottom third among the EU Member States.

Sándor Czomba, former Secretary of State for Employment Policy agreed with the idea of further personal income tax reduction which, in his opinion, would have beneficial impacts in the long term as well. With regard to the employment situation he noted that in the eastern counties the unemployment rate was still almost 10 percent. ‘However, the Hungarian workforce has poor mobility, therefore work opportunities must be transferred to the needy regions by means of a state support system’, he added. Based on local experiences he noted that not everyone is willing to work and the number of individuals reluctant to leave public employment could be almost one hundred thousand nationwide. According to his opinion foreign workforce should be considered on invitation basis subject to adequate qualification.

Gábor Regős, Head of Macroeconomics Division at Századvég Gazdaságkutató Zrt. agreed with the admission of skilled and motivated foreign workforce and the fact that public workers could only be partially introduced to the primary labour market. In his opinion Hungary falls behind the major competitors of the region in terms of wages and considers that there is room for further increase. ‘However, it would require the exact knowledge of productivity data the assessment of which is often problematic’, he added.

Ferenc Rolek, Vice President of the Confederation of Hungarian Employers and Industrialists identified improved efficiency and productivity as a prerequisite of wage increase. He also suggested that the labour demand should be reduced, for example, by automation, work organization and transformation of the training system. Representing the employers’ side he is of the opinion that the further decrease in workforce expected over the next decades cannot be compensated by the activation of additional groups of employees. For this reason he is reluctant to set employment targets but considers that a long-term sustainable employment rate could be accomplished and that primary education, rather than vocational training should have greater focus. ‘Any shortcomings of the former are impossible to remedy during the few years of secondary education’, he explained. (MTI)

Press coverage:
Tíz év múlva félmillióval kevesebb munkaképes korú lesz Magyarországon (Portfolio.hu)
Az szja csökkentésével növelné a béreket az MNB egyik igazgatója (Napi.hu)

Related documents:
Slides of the introductory presentation by Gergely Baksay (pdf)
330-point Competitiveness document of the MNB (pdf)