The Hungarian plan to reduce unemployment

First, a little background on what emerged yesterday as "Magyar Munka Terv" (Hungarian Work Plan). The name of the program is awkward not only in English but also in Hungarian. The Orbán government with its love of the word "nemzeti" (national) originally wanted to call it Nemzeti Munka Terv, but most likely because the politicos' historical knowledge is spotty at best they didn't realize that Prime Minister Gyula Gömbös's program for solving the unemployment problem in the first half of the 1930s bore that name. And those who are somewhat familiar with that era know that Gömbös was a great admirer of Mussolini and fascism in general. In fact, he was planning to introduce a system in Hungary very similar to that of Mussolini's corporate state.

Viktor Orbán has been repeatedly compared to Gyula Gömbös and not without reason. However, being likened to the anti-semitic admirer of fascism and nazism is not exactly a compliment, and when the media called attention to this unfortunate choice of names, the government quickly changed it to Magyarország Munka Terv. That sounded really bad. It seems that the program's name is now settled. It is called Magyar Munka Terv.

The first time there was any mention of a plan for remedying the low employment rate in the country was on March 15 in Viktor Orbán's speech on the national holiday. He announced that in addition to the New Széchenyi Plan and the Kálmán Széll Plan there will be a national work plan. When some newspapermen inquired from György Matolcsy's ministry what this work plan was all about, everybody looked baffled. Perhaps they just feigned ignorance, perhaps they were not yet informed about the plans that were being hatched in the prime minister's office. Because only a few days later Mihály Varga, undersecretary in Orbán's office, talked about a public works program that will start on July 1. The program, he said, may potentially result in work for 800,000 people.

As of yesterday the text of the program appeared on the website of the Nemzeti Gazdasági Minisztérium (National Economic Ministry). We may recall that originally Viktor Orbán promised one million new jobs in the next ten years. Jobs for taxpaying citizens. In the text of Magyar Munka Terv we learn that in the next year and a half there will be 300,000 new jobs and by 2015 another 100,000. The document refrains from talking about the situation in 2020, but it seems that the original one million figure is still the Orbán government's goal. The question is whether these jobs will be occupied by people who also pay taxes. From the look of things it seems doubtful.

The primary elements of the plan to reduce unemployment include: (1) genuine new jobs created as a result of economic growth. In order to facilitate the creation of such jobs, the government will make employers' lives easier by reducing bureaucracy and payroll taxes; (2) temporary jobs created by local governments and non-profit organizations with some help from the government that would serve as a transition to employment in the open labor market; and (3) the public works projects that will replace welfare payments.

Naturally the plan's text doesn't mention that about 80% of these new jobs will be very low-paying part-time jobs on public projects as we outlined yesterday. Sándor Pintér's bill (T/3500) on the organization of the gigantic public works program is available on the parliament's website. The retired policemen's information was quite accurate.

According to Magyar Munka Terv, the labor code must be changed in order to facilitate the creation of new jobs. The changes will be such that there will be less protection for the employees and more power given to the employers. The details have not been released, but apparently by July 1 we will know more about the changes the government plans to introduce.

In any case, it seems that from here on trade unions will not be able to negotiate with management about decisions concerning the running of the business. For example, currently the unions at BKV (Budapest Transit) can make demands over business decisions. I remember quite well that they threatened to strike unless BKV changed some very old buses for new ones. From here on, trade unions can negotiate only about salaries and benefits.

Then there is another labor-related organization that most people are not familiar with called "üzemi tanácsok" (factory councils). In theory every business that has employees is supposed to have such a council whose job it is to represent the interests of the employees. But it seems that these councils barely function or simply don't exist. Perhaps the government's aim is to shift "power" to the practically non-existent councils and at the same time limit the competence of the trade unions.

According to the plan, by changing welfare to workfare the country will save 67 billion forints a year. Economists who were asked their opinion of Magyar Munka Terv by MTI cautiously announced that the direction is good but they raised several concerns. Judit Adler (GKI Gazdaságkutató Zrt.) questioned the feasibility of creating one million real jobs in ten years. Employing people in public works projects for a short time and for little money may help the statistics, but behind such a policy there is only "misery and an absolute drop in living standards." Adler found the limitations planned on the functioning of trade unions "distasteful." Ágnes Hárs (Kopint-Tárki) pointed out that there are too many assumptions concerning economic growth in the plan. The most common complaint is that the plan is too vague and that no background studies have been conducted about the effects of the plan.

I'm no economist, but I think that the present economic climate is such that we are unlikely to see the level of economic growth that would translate into employment figures of the magnitude outlined in the Magyar Munka Terv. I'm talking about real jobs.

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Hang on … are we talking about unions in the public sector? Independent unions cannot be forced to do anything. What happens if the employees just stop working for any reason? Will go to jail? Or is this again some Orban big mouth idiocy that absolutely means nothing in reality?

Mutt, I’m afraid union power can disappear very quickly indeed. In the UK before Thatcher the unions were very strong, perhaps too strong, and both government and business had to take them seriously. They effectively brought down the previous Tory Prime Minister (Ted Heath). No one would have believed that this power could be reduced. Governments had tried it before and had always lost. It was impossible to believe that the workers would allow institutions to be destroyed that had taken a hundred years or more to build, which had cost a great deal of suffering in their creation, and which were the only safeguard of the working people’s wages and conditions. But Thatcher took on the unions and, in just a few years, had brought them to their knees. Rigid rules on strike ballots were introduced, making it both long winded and expensive to call a strike (and easy to declare it unlawful, even if it was called) and sympathy strikes were banned. Unions could no longer call strikes easily and could no longer strike to support each other. Without the ability to threaten and take industrial action, and without the ability to support each other and present a… Read more »

Forward to Romania.
Union with Romania is the best way to eliminate the nemzeti orban plots.
If there are no intelligent hungarian political leaders, let us subcontract the governing of hungary to the intelligent romanians.


What about union with Romania, Slovakia, Ukraine, Serbia and Croatia?
It might be difficult to come up with a name for such a union, but I’m sure Fidesz would be happy with ‘Greater Hungary’.

Lutra lutra

I can’t imagine the EU giving any kind of financial support to projects that so distort the labour market, in which case it might end up costing the country more than a sane public works programme.
Besides, is there any discussion of a pilot project to see whether it’s possible to implement? What’s to stop doctors from signing off the long-term unemployed as sick/disabled, how will quality standards/deadlines be enforced and how will former forced labourers be rehabilitated – sorry, how will participants be returned to the labour market?