Procreation and pensions in Hungary

In the last month or so article after article appeared about the conclusions of a group of economists and demographers who have been discussing possible solutions to the interrelated problems of the low Hungarian birthrate and the eventual depletion of the state pension fund. This group, the Népesedési Kerekasztal (Demographic round table), seems to have the support of the Orbán government. It is deeply conservative and a promoter of family values.

One of the most vocal proponents of pension reform among the group is Katalin Botos, an economist who was a member of parliament between 1990 and 1994 and also served as minister without portfolio in charge of the banking sector in the Antall government. Prior to the change of regime she was a department head in the Ministry of Finance (1971-1987). Lately, she has been teaching economics at various universities.

The Hungarian media acts as if this is the first time the public has heard about the outlandish plans of Katalin Botos. But in May 2012 Népszava ran the following headline: “One must give birth for one’s pension.” At that time Katalin Botos and her husband József Botos were active in the Working Group for a Family Friendly Hungary, which was organized under the aegis of the Ministry of Hungarian Economy. The study that appeared at that time was entitled “A középosztály gyermekvállalási forradalma” (The revolution of childbearing of the middle classes). In it, the Botoses explained the logic behind the introduction of a sliding scale of pension payments depending on the number of children. After all, pensions are being paid by current wage earners, and if a couple did not produce at least two children they are freeloaders.

At that time the group made calculations on the basis of 2010 maximum, minimum, and average salaries and came to the conclusion that an employee earning an average salary would get 14.4 points but only if he/she produced at least two children. Extra points would be earned for each additional child. On the other hand, employees with one or no child would be docked a certain number of points. According to this system, someone with an average salary of 113,000 forints with no children would receive a pension of 70,000 forints while a person with four children would get 142,000!

Triplets

The more the merrier

Members of the working group did address the problem of couples who cannot have children for physical reasons but somewhat heartlessly remarked that “the fact still is that there is no one behind them who is responsible for their pensions.”

When this study was made public the vast majority of experts found the scheme unacceptable and ineffectual. To hope for a higher birthrate by linking it to higher pensions thirty or forty years later is totally unrealistic.

The public reception was anything but friendly, and the government promptly announced that they have no intention of introducing it in the near future. But, as we can see, this plan has remained on the government’s agenda because the latest scheme released by the Demographic Round Table is practically the same as the one in 2012. The few additions to the new report in fact make it even less attractive.

As far as the government was concerned, the original Botos plan had one huge flaw: in the Roma population families are large and girls begin to reproduce early. Surely, the argument went, you don’t want to encourage them with a pension system that might increase family sizes. So, an additional restriction was added: only children who finished high school (matriculation) or trade school would count. Not surprisingly, this was considered by critics of the plan as anti-Roma.

This time around the authors of the scheme also addressed details that were not considered in the 2012 version. For example, a person whose child died before he could finish high school would be exempt. The same would be true of children with a mental disability. But many questions remain. What will happen to young people who decide to work abroad? Will their departure be accompanied by a drastically reduced pension for their parents?

Although the plan was fleshed out a bit, by and large the “mad” scheme, as many commentators called it, remained intact.

Across the whole spectrum of the Hungarian media the reaction was uniformly negative. And real panic set in when Péter Harrach, leader of the Christian Democratic parliamentary delegation, announced that the report of the Demographic Round Table was in line with the thinking of the government and therefore there was a good possibility that the suggestions will be adopted, perhaps as early as September.

This was unfortunate from the government’s point of view. Right before the municipal elections such an announcement could have disastrous consequences, especially among those under the age of 35 whose pensions would be directly affected by the new law. Mihály Varga, minister of national economy, quickly reassured the voters after Harrach’s unfortunate interview that “it will not be necessary to have more children for higher pensions.” The Hungarian pension system is stable and there is no need to make any changes before 2030. But then why all the talk about a scheme that has been on the table for at least two years?

Well-known experts on the pension system, like György Németh, are convinced that the entire economic framework that lies behind the Botos couple’s scheme is wrong. In fact, in Németh’s opinion, it is unacceptable. Raising the birthrate is desirable, but it can be achieved only by the introduction of government measures that lower the expenses of child rearing. Compensation forty years down the road for the heavy financial burden of bringing up children today will not achieve anything. It is no coincidence that this interview appeared in Magyar Nemzet.

I would like to believe that this madcap idea will not be adopted, but I have a strong suspicion that in spite of Varga’s assurances to the contrary something is afoot. I would not be at all surprised if within a few months parliament passes a law that links procreation with pensions. If such law is passed, even more people will leave Hungary and settle elsewhere where the state does not interfere in their private lives. Oh well, at least the state won’t have to worry about their pensions.

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Ron
Guest

Life insurance and pension profit and losses are always calculated on the mortality rate. So if they really want to make a profit they need to make sure that the population dies younger and not later and not on birthrates.

Paul
Guest

Not often I laugh whilst reading a HS article, but this idea is just so mad I couldn’t help it!

I think we should encourage this loony scheme, and any others Orbán’s people may have up their sleeves – the more crazy ideas like this, the quicker the end for Orbán.

But, whether it’s linked to pensions or not, measures are already in place, or are due soon, which aim to get people to have more kids. The child benefit system already dramatically favours families with three or more children (although presumably not Roma families?), and the old ‘three years off for each child’ system is about to be reintroduced (Orbán, I think, initially reduced it to two years).

Mind you, it’s al a little academic if the government steals your pension fund and uses it to bail out its ‘alternative’ approach to economics…

Paul
Guest

Ron, the Hungarian diet and the Hungarians love of a strong drink (or five) already does that!

gdfxx
Guest

Another idea stolen from Ceausescu, somewhat modified. During the Romanian dictator’s reign childless adults were forced to pay a so called “childless tax”.

The next ideas to steal: prohibition of abortion (with jail sentences for physicians who performed it) and later monthly checks for pregnancy of all women who were fertile to make sure the pregnancy was completed by birth.

donlaszlo
Guest

Re: Graham (sorry for the belated answers)

To Eva: indeed, a lot of people – and almost everybody on this blog – sees Putin´s Russia a bigger threat to Eastern Europe than it actually might be…

To Marcel Dé: independently from Graham´s purpose, I find his article less biased than many others (just as I find your comments more balanced than many others on this blog).

To Istvan:
A Swedish analyst wrote in 2006 http://foi.se/ReportFiles/foir_1984.pdf
“The Kremlin and the energy firms act in tune when it comes to many projects of strategic nature… Basically, Russia is willing to take economic losses to attain political gains, but if the whole process is taken into consideration and in the wider context, also the politically driven actions have an economic rationale.”
“To Russia’s defence it must be said that acting in the grey zone between business and politics is a practice that exists also by Western states and energy corporations.” (ExxonMobil´s U.S. energy independence championing is perhaps the latest development to this regard.)

And certainly, both European sanctions and Russian countersanctions are absurd.

LwwiH
Guest

“This was unfortunate from the government’s point of view. Right before the municipal elections such an announcement could have disastrous consequences”

Isn’t let’s keep this a secret equal to no mandate for this type of change? Where is the opposition? Can’t they hammer on the fact that OV has either been wasting money on this study or he intends to implement it despite what is being said. Certainly recent history suggests that the ruling party will deliberately lie to the public to hide their real intent as long as necessary.

@donlaszlo, let me remind you of the current situation. We have a situation where one country that has invaded and is occupying part of another country. For anyone to suggest that it’s business as usual is to legitimize this action. May I remind you of the tarty signed in Budapest in 1994 and our obligations under it. My guess is that is that either these sanctions affect you or you’ve got your hrsd so far up OVs a$$ that you’ll eat anything he manufactures.

Marcel Dé (@MarcelD10)
Guest
Considering the future of pay-as-you-go pension systems, linking the level of individual pensions to the number of children is not a madcap idea per se. It has been the subject of numerous papers in economic and population reviews over the last twenty years, and as far as I can tell from a sneak peak at peer reviews the equations stand. However – and this is a big however – it’s not a good idea to implement. Firstly, because it would lead to decisions having weird social implications, such as those described in this piece (plus another one that isn’t mentioned: you probably would have to tax differently women’s and men’s labor). And second, because other papers have demonstrated that stronger, better child benefit incentives can achieve a better optimum – without putting such a strain on social cohesion and such pressure on individual choices. But I guess that in the current Hungarian context equality and individual freedom have become socialist-liberal concerns, in a nutshell undesirable. And that it’s time to show that when OV mentioned a ‘revolution’ he indeed meant the re-shaping of society, in a christian-conservative, nationalist and authoritarian way: a place for (almost) everyone, and everyone in their… Read more »
Guest

I am only wondering how someone can live with just a pension of 70,000 forints?

Guest

From experience with our young ones and their friends I’d say that people won’t have children because of some long term benefit (which isn’t sure any way …) if right now they can’t afford them!

It’s very simple:

With a “normal” Hungarian income you can’t raise kids – either you have a really well paying job or family that can help you or you just don’t care …

As we saw in the statistics on portfolio.hu even with two “average incomes” of 15 000 HUF each it’s almost impossible even without kids …

Guest

Sorry, of course it should have been 150 000 …

Paul
Guest

This annoying ‘bucket challenge’ craze has even affected the Budapest elections (apparently):

http://budapost.eu/2014/08/bucket-challenge-as-a-campaign-tool/

Would a video like this really have this much effect in Hungary? In the UK it might even get you some extra votes!

petofi
Guest

In a little-known writing of Maria Schmidt, the learned professor contends that Hungarians were a leading tribe in the time of Noah.
From a different source, I have gathered that this tribe approached Noah to get on the ark…but
Noah, perforce, had to leave them behind–the animals objected.

Member

I still don’t understand what they will be doing if some families decide to adopt let say 4 fourteen year old children. They can have them until they are 18 (make them work from age 16, so it does not cost to much), and get them out of the house when they reach their 18th birthday. For a 4 year investment, this is an excellent return!
(I forsee how Hungary will lead child abuse cases in twenty years. Rational people who understand that they do not have what it takes to have children now will be forced have some.)

Guest

@gdfxx: “Next ideas to steal: prohibition of abortion…” This is missing from the newer versions of the Fundamental Law, but in the April 25, 2011 Draft Constitution under Freedom and Responsibility, Article II states:
“Human dignity is inviolable. Everyone has the right to life and human dignity: the life of a
foetus will be protected from conception.”
Gives me chills.

petofi
Guest

Pensions?
Ten years from now?

I’d bet against it.

Kormos
Guest

Yes Petofi. We do not know “the day and the hour” do we?

petofi
Guest

In a time when Orban is ripping the country, NOW, to shreds…why bother with something as nebulous as pensions.

THE REAL DEAL: WHAT TO DO ABOUT RUSSIA

The NATO head had it right: place a hefty nato contingent in countries surrounding Ukraine, including, and especially, Hungary. Then we’ll see Viktor’s true colors…

petofi
Guest

I’d wager it’ll be Red, White, and Blue…

Worg
Guest

Have you read this? The only interesting thing is that the new oligarchs, Garancsi and Mészáros and Hernádi are widely rumored to be nothing more than fronts for Orban. It seems ttat simply Orban decided to take the money which previously Simicska took.

It’s all about the energy business. And if it’s energy then it’s about the Russians, obviously.

http://444.hu/2014/09/01/uj-klan-lep-simicska-lajos-helyebe-mikor-veget-er-a-csatajuk-orbannal/

Realitycheck
Guest

Maybe by design, but certainly by its outcome this is a sexist policy that will setback Hungarian women’s advancement and rights. Women will feel pressure to stay home and make babies, instead of advancing their careers.

spectator
Guest

There is the proof in Hungary: Darwin was wrong!
Evolution can go backward, indeed!

Paul
Guest

“Maybe by design, but certainly by its outcome this is a sexist policy that will setback Hungarian women’s advancement and rights. Women will feel pressure to stay home and make babies, instead of advancing their careers.”

Spot on. Feminism and equal rights for women has never really been able to put down strong roots in Hungary. It won’t take much for the old “traditional” Hungarian view of women (cooking, cleaning, looking after the kids) to become mainstream once again. It’s only really the basic economic necessity of women having to work that creates this facsimile of semi-equality that we see now – there has been no real fundamental shift in attitudes (even amongst women themselves).

And those few modern, younger, women who do want more out of their lives – they will just get on the next plane to Germany, the UK or the US.

petofi
Guest

@spectator

“…Evolution can go backward…”

I’ve had the very same thought!

Darwin would have to junk his theory about survival of the fittest if he lived today–he’d have to change it to “survival of the BUNKOS”!

Paul
Guest

“petofi

September 1, 2014 at 12:09 pm

I’d wager it’ll be Red, White, and Blue…”

But which red, white and blue?!

petofi
Guest

If you’d read my offerings you wouldn’t have to ask–

An
Guest

Splendid… I can tell you that my mother is not living on the pension that she receives from the state but on the money I send her. Old people who are childless have zero family support.

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