Tag Archives: guest workers

Shrinking population, shrinking labor force, sluggish economy

Given the Hungarian government’s fierce opposition to accepting any refugees, I decided to take a look at the latest Hungarian population statistics.

Since Viktor Orbán became prime minister in 2010, the population of Hungary has shrunk from 10,014,324 to 9,830,485 (as of 2016). It has lost 183,939 persons, roughly the population of the second largest Hungarian city, Debrecen. If we break these figures down by age group, the situation is even more dire. Today there are fewer children between the ages of 1 and 14 (-62,408) and fewer adults between the ages of 15 and 64 (-264,527) than in 2010. What is more alarming is that the number of those over the age of 65 has grown substantially. To be precise, by 164,517, which is about the population of Szeged, Hungary’s third largest city.

Ever since the second half of the 1980s, the natural decrease of the population was around -3.5 per 1,000 annually. Last year was one of the worst, at -4.1. The Demographic Research Institute of the Central Statistical Office predicts that if the trend of the last 30 years continues, Hungary’s population will be under 8 million by 2060.

Current population statistics most likely overestimate the number of inhabitants residing in the country since many of those who moved abroad in the last few years never bothered to announce their departure to the authorities. Their number might be as high as 600,000, according to figures provided by Eurostat and assorted national statistical offices. Under these circumstances, a labor shortage in practically every sector of the economy is unavoidable.

Last summer I wrote two posts about the severe labor shortage in Hungary caused by the low birthrate and the massive exodus of Hungarians. I expressed my belief that without an infusion of foreign labor the situation cannot be remedied. A few days later the National Association of Employers and Manufacturers (MGYOSZ) suggested that Hungary would immediately need about 250,000 foreign workers, who should be enticed to come to Hungary from abroad. Mihály Varga, minister of national economy, agreed with MGYOSZ’s estimate of the situation, but in no time Fidesz published a statement saying that the Hungarian government provides work opportunities for Hungarians, not for immigrants. Both MGYOSZ and Varga got the message, but it turned out that the government “secretly” began the importation of foreign workers from so-called third countries, i.e., countries lying outside the European Union.

Hungary can hope for immigration only from countries with lower living standards than its own. Thus the government gave Samsung Magyarország, located in Jászfényszaru, a town of 5,000 in the northern portion of the Great Plain region of Central Hungary, permission to recruit workers from war-torn Ukraine. Of course, for Ukrainian speakers Poland or the Czech Republic might be more attractive given the easier linguistic communication there, so Samsung had to make its job offer especially enticing. By November of last year Samsung employed about 150 Ukrainians, and apparently their numbers are growing. In addition to their monthly pay of about 125,000 forints, they receive housing, some food, and travel expenses to return home once a month. About 100 of them live in nearby Jászberény in apartment houses; others are still in temporary housing on a camp site. The 125,000 forint salary isn’t much, but in comparison to what they would make in Ukraine it is considered to be quite good. Index interviewed a couple who are all set and ready to settle in Hungary. In a few years they will be able to save enough money to buy a house in one of the nearby villages. Another man with a Hungarian wife is learning Hungarian in order to become a Hungarian citizen.

The Ukrainians working on the Samsung assembly line were given on-the-job training. The same is most likely true of the six Indian guest workers who milk cows on a dairy farm in Sarud, close to Eger. Locals were either not interested in the job or, once hired, didn’t work out. The owner of the dairy farm heard about Indian workers at another farm who were highly praised. So he decided to follow suit. The first six have arrived. They are so hard working and reliable that the Hungarian dairy farmer has nothing but praise for them.

Sándor Csányi, head of Hungary’s largest bank, established a slaughterhouse in Mohács. He had a terrible time finding butchers because experienced Hungarian butchers had left for Germany a long time ago. Supermarkets also have a very hard time finding workers, and their management teams have been thinking of ways to fill these positions–one strategy is to retrain public workers. The few migrants who received permission to stay in Hungary quickly gain employment–mind you, mostly by foreign-owned firms.

The government is now trying to remedy the serious labor shortage by allowing retirees to accept tax-free part-time jobs. It was only a few years ago that the Orbán government insisted on a mandatory retirement age of 65. Now the government is trying to entice retirees to return to work.

Hungary, of course, is not alone in facing this problem. Germany’s labor shortage won’t easily be remedied with often unskilled migrants who don’t speak the language. But immigrants learn fast. With a well thought out plan, within a few years Germany might solve its labor shortfall. Great Britain, on the other hand, will be in trouble if Theresa May’s government succeeds in putting an end to or severely restricting immigration to the British Isles. For example, Brits show little interest in working in hotels and restaurants. In one chain, Pret a Manger, 65% of the employers are from countries outside the European Union. The hospitality industry would probably collapse without a steady flow of immigrants. Only recently Global Future, an employer-backed think tank, reported that the British economy needs an inward migration flow of 200,000 people a year “to avoid the catastrophic economic consequences” of Brexit. They warned that if the UK refuses to be flexible about labor inflow, the country could face decades of slow growth similar to that experienced by Japan. Just today The Guardian published an article that recounts the possible plight of Hall Hunter Partnership, a business that grows 10% of the UK’s strawberries, 19% of its raspberries, and 42% of its blueberries on thousands of acres. The company needs 3,000 pickers, who come from Bulgaria, Romania, and other East European countries. The opponents of EU membership talked about sovereignty and control, railed against the free movement of labor, but “what they didn’t mention is the way the British food supply chain has, over the past 30 years, become increasingly reliant on workers from elsewhere, both permanent residents and seasonal labor.” Around 20% of all employees in British agriculture come from abroad, mostly from Romania and Bulgaria, while 63% of the employees of members of the British Meat Processors Association come from outside the UK.

Indeed, the example of Japan might be a good illustration of what could happen to Great Britain if it closes its doors to immigrants vital to maintaining its economy. Japan’s birth rate has been dropping since the 1970s. “One percent shrinkage in population will slow Japan’s economic growth by about half a percentage point each year. So 0.5 percent of GDP is about 2.5 trillion yen ($2.95 billion) every year that’s potentially lost economic revenue,” according to an economic expert on Japan. He thinks that Japanese society will finally have to decide that they must embrace the idea of immigration. This is not going to be easy in insular, quasi-racist Japan.

The same holds true in Hungary, given Viktor Orbán’s insistence on “cultural purity.” It is impossible to maintain a robust economy with a shrinking workforce and an aging population. Something must be done.

May 21, 2017

Severe labor shortage combined with anti-immigration propaganda

Two days ago, seemingly out of the blue, Mihály Varga, minister of the economy, got in touch with MTI, Hungary’s official telegraphic agency, to make the grand announcement that “the government is taking steps to remedy the growing labor shortage that is becoming an impediment to economic growth.” As it turned out, the minister’s move was prompted by a proposal submitted by the National Association of Employers and Manufacturers (Munkaadók és Gyáriparosok Országos Szövetsége/MGYOSZ) to address the acute shortage of qualified workers in many fields.

Varga stated that the government agrees with many of the recommendations, which include the importation of guest workers from so-called third countries, i.e. outside the European Union. In order to facilitate this recommendation, the government promised to reduce the tax burden on companies that bring in foreign employees. This is the first time the Orbán government has officially admitted that the lack of qualified workers is a serious problem in Hungary.

The problem, of course, is not new. Already a couple of years ago Stefan Körmendi, managing director of Europakraft GmbH, bitterly complained that the Hungarian government had deceived him and his company when it sang the praises of the “well-qualified Hungarian labor force.” His company needed skilled welders, pipe fitters, and disk roller specialists. There were plenty of applicants, but when they had to demonstrate their skills, most of them were unable to perform even the most basic tasks. Sixty percent of the 600 applicants tested couldn’t even weld, and all of these people had a piece of paper testifying that they had successfully been trained as welders. The whole sad story can be read in my post from 2014.

Since then the situation has only gotten worse. At the end of June Népszabadság reported that some foreign companies are so desperate that they are importing employees from their other factories to work in their Hungarian division for shorter or longer stints. The article highlighted the case of a factory that makes tops for luxury convertibles. The company’s Hungarian division, situated in Szügy, a small village in Nógrád County, was in such trouble that it had to bring in four women and four men from its Mexican division in Toluca for three months. Even with the added expense of transportation from Mexico and perhaps bonus pay, this solution was apparently still worth it. Guest workers also came from the company’s Russian and Serbian divisions. These foreign employees were necessary because the quality of the work done by the locals was not what management expected. The number of rejects was far too high. Moreover, this factory ran three shifts, and it was difficult to fill all the shifts with Hungarians. They weren’t interested in working outside the usual daytime hours.

Bors, a Hungarian tabloid, dispatched a reporter to Szügy, where he learned more details of the lives of Mexican guest workers while in Hungary. They were placed in a stately mansion that serves as a hotel; they were taken to Budapest and other cities in the country on sightseeing trips; the company even made sure that they could watch Copa America football matches on television. Apparently, they didn’t like the food, but otherwise I’m sure this Hungarian trip was quite an adventure for them. After the Mexicans left, a new batch of people came from Tatarstan, Russia. Clearly, the situation is desperate, and I’m sure that the management of this company is just as frustrated as Körmendi was back in 2014.

MGYOSZ’s suggestions “for the handling of the critical labor shortage in Hungary” started with the main reasons for this shortage: low birthrate; emigration, especially of more highly qualified workers and university graduates; the fact that almost half of those seeking employment are unskilled; and a workforce whose quality is on the decline. Something must be done quickly because otherwise the economic growth of the last couple of years will come to a screeching halt.

To solve this crisis, first and foremost the government should assist in attracting foreign workers. For example, one million Ukrainians are working in Poland at the moment. In Hungary’s case, that would mean the importation of about 250,000 foreign employees. But Hungary is not an attractive place for guest workers because of low wages, high taxes, the lack of housing, and the low level of social services. MGYOSZ asked the government to lessen the tax burden on employees so they could raise wages. And naturally, to put more effort into the proper training of workers. The long-term goals include a better educational system that emphasizes the 4Ks: kreativitás, kommunikáció, kooperáció, and kritikai gondolkodás. As we know, Viktor Orbán’s ideas on education stand in sharp contrast to these guiding principles.

Turkish guest workers arriving at the Düsseldorf Airport on November 27, 1961 / Source: en.qantara.de

Turkish guest workers arriving at the Düsseldorf Airport on November 27, 1961  Source: en.qantara.de

Mihály Varga, I’m afraid, was a bit too hasty when he reacted positively to MGYOSZ’s suggestions. The Orbán government has consistently and fiercely opposed any kind of immigration and keeps repeating that more babies will solve all the problems. Mind you, the demographic statistics show no great positive changes on that score. Viktor Orbán must have been furious, and I wonder what “Misi” got from the boss.

Fidesz published a statement saying that the Hungarian government provides work opportunities for Hungarians, not for immigrants. Only the political left and Brussels want to flood Europe and the labor market with immigrants. The Prime Minister’s office also spoke out again against immigration. According to its spokesman, statistics prove that immigration actually exacerbates the problems of the labor market. MSZP’s spokesman, Nándor Gúr, also objected to the scheme because the presence of foreign workers would lower wages in general. The government mouthpiece, Magyar Idők, tried to provide cover for Varga by claiming that MGYOSZ actually talked about guest workers from “the neighboring countries” and not from “third countries.”

Some commentators, like Kinga Facsinay of Magyar Nemzet, pointed out that after a year and a half of intense anti-immigration propaganda, Varga’s enthusiastic embrace of the importation of a large number of guest workers is a strange turn of events. Actually, this is just another example of the confusion within the government that has been endemic ever Fidesz won the election in 2010.

But, yes, the propaganda was, and remains, both intense and expensive. On the anti-migrant campaign the government spent billions: 960 million forints for a “national consultation” and 1.2 billion for the two billboard campaigns. The “Message to Brussels” campaign wasn’t cheap either; it cost 1 billion forints. And the October 2 referendum on quotas will cost 4.5 billion. Instead of wasting all this money on propaganda, the government could have used it to improve the education of future Hungarian workers.

More than 25 years have gone by since the arrival of democracy in Hungary, and yet over 40% of those who are actively seeking employment today have no qualifications for any job. This is a devastating indictment of the Hungarian educational system. It also underscores the failure of successive governments to create an economic environment that would have kept emigration within bounds. Since both have been neglected, I see no short-term internal fix for the Hungarian labor shortage. And this will in turn discourage foreign companies from investing in the country.

If the Hungarian government changed course and welcomed guest workers, this might help a bit. But under the present circumstances few people, especially highly skilled workers, would be enticed to emigrate to Hungary in the hope of a better life.

July 8, 2016