When judging the situation of the Hungarian economy it is often stated that the rate of investments is very low in the country and that 95% of all the investments are financed from EU funds. In other words, at present our economy cannot be developed from national resources, and it is also the case with creating new jobs. Policy Agenda has analysed how far the government has gone in creating jobs solely from national resources.

In spite of the crisis we are not spending more on creating new jobs

The source for financing the state`s employment policies is the National Employment Fund (previously called Labour Market Fund). The fund had an average of 342 billion HUF each year between 2007-2013; it is from this fund the government manages to pay out job-seekers` benefit as well as the national contribution to the EU financed employment  programmes, the support for labour market programmes and financing training projects.

In principle, this is the resource to employ in case of an unexpected unemployment crisis in one of the regions of the country – as it is happening in Dunaújváros as a result of the potential layoffs at Dunaferr – this gives the government a chance for finding provisional or eventual solution to such crises. Obviously, the resources are needed most at the peak of the crisis since the number of layoffs has escaped drastically. In other words, the solution – as West-European examples show – is to restructure the available resources for managing both employment and the consequential social crises, so the state cannot afford to step back from the scene.

Billion HUF

	2007	2008	2009	2010	2011	2012	2013 (plan)
National Employment Found	341.3	384,4	427	297.6	283.4	305.1	355
Active subsudies	59.5	71.9	45.6	42.7	30.9	26.8	33

 

Examining the implementation of the 2007-2012 budget laws one can clearly see that the Hungarian governments acted quite the opposite way. While in 2007-2008 the government spent 60 billion/72 billion HUF – without the EU resources – on employment and training benefits, the figure in 2012 was reduced to 26,8 billion HUF and it will not reach 35 billion HUF according to present plans (the modified appropriation is 33,5 billion HUF).

All the existing resources are spent on public works

The present government has basically changed the approach in employment policy.  On the one hand, they radically, as a rule reduced the job seekers entitlement to three months – which can be interpreted as a serious step-back – while they continuously spend more on financing public works programme from the National Employment Fund. While in 2010 the state spent zero forint on public works from the Labour Market Fund, last year the sum paid out on the purpose was 132 billion HUF, and according to this year plan they are spending 154 billion HUF.

The change of approach in unemployment policy is spectacularly illustrated by the fact that compared to the 25% of the Labour Market Funds spent  on public works and job-seekers` allowance in 2007, the figure this year has reached 60-65%. What is more, most of the sum is paid out for financing public works.

	2007	2008	2009	2010	2011	2012	2013 (plan)
passive expenditures (%)	0	0	0	0	21	43	43
public work programme (%)	27	26	33	46	44	21	17

 

As Policy Agenda`s analysis demonstrated public works project is an ineffective method from the point of view of the labour market. The number of those finding a job on the primary labour market after doing communal work is less than 10%. Still, the programme is really spectacular in the political sense since it may involve as much as 100 000 people at the same time.

Hungary does very little to create new jobs and save them

Statistics show the government expends very little on creating new jobs aside from the European Union funds. According to the budget report of 2012 the government helped create 17 000 new jobs from national resources. This figure includes classical applications for creating jobs, supporting employers offering jobs for career starters, social mobility programmes and supporting self-employment programmes. The sum spent on all these programmes did not reach 13,5 billion HUF. This means the state spent an average of about 800 000 HUF per capita to create a new job.

On the contrary,  the government spent 1 450 000 HUF on each and every public worker in 2012 (according to KSH statistics 90 700 people were employed in public works at a monthly rate and this cost 131,9 billion HUF for the state). While the money payed out for supporting public works must be expended every year – since the public works system is not self-sustaining – creating jobs at the primary labour market would have more lasting effects and would need a single, once-time-only state investment.

Statistics clearly show that supporting public works is much less effective and more expensive than spending the same sum of money on creating new jobs. In spite of these facts the government spends ten times more on communal work programmes than on real job creation. A further negative factor can turn up again in the shortly completed budget of 2014 which will keep up the same strange approach. The reason of this rather irrational way may be the willingness of the governing parties to satisfy the supposed or real needs of society. In other words, the government would not want to give „free benefit” for anyone even if the existing system was a more expensive, less effective and socially harmful solution to the problem of unemployment.