80% of new jobs in Hungary to be created by public employment in 2012

The Hungarian Work Plan, originally promised to be unveiled by 30 April, was published on the website of the National Economy Ministry on Thursday. Its dedicated objective is to present the means to an end, i.e. the road leading to one million new jobs by 2020. The 80-page document contains detailed employment prognoses for the next five years, along with the planned measures, a large part of which have been disclosed one by one over the past few months.

Many of the targeted 400,000 new jobs will be public work

The government declared already in 2010 that by 2015 it will create 400,00 new jobs and the Convergence Programme also included this objective. But this is the first time the cabinet has unveiled its detailed employment prognoses in this respect - in the Hungarian Work Programme.

According to the ministry’ calculations, if the baseline assumption of a 3% GDP growth is reaches some 292,000 new jobs could be created by 2015 relative to Central Statistics Office's (KSH) 2010 figure (3.75 million). At a more dynamic growth, 5% for instance, the increase could reach 463,000 people. The 400,000 new jobs the cabinet is bent on creating would require a growth somewhere in the middle (the average of the two growth figures), considering the ministry projects 377,000 new jobs.

Some of the new jobs between 2011 and 2015 will be created by the private sector, but the lion’s share of the increase is expected to stem from public work programmes and the whitening of the economy, as expected by the government.

According to the Economy Ministry, 60% of the new jobs in 2011 will appear in the private sector, but from 2012 - as a result of the measures that come into effect on 1 Jan, including a wider launch of public work programmes and the reduction of the availability of jobseeker’s benefit to 90 days - the ratio of jobs created by public work programmes and via the whitening of the economy will leap.

As you can see on the chart below, most of the newly created jobs, 80% (!), is supposed to stem from the latter two, while the contribution of the private sector would rise to only 35% by 2014. It is also interesting that the ministry does not expect this ratio to rise even with a pickup in GDP growth. Its contribution is projected to remain at 35% both in the baseline and the normative scenarios.

A larger portion (30%) of new jobs in the private sector is to be created in the manufacturing industry, the ministry forecasts. It expects 20% of the new jobs to be created in the wholesale and retail sectors and 10% to be established in the real estate sector.

Make the Hungarian employee one of the most flexible there is

The government aims to make the Hungarian labour market one of the most flexible in Europe, the Work Plan says. The foremost means to this end would be the modification of the Labour Code that is likely to become effective on 1 January 2012.

- New, differentiated Labour Code - The goal is to increasingly consider the interests of SMEs by the differentiation of regulations based on the number of employees. In practice, the cabinet wants to ease requirements that a large corporate’s staff can deal with easily but which cause difficulties for smaller businesses. The new rules would also facilitate a more problem-free termination of employment contract for SMEs.

- Cutting red tape for employers - The objective to reduce bureaucracy-related expenditure for companies was announced in April. Of the HUF 500 bn first step HUF 105 bn worth of measures have already been announced and the government is expecting proposals as to how expenditure should be lowered by another HUF 400 bn.

Three-pillar employment supporting system:

- Targeted wage and contribution subsidies for micro, small and medium-sized enterprises;

- Social economy: job creation for the unemployed is to be organised in view of local conditions, party from state support and partly from own funds. This is a transitional form of employment, the longer-term aim of which is to create a doorway to employment on the open market.

- Public employment: In connection with a reduction in social benefits, the government will organise itself temporary employment of those who have no realistic opportunity to find a job in the first two pillars.

The Labour Market Fund will be split in two and the new National Employment Fund will deal exclusively with employment-related programmes, without social elements. The financing of public employment must be solved from budget resources as no EU funding may be requested for this purpose. The 2012 Budget is to clip HUF 120 bn off of the LMF’s annual budget, which would probably serve as funds for the public employment programmes.

But there’s more...

In order to achieve the restructuring and savings outlined in the Széll Kálmán Plan, a package of structural reform measures, further steps will need to be taken in the area of employment.

Therefore:
- further changes may be made to the tax and contribution systems;
- the state may review and abolish outsourced activities and/or delegate these tasks on itself;
- the cabinet may review the employment statistics system;
- public employment programmes will be finalised;
- rehabilitation may enjoy a more pronounced support, with relation to measures aiming to overhaul the disability pension regime;
- the harmonisation of transport benefits and the home support system may also take place.

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