Youth graduation rate shows a downward trend in Hungary

When a country runs out of reserves for quantitative growth (rapid growth in the number of workers), it is left with qualitative growth (improving the skills of people). The growth of the Hungarian economy in recent years has been dominated by a quantitative approach, but as the labour force is running out, it is worth rethinking the quality of human capital. However, recent trends are not encouraging.

There are fewer young graduates

Last year, the share of 25-34 year olds with a degree in Hungary fell to a low level not seen in the past decade. While the number of young graduates in the European Union has been rising steadily, the trend in Hungary is downwards again after a temporary upturn. Last year, fewer than three in ten young people in Hungary had a degree, according to recent Eurostat data, reflecting the increasing decline of the education sector and the rise of a lower-skilled manufacturing sector.

Meanwhile, the EU is on track to reach the 45% target by 2030, with 43% of young people graduating last year. If the trend seen over the last decade continues, it won't be long before the EU average could easily reach the target level in 3-4 years. However, the situation in Hungary is different.

A decade ago Hungary was less than 5 percentage points behind the EU average, but now the gap is over 13 percentage points.

Hungary now has the second lowest share of graduates in Europe. A few years ago the country was ahead of Italy, but last year it caught up thanks to the fact that the proportion of 25-34 year olds with a degree increased in Italy and decreased in Hungary. It is also worth looking at how Hungary's position has changed over a decade in a European comparison. While in 2012 it was towards the bottom of the mid-range, it is now among the bottom performers. Interestingly, this has happened while the share of young graduates has hardly changed in Hungary, while in other countries the share of people with tertiary education has increased.

Similar to previous years, the proportion of 25-34 year olds in Hungary with tertiary education was highest in Central Hungary (48%) and lowest in Northern Hungary (16.3%) and Northern Great Plain (18.8%) last year, according to data from the Hungarian Statistical Office (KSH). As is the trend in the EU, the proportion of women with tertiary education was higher: in 2023, 36% of women in the age group surveyed in Hungary were among the most highly educated, 12.8 percentage points higher than the proportion of men.

Higher skills, higher pay

Yet it would be really worthwhile if more people in our country got a higher education. The most recent earnings data are not yet available, but the figures for 2022 show that those with tertiary qualifications earned between HUF 660-940,000 gross, while those with lower qualifications earned between HUF 290-480,000. The wage gap between higher and lower educated is therefore huge.

This situation is illustrated by data from shared service or business service centres, where highly skilled, language-speaking workers are sought and wages are 70% above the national average. However, it seems that the government's quantitative approach to the labour market will continue to prevail, despite the fact that the working age population will decline over the next decade. The next few years may also bring a wave of factory construction in this country, which will predominantly seek lower-skilled workers. The halt in both the wave of factory construction and the improvement in skill levels signals a stalling of the transition to a knowledge-intensive economy. Yet the best way out of the middle-income trap, with the high employment levels Hungary has achieved in recent years, is to become better skilled. This is reflected in the fact that the living standards of graduates are incomparably better than those of the low-skilled. However, with more and more low value-added firms coming to Hungary, relying on cheap labour at the saddest point of the smile curve, a reversal of the trend is surely still to come.

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