Country Brief - Hungary

HUNGARY PORTRAITS OF LABOR MARKET EXCLUSION

“Portraits of Labor Market Exclusion” sheds new light on the life situations and labor market experiences of individuals and households in the years of the financial, economic, and employment crisis between 2008 and 2011. In this joint project of the European Commission and the World Bank, profiles of the unemployed and inactive populations were developed via a clustering analysis of data from the European Income and Living Conditions Survey. The analysis takes a comprehensive view of policy making, focusing on both the labor market attachment of a country’s out-of-work population, their participation in social protection programs, as well as their poverty profile.

Figure 1: Classes of Out-of-Work Population in Hungary, 2011 2% 2% 4%

Disabled with previous work experience

4%

Mostly male early retirees and retirees 19%

Urban retired women Prime-aged unemployed

12%

Prime-aged inactive mothers with work experience 15%

Prime-aged long-term unemployed Unemployed youth

13%

Low-educated rural inactive mothers without work experience 14%

15%

Educated single students Low-educated disabled without work experience High priority Medium priority

Source: World Bank staff analysis

The analysis for Hungary identified a total of 2.27 million out-of-work individuals (unemployed and inactive) between ages 16 and 64 for the year 2011 (total population: 9.83 million). Of the ten profiles identified in Hungary, seven emerge with a “high” or “medium” priority for action given their activation need, potential, and barriers (Figure 1). Prime-aged unemployed, prime-aged long-term unemployed and unemployed youth are considered high priority for further activation. Together, they account for 30 percent of the out-of-work population. Disabled with previous work experience, prime-aged inactive mothers with work experience, and low-educated rural inactive mothers without work experience are assessed to be of “medium” priority driven by their lower activation potential. Educated single students were also considered a “medium” priority because of the potential scarring effects of labor market detachment for young people at an early age. Nevertheless, given that one of their main labor market barriers (language completion requirement) was addressed through dedicated programs after 2011, they are not considered as a prioritized group by the Hungarian authorities for further action in 2014 or later. Mostly male early retirees and retirees, urban retired women, and low-educated disabled without work experience are not considered as priority for further activation measures owing, respectively, to their officially achieved retirement status and extreme distance (via very low educational attainment and self-declared disability) from the labor market.

Figure 2 maps the clusters according to the labor market and social barriers that might limit their labor market activation. Given their shorter period of unemployment and work experience, prime-aged unemployed face fewer labor market barriers, which is reflected in the figure by locating this profile in

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HUNGARY

PORTRAITS OF LABOR MARKET EXCLUSION |

the bottom left quadrant. Activation policies for the individuals in this profile should focus on market-based types of interventions, such as providing information on job openings and assisting in job search, application, and job-matching intermediation—services that could be provided through public employment services (PESs) or private employment agencies. Additionally, linkage with regional economic development activities, self-employment, and entrepreneurship support could help some of these unemployed individuals attain selfsufficient lives and improve their welfare.

The prime-aged long-term unemployed and unemployed youth, on the other hand, are considered as needing intensified activation because, respectively, they have been detached from the labor market for a longer period (86 percent are long-term unemployed) or have little or no prior work experience (82 percent have never worked). Activation policies to be considered for the individuals in these two profiles are those that help with job market re-entry, training, and mobility. Building on their acquired skills and upgrading missing functional or technical skills may strengthen their case with new employers. Moreover, in order to combat any behavioral and attitudinal detachment from the labor market that may result after long periods of unemployment, programs that subject individuals to a (time-limited) public works requirement, combined with training, job search, and skills support could also be implemented.

Job-start programs that offer placement through subsidized internships, accompanied by professional and life-skills training, could help in breaking the common barrier faced by younger cohorts of required work experience for many entry-level positions.

The profiles considered a medium priority for activation— disabled with previous work experience, prime-aged inactive mothers with work experience, and low-educated rural inactive mothers without work experience—face larger social barriers and present different activation challenges. Taking into account that 94 percent of disabled with previous work experience declare themselves disabled, but only 65 percent consider themselves ‘strongly limited’ in their daily activity, reinsertion into the labor market will most probably have to involve reassessing their disability status. Despite their lower activation potential, the size of this profile suggests that they should be considered in the policy agenda.

Figure 2: Activation Types of Prioritized Clusters in Hungary High

Labor market barriers (education, skills, experience)

|

Hard-to-serve (skills, special support)

Intensified Activation (TVET, Skills) Unemployed Youth

Low-educated rural inactive mothers without work experience

Prime-aged longterm unemployed Prime-aged unemployed

Educated Single Students Market Ready (job info, matching, search assistance)

Disabled with previous work experience

Prime-aged inactive mothers with work experience Special Support (care for dependents, transport, social, health) High

Social barriers (childcare, gender, poverty, disability)

Source: World Bank staff analysis and assessment

Finally, the women included in the two profiles of inactive mothers, even though they differ in terms of characteristics and activation challenges, would benefit from greater access to social and public services near their home (such as child and elder care) as well as from job-search assistance and professional training. Moreover, improving flexibility in work schedules— including part-time and home-based work—in order to facilitate combining work with other responsibilities would make it easier for women to hold jobs.

General social protection and labor policy priorities should address the labor market barriers and disincentives that the out-of-work population faces. Improving access to services, such as child and elder care, broader labor market reforms that consider more flexible work schedules, policies that eliminate mobility barriers, and education reforms that ensure quality and relevance in expanding the tertiary education system could be considered in the policy agenda. Moreover, broader economic reforms that strengthen job creation and entrepreneurship are crucial in fostering labor market attachment. In this sense, all efforts need to be embedded into activities for economic growth and job demand creation.

Note: Base data for this analysis was harmonized EU SILC (Survey of Income and Living Conditions), released by Eurostat in 2013 with a time-lag of 2 years, referring to the year 2011.

Financed by the European Commission www.ec.europa.eu/social

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http://www.worldbank.org/en/ country/centraleuropeandthebaltics

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