Government transfers public workers into social cooperatives

September 26, 2017

Government transfers public workers into social cooperatives
Photo:árton Magócsi

The government is planning to transfer public workers from the faulty public work program into local social cooperatives, reports. In theory, social cooperatives could be a step up for public workers, but as experts argue, a change in the law allowing membership of municipal councils in the cooperatives suggests that the transition’s primary aim is not to improve the welfare of public workers, but to push up employment statistics.

The government decided at the beginning of this year to scale back the controversial public work program in upcoming years. Meanwhile, Hungary is suffering a serious labor shortage, for which one plausible solution could be to fill vacant positions with public workers. But given the lack of opportunities for training through the program, most public workers are likely to be unqualified to fill these positions.

The government therefore chose another path by singling out social cooperatives as the ultimate solution for improving the public work scheme.

The aim of social cooperatives is to provide work for unemployed and underprivileged members and improve their social conditions. All members are equal, profits are shared equally and decisions made collectively.

But when the government decided to transfer public workers into social cooperatives, it changed the law on cooperatives so that municipal councils can also become members, according to György Molnár, a researcher at the Institute of Economics of the Hungarian Academy of Sciences. Cooperatives that have local councils as members cannot be considered real social cooperatives, Molnár told

The logic underlying the concept of including municipal councils in the cooperatives was that since many councils acquired a lot of work equipment under the framework of the public work scheme, as members of the social cooperative they could provide this equipment to other cooperative members free of charge. But Molnár , who has interviewed numerous cooperative members, argues that these cooperatives, in their current form, will only maintain the vulnerability of public workers.

“The mayor’s will is going to prevail just like in the public work scheme, and members will not dare to contradict [the mayor] because their livelihood will be at stake,” Molnár says.

While statistically cooperative members will be considered employees of the primary labor market, they will not see a change in their everyday working conditions. Their sub-subsistence wages will not increase, since social cooperatives have been removed from the scope of the labor code that guarantees a minimum wage. The government also encourages social cooperatives to become financially self-sufficient, but in the meantime it does not want to exceed the current level of funding for the public work scheme. The only way public workers might earn more in the cooperatives is if the cooperative manages to independently find a profitable activity. Even then, Molnár argues, it will be up to the mayor whether they want to spend the profit on increasing wages.

“The real problem is that this is not a real solution, it is not any better than public work. There might be a couple of cooperatives that will live on a market basis but most of them will not be able to maintain themselves without the help of the state,” Molnár says.

Nevertheless, the transition is already under way. New social cooperatives have been founded recently all over the country. contacted the Ministry for National Economy to learn why the ministry thinks that social cooperatives are an adequate solution. According to the ministry, social cooperatives as a new entrepreneurial form might play a significant role in local economic development, and strengthen social cohesion that leads to economic stability.