In Hungary poor families reduced to living on a quarter of subsistence income

April 9, 2015


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Many believe that the poor abuse the social welfare system.  However, there isn’t that much for them to abuse. Welfare expenditures have decreased since 2010.  For every 100 Hungarian forints spent on social payments, only 2 are spent on the poor.  An average family of four lives on just one-quarter of the subsistence wage, which is not even enough to purchase healthy food. The Budapest Institute and the Roma Press Center collected the most important information about the Hungarian social benefit system.

What are we talking about? 

The terminology of allowances and welfare expenditures is frequently mixed up. The welfare system is responsible for the health, living conditions and education of the citizens.  Every single forint spent on these three areas is considered as a welfare expenditure, including the wages of the teachers, doctors and family allowances as well. Certain welfare benefits are granted for every citizen.  Some of them are paid out in the form of social insurance.  The third group is granted on the basis of need. Only the last group is called “allowances.”

Certain allowances are granted for longer term, such as the dwelling maintenance subsidy, the employment substitution subsidy, the regular social allowance, the elder people’s allowance and nursing fees.  In addition, there are one-time grants for crisis situations such as the funeral subsidy or the transitional subsidy. Some of these subsidies are not granted in cash.  The regular child protection subsidy is transferred to the kindergarten or the school and spent on feeding the children.

Even if many believe that the family allowance is a subsidy, it is not

Among the most important allowances, there are the regular child protection allowance and the dwelling maintenance subsidy. In 2013 on average every 5th person under the age of 25 received the child protection subsidy.  Nearly every twentieth adult received the dwelling maintenance subsidy.

How much does this whole thing cost? 

In 2014  31.9 percent of the state budget went to welfare expenditures, that is 32 tax forints out of 100. Of this, 17 forints went to pensions, 5 forints to sick-allowance and other insurance-based allowances, and 4 forints to social institutions (children’s and elderly people’s homes). Only 2 out of 100 forints goes to allowances, which amounts to 2.4 percent of the state budget. Actually only half of it is real allowance, as from 2012 so-called early retirement and official pensions make up the other half.

Hungarian state budget welfare expenditures in 2014.

(Source: Magyar Államkincstár)

Hungary

That means Hungary does not spend an excessive amount on allowances.  Furthermore, the rate of spending on welfare has been steadily decreasing since 2010. The three main allowances for working-age citizens (the regular social allowance, the dwelling maintenance subsidy and the employment substituting subsidy) have not changed.  For years the amount has been around 1 percent of the national budget, even though the number of needy people has increased dramatically.

Ratio of welfare expenditures and allowances in the budget, 2004 – 2014 Source: Hungarian State Treasury real (final records) data.

It has been going on for 15 years

In 2000, during the first Orbán government, the system of unemployment allowances was completely overhauled. From that time the allowance was granted for only 9 months and the process of selecting and granting was allotted to the local governments. Meanwhile, the recipients had to accept participation in a public work scheme program. At the time it was introduced, the applicants for regular social allowance had to spend at least 30 days a year working in a public work scheme.

The next reform took place under the Bajnai government in 2009.  Recipients were separated into two groups: those capable of working received the fixed amount, the so-called standby allowance (RÁT), in exchange for which they had to undertake 90 days of public work instead of 30. They also had to cooperate with the local job center. The younger and elder recipients received the amount according to the old rules. In 2012 the name of RÁT was changed to “employment substituting subsidy” and the amount decreased from HUF 28,500 (USD 130) to HUF 22,800 (USD 105).  The amount has not changed since 2012.

What we have now

The allowance system was again overhauled in March 2015.  Responsibility for administering the employment substituting subsidy and social allowances was transferred to the local governments of some 3,100 settlements. Parts of the allowances were renamed allowances for health damage and childcare. On the other hand those who were close to retirement were removed from the eligible group.  Many experts supported transferring the two allowances to a district level because by this the factor of autocratic behavior of the mayor is eliminated and a significant problem is solved.

On the level of the settlements there is a new form of subsidy about which the local governments are free to decide. They can incorporate into it the so-called debt management subsidy, the free public health service, the fair nursing fee, the dwelling maintenance subsidy, the local government aid, the funeral aid and the heating subsidy.

According to the Ministry for Human Resources, this was not a problem because the government has to transfer enough money to the local governments to cover the new expenditures. But in reality many settlements have had to cut expenditures.  According to Károly Czibere, undersecretary responsible for social affairs, these settlements cannot complain about lack of money.

Is it enough? 

The short answer is no.  In the case of an average family of four, none of whose members is a pensioner or permanently disabled, the income will not reach the subsistence level.

The amount of employment substitution subsidy is HUF 22,800 (USD 83) per person.  However, only one member of the family is entitled to receive it. The family allowance in the case of two children is HUF 13,300 (USD 48) per child. If the local government retains a dwelling maintenance subsidy of HUF 8,800 (USD 32) per household, the monthly income will reach HUF 58,200 (USD 212), or a quarter of the official subsistence level of HUF 253,000 (USD 920) in the case of a four-person household.  This is not even enough to cover the cost of healthy dining (HUF 86,000/USD 390).