OECD on post-crisis Hungary

March 25, 2014

OECDstudycrisisandaftermath

The OECD (Organization for Economic Co-operation and Development) recently released a study showing how different member state have grappled with socio-economic issues since the 2008 crisis.

Society At A Glance 2014; OECD Social Indicators, The Crisis and Its Aftermath compares recent data on the social situation and also provides a guide to help understand the structure of OECD social indicators.

We compiled and included sections mentioning Hungary (with accompanying graph, charts, and table) from the report.

Economic hardship felt most acutely among low income earners and youth

The social impact of the crisis is reflected in the growing numbers of people who struggle to meet their basic needs. According to data from the Gallup World Poll, one in four respondents in the OECD area reported income difficulties in 2012, with the proportion climbing to three out of four in Hungary and Greece.

Over 15 percent of adults in Hungary live in “workless” households, where all household members aged 15-64 are either unemployed or labour-market inactive.

Figure 1.5

Government cuts to public education

Between 2009 and 2010 spending on public education as a percentage of GDP decreased in more than half of OECD countries, with cuts especially sharp in Hungary, Iceland, Italy, Sweden, Switzerland, and the United States.

The consequences of lower public spending on education, be it in the form of lower student participation, poorer outcomes, or reduced upwards mobility for children of low-income parents, will only materialize with time. As with cuts in other areas of public investment, it is precisely the longer-term consequences that can be most damaging.

Growing numbers of Hungarians cannot afford food

Since 2007, the number of Hungarians who claim not to have enough money to buy food has doubled. Hungary has the third lowest ranking of OECD countries in this area, performing only slightly better than Turkey and Mexico.

Figure 1.7

Hungary responded to crisis with drastic cuts to public spending

Household Income

Hungary’s poor economic performance since the crisis of 2007-2008 resulted in it being grouped with the following countries who also experienced a large decline in household incomes: Estonia, Greece, Iceland, Ireland, Mexico, New Zealand, and Spain.

Countries that adequately responded to the crisis (thereby experiencing a small decline, or small growth) include Austria, the Slovak Republic, and the Czech Republic.

Public Social Spending

Hungary and Greece responded to the crisis by cutting real social spending 17% and 11%, respectively. The cuts made by the two countries illustrate the difficulties of maintaining a counter-cyclical policy stance in a severe downturn.

Spending on working-age cash transfers rose steeply except in Hungary

“Working-age” cash transfers include the following spending categories: incapacity benefits (disability and sickness), family cash benefits, unemployment and so-called “other social policy areas” (which includes minimum-income benefits). The contribution of changes in “working-age” transfers to changes in total social spending is calculated in relation to spending as a percentage of GDP.

Figure 1.11

Estimates for 2007-08 and 20012-13 are averaged over two-year periods to allow for the different years in which the crisis began across countries and to reduce the effect of annual fluctuations.

In-work income, out-of-work income, and net replacement rate over 60 months decreased

The net replacement rate is calculated for a single individual with a “low-paid” job prior to becoming unemployed. Calculated incomes in work and out of work take into account income taxes, own social contributions, in-work benefits, unemployment insurance and assistance. Unemployment benefits in Hungary decreased between 2007 and 2011.

Figure 1.12

Reducing Hungary’s national debt to 60% of GDP will require further cuts to government spending.Figure 1.15

Significant changes to unemployment, minimum-income, and incapacity benefits

There are only a few instances of assistance benefits being cut within OECD countries after 2008.  Hungary abolished unemployment assistance, tightened access to social assistance, and reduced the duration of unemployment insurance providing income support to working-age people.

In Hungary, measures to decrease and restrict access to benefits were followed by substantial drops in recipient numbers, despite high rates of long-term unemployment.

Changes to family-related benefits

Hungary introduced a one-off payment for low income families (2009), extended childcare provisions (2009), but put a temporary freeze on universal allowance (2011).

Significant changes to the accessibility of old-age pensions

Hungary diverted private pension plans into the public pension. Unlike in Estonia, the diversion of private pension contributions in Hungary are permanent and involves a complete retreat from the compulsory private pension scheme. Hungary received a lower overall benefit level.

Table 1.3

A working partner makes family incomes more resilient to income losses

Net incomes at different stages of unemployment, with and without a working partner, percentage of in-work income in 2011.

Figure 1.20

Household income of OECD countries varies between USD 4500 and USD 36,400

3.2

Poorer households tended to lose more or gain less between 2007 and 2010.

Between 2007 and 2010 poorer households in Hungary experienced a far greater decrease in disposable income than in other OECD countries. 3.2Fertility Rates

In 2011 fertility rates were notably low in Hungary, with women having an average of 1.24 children on average (substantially less than half the 2.1 required in order to maintain population). During the crisis years between 2008 and 2011, fertility rates fell by one decimal point in Hungary.

3.3

(Table 3.3)

Net migration rates

The foreign-born population, as a percentage of the total population in Hungary, almost doubled from 2001 to 2011, while the average annual net migration rates remained about the same.

Relationship status

In 2012, one out of five Hungarians was single/never been married, and the number of respondents either divorced or separated was about the same.

3.8

Marriage rates in Hungary decreased 50 percent between 1970 and 2010.

3.9

The number of working-age people (20-64) per pensioner (65+) in Hungary in 2012 was 3.7, below the OECD average of 4.2. Hungary’s old-age support ratio is expected to decrease to 2.1 by 2050.

3.11

The economic crisis’ impact on employment rates

Total employment rate among those aged 15-64 in Q2 2013 was 58.2 percent. Just over 50 percent of women in this age group were employed compared to 65 percent for men. Between 2007 and Q2 2013, there was a marginal increase in Hungary’s employment rate attributable to the high rate of employment among women.

4.1

Involuntary part-time work increase during the crisis

In Hungary, the share of involuntary part-time workers in total employment between 2007 and 2012 increased among men and women, but was slightly higher amongst women.

In Hungary, changes in employment rates of the native-born and foreign-born population of Hungary between 2007 and 2012 were marked by a slight decrease in the employment rate of native-born workers, and a rise of about 2 percent in the employment rate of Hungary’s foreign-born population.

Increased Unemployment

In Hungary, unemployment in percentage of the labour force, aged 15-64, was officially 10.5 percent in Q2 2013, with more women being unemployed than men. There was virtually no change in the average unemployment rate between 2007 and Q2 2013. A sharp decrease of private sector employment, and the high rate of individuals employed through the public employment scheme heavily sway the Q2 2013 figures.

4.3

Unemployment impacts twice as many youth (15-24) in Hungary than older people (55-64).

Youth neither in employment, education nor training (NEETS) rates in Hungary

In Hungary, the share of 15-24 year olds who are unemployed or inactive and neither in education nor in training is higher among the native-born than it is among the foreign-born.

In Hungary during Q4 2014, 7.8 percent were unemployed and 7.3 percent inactive. The number of inactive youth had decreased compared to Q4 2007, but the number of unemployed rose by almost 3 percent.

The total percentage of Hungary’s 15-29 year-olds not in education and not employed by completed level of education is around 19 percent. Young people not in education and not employed who have completed a low level of education is just under 20 percent. Young people having completed higher education but unemployed and not in education is around 16 percent.

NEET rates among Hungary’s immigrant youth have increased slightly between 2008 and 2012, while the NEET rates of native-born Hungarians climbed more than 5 percent in the same time.

Life expectancy and retirement

The life expectancy of Hungarian women at the effective age of labour force exit is 82 years, while the life expectancy for men at the effective age of retirement is 77.4. (4.10)

4.10

Education spending

In Hungary, the annual expenditure per student from primary through tertiary education, in USD at current prices and at current Purchasing Power Parities in 2010 was approximately USD 5300. There was no percentage change in public expenditure for educational institutions as a percentage of GDP between 2008 and 2009, but an almost 5 percent decrease took place between 2009 and 2010.

4.12

(4.12)

Child poverty increased considerably

In 2010, 6.8 percent of Hungarians were living with less than 50 percent of median equivalised household income.

Between 2007 and 2010, poverty rates among Hungary’s elderly (over 65) dropped by more than 3 percent. However, poverty rates among children (0-17) increased by 3 percent, and poverty rates among young adults (18-25) also increased by the same amount.

5.4

In Hungary, minimum-income benefits don’t even come close to the poverty line for single people or couples with two children.

5.5

5.6

Social Spending

Public social spending in percent of GDP increased in all OECD countries with the exception of Hungary. Social expenditures rose .4 percent between 2007-09 and 2009-10, but fell by 1.9 percent between 2009-10 and 2012-13.

5.7

Pensions make up just under 10 percent of social spending as a percentage of GDP, just over 6 percent in social spending provides income support to the working age population, about 10 percent goes to health services, and about 3 percent goes to all other social services. Hungary, Greece, and Turkey do not have figures for the total net social spending.

Not satisfied

2012 figures from the Eurobarometer Index indicate Hungarians are less satisfied with health care provisions, even less satisfied with pension provisions, even less satisfied with the way inequality and poverty are addressed, and even less satisfied with unemployment benefits. Hungary was the third worst performer on the Eurobarometer Index on satisfaction rankings.

5.8,5.9

Out-of-work benefits

In Hungary, the number of recipients (15-64 year-old population) of cash transfers from unemployment insurance as a percentage is 1.8 percent, a .4 percent increase increase between 2007 and 2010. The percentage recipients of unemployment assistance is .9 percent, and 3.1 percent receive social assistance. Between 2007 and 2010, the percentage point increase in recipients was .4 percent and .3 in unemployment assistance.

5.11

Life expectancy

Between 1970 and 2011 life expectancy in Hungary increased 5.8 years to 75 years, which is five years less than OECD average.

6.1

6.2,6.3

Perceived state of health

In Hungary, less than 60 percent of adults consider themselves to be in good health. 56.1 percent of the total population aged 15 and over think they are healthy. 52.5 percent of women think they are healthy, compared to 60.1 percent of men.

6.4

Suicide

In Hungary, more than 20 deaths per 100 000 population were caused by suicide. The aged-standardized suicide mortality rate per 100 000 persons in 2011 was 22.8, lower than Korea, but higher than that of Russia and Japan.

6.6

Life satisfaction in Hungary was 4.7 in 2012, a drop of .3 points from 2007.

7.1

Hungarian women and men are among the least satisfied in OECD countries, with men experiencing slightly less satisfaction than women.

7.2,7.3Tolerance

In general, attitudes towards gays and lesbians became more tolerant between 2007 and 2012. However, Hungary, Greece, and Turkey experienced significant declines in tolerance.

Hungarians exhibited growing intolerance for ethnic minorities, gays and lesbians. An increasing percentage of Hungarians do not believe the place where they live is a good place to live for immigrants from other countries.

7.4 7.5,7.6Confidence in Institutions

Between 2007 and 2012, confidence in Hungary’s national government decreased from 26% to 23% among adults and from 9% to 8% among youth (aged 15-24).

7.7

Confidence in financial institutions among Hungarians decreased 25% between 2007 and 2012.

7.8,7.9After Mexico, Hungary experienced the greatest decrease in the level of confidence in local police between 2007 and 2012. 59 percent of people felt it was safe to walk alone at night, a 5 percentage point decline between 2007 and 2012.

7.11,7.12Referenced in this article: