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Aug 25, 2016

Hungary's economy heating up, labor market struggles to keep up

In 2014, PM Orbán predicted a shortage of labor to come, and recent events support his forecast

Prime Minister Viktor Orbán was spot on when he said that Hungary's economy is developing so fast that we need to increase the number of skilled workers in Hungary, reports Portfolio.hu today.

As early as October 2014, just before the local government elections in Hungary, PM Orbán already predicted a shortage of labor to come in 12 to 18 months, and recent events have proven him to be correct. Hungary is now suffering from a labor shortage.

"Hungary's economy is developing, which creates new problems that one needs to address. In a year, or a year-and-a-half, we will be facing a shortage of workforce. There will not be enough skilled people, which makes it imperative to hurry up now," the prime minister said nearly two years ago, a prediction that is proving correct.

The past few years have seen a significant contraction in the size of the available workforce in Hungary as economic recovery resulted in increased demand for labor. Of course, the trend did not affect all regions equally.

Considering the number of the unemployed and those employed through the public work program together shows that a job market boom is less apparent in the eastern half of the country.

An analysis of the jobless and public workers as a percentage of the economically active population yields similar results. Labour supply grew in the Northern Great Plains, whilst the remaining regions saw a decrease: some to a small degree, others dramatically.

The situation is the worst in the Nyugat-Dunántúl (Western Hungary) and Közép-Dunántúl (Central-Western Hungary) regions. The relative weight of the unemployed, public workers included, fell a respective 5.4 and 4.3 percentage points in the past three years. The unemployment rate is down to less than 3 percent in both regions, and the supply of available workforce is scanty, even including those in the public works scheme.

That is, the western half of Hungary has practically run out of available workforce, which is little wonder as the industrial sector has soaked up many people in those regions, where the draining effect of Austria - and to a lesser degree, of Slovakia - is most acutely felt.

It should be noted that the situation in the Central Hungary region including Budapest is not much better than in Western Hungary, either; unemployment is only 3.9 percent and the number of public workers is relatively low.

Available workforce can only be found in the eastern half of the country. The largest number of idle hands is in the Norther Great Plains (Hajdú-Bihar, Jász-Nagykun-Szolnok and Szabolcs-Szatmár-Bereg counties), where unemploment is still very high at 9.7 percent and the ratio of public workers is even higher at 10.8 percent.

Read more here.