European Trade Union Institute, ETUI.

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25 January 2018

Hungary: shrinking Public Work Scheme after reform

The Public Work Scheme that was implemented by the government as a means to activate long term unemployed people and to prevent permanent job seekers from getting out of the working life has been restructured in the course of 2017. The scheme was criticised by many observers as inefficient. However, serious consultation on an alternative active labour market policy is lacking.

The government announced In mid-2017 its plan to scale back the controversial public work program (PWS) and to reduce the monthly average number of people employed in public works from 230,000 to 150,000 by 2020. In previous years, the government had significantly extended its policy to develop the PWS into the most important employment program. The aim of the PWS was to activate long term unemployed people and to prevent permanent job seekers from getting out of work.

The policy has been criticised by many observers for its low efficiency in reintegrating people into the primary labour market, its poor targeting (involving not only those in the most disadvantaged positions, from disadvantaged regions), and for the fact that it absorbed funds from other more efficient labour market tools and provided a lower income than the minimum wage. The massive extension of public works took place at the expense of other, more efficient active labour market policies such as training and mentoring. The European Commission repeatedly urged the government to reconsider the scheme, warning that it did not improve prospects for the jobless. The OECD added to this criticism that in practice, public investment grew to 6.7% of GDP in 2015, the highest across OECD countries. On the other hand, there was a marked decrease in social protection of -2.3 p.p. of GDP, reaching 15% of GDP in 2015.

According to the latest data, the number of people involved in public works decreased from 225,000 in 2016 to 182,000 in 2017. The number of public workers has been reduced mostly in the least economically and socially advanced eastern parts of the country (with 60% of the total decrease achieved there). Latest statistics indicate that the number is still on the decrease (147,000 by the end of 2017). The government planned to transfer public workers from the PWS into local social cooperatives (see our 1 August 2017 News item). While statistically cooperative members are considered employees in the private sector, there is no change in their pay and working conditions. Their wages do not increase, since social cooperatives have been removed from the application of the labour code that guarantees a minimum wage.

The influence of the trade unions on the labour market policy has gradually decreased. The country moved from a situation with industrial relations characterised by relatively strong national tripartite cooperation to limited consultation only. Despite substantial wage increases in recent years, the trade unionists often question whether the economic growth and the positive economic indicators are achieved at an excessive cost borne by the workers.

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