Global Economics

In Hungary, the Jobless Go to Labor Camp


Wielding scythes and pitchforks, about 30 men and women hack through brambles on a hillside above the Hungarian village of Gyöngyöspata. With the nearest road more than a half mile away, workers have to hike in with food and water for the day. For bathroom and lunch breaks, they duck into a thicket that offers the only shade in the 98F heat. “It’s degrading to work in these conditions,” says Károly Lakatos, a 38-year-old father of three who was laid off earlier this year from his forklift-operator job in an auto parts factory. When his unemployment benefits ran out, the government assigned him to a brigade clearing land owned by the village.

If Prime Minister Viktor Orbán has his way, hundreds of thousands of Hungarians will soon join similar squads. Under a plan approved by Parliament in July, by 2012 some 300,000 people will be working in community service jobs—doing everything from picking up trash to building stadiums—instead of drawing welfare or unemployment benefits. Hungary will no longer “give benefits to those capable of work, when there is much work to be done,” Orbán said in June. The effort is part of the ruling Fidesz Party’s 2010 election pledge to create 1 million jobs over the next decade.

No question, Hungary needs jobs. Only 54.6 percent of the working-age population is employed, the lowest rate in the European Union, according to EU data. An anemic economy, forecast to grow 2 percent in 2011, is part of the problem. But the real culprit is the sprawling welfare state created after the fall of communism. To help workers who lost jobs in state-run industries, the government established generous early retirement, disability, and parental leave programs. Those benefits are still in place. According to the EU’s Eurostat agency, in 2008 Hungary spent $5,200 per capita on social protection, vs. $4,088 in Slovakia and $3,706 in Poland. “There are people in this work program who’ve never had a proper job in their lives,” says Oszkár Juhász, the mayor of Gyöngyöspata, which is an hour’s drive northeast of Budapest.

Under the new law, jobless benefits will be cut off after 90 days, down from nine months, and eligibility for other welfare payouts will be curtailed. People taken off the dole are being offered jobs paying $303 a month, twice the basic welfare payment but less than the standard $415 minimum wage. Those who refuse will receive no government aid.

The opposition Socialist Party says the program “is based on fear and force, just like in a previous era of terror”—an allusion to the hundreds of thousands of Hungarians who were conscripted for Nazi and Soviet work camps. By launching the program in Gyöngyöspata, where members of the town’s Roma ethnic minority clashed with nationalist vigilantes earlier this year, the government gave the impression that it is trying “to keep the Roma under control,” says Péter Juhász of the Hungarian Civil Liberties Union. “We live in fear that the black uniforms [worn by the vigilantes] will return,” says Irén Rácz, a 57-year-old Roma assigned to the Gyöngyöspata brigade.

Roma make up about 6 percent of Hungary’s population and as much as 12 percent of those receiving welfare and unemployment benefits, according to the Budapest Institute. In Gyöngyöspata, 36 of the 40 people working in the program are Roma. Hungary’s Interior Ministry, which administers the program, says it is paying special attention to Roma because they are discriminated against and “underskilled” compared with other workers. “There is little chance that they can find work in the private sector without development programs,” the ministry said in a written response to questions from Bloomberg Businessweek.

The policy’s price tag is another concern. The government, which is repaying a $29 billion bailout led by the International Monetary Fund, hasn’t specified where it will find the money to put hundreds of thousands of workers on the state payroll and finance projects to employ them. Orbán has said the program will rely on old-fashioned manual labor. “Building dams, cleaning ditches, building reservoirs—this won’t happen using 21st century technology,” he said in a May television interview. Balázs Váradi, a Budapest Institute economist who advised the previous Socialist government, says “there has been an explicit choice to use labor-intensive methods, even if that is not economical.” The Gyöngyöspata workers are to spend three months clearing 16 hectares of land, a job that could be completed far more quickly and cheaply with machinery.

Hungarian employers say they are eager for skilled workers. Daimler (DDAIF) is recruiting 2,500 people, including engineers and IT specialists, for a new Mercedes factory in the town of Kecskemét. Public-works jobs generally don’t provide the kind of training and experience businesses need, says Adrienn Bálint, director for social dialogue at the Confederation of Hungarian Employers and Industrialists. “This is not productive work,” she says.

Nearly a decade ago, Slovakia tried a similar public-works program to wean people off the dole, but the government abandoned the effort after a few years “because they realized people were not transiting into regular employment,” says Martin Kahanec, an assistant professor of public policy at Central European University in Budapest.

Standing amid piles of cleared underbrush, Lakatos says he’s certain about one thing: “I don’t want my children to do what I am doing. I want them to be sitting with a tie in front of a computer.”

The bottom line: Hungary is forcing its unemployed into work brigades, doing projects that could be accomplished more cheaply by machinery.

Matlack is a Paris correspondent for Bloomberg Businessweek.
Gergely is a reporter for Bloomberg News.

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