Hungary's labour shortage even greater challenge than thought

Hungary's labour shortage even greater challenge than thought
By bne IntelliNews July 10, 2018

Official data from Hungary's statistics office KSH puts job vacancies at 80,000, but the actual figure is estimated at 300,000, industry leaders say, Hungarian media reported on July 9.

"The lack of skilled workers is an increasing problem for all sectors of the economy, and the problem is the most pressing in construction, catering, and tourism where there is a daily problem of finding and retaining skilled workers", said Ferenc Rolek, vice president of the Hungarian Association of Hungarian Industrialists (MGYOSZ).

Surveys show that nine out of ten companies in the manufacturing sector said a labour shortage could lead to reducing output. The KSH survey puts vacancies at 24,000, which is hugely underestimated, as the survey only includes companies with at least five people. 

Taking into account corporate surveys and the fact that the most people work in the manufacturing sector, even the most cautious estimate put job vacancy around 100,000 in the sector, but many industry leaders say up to 200,000 workers could be absorbed by the manufacturing industry.  

Hungary's construction sector has seen employment reach pre-crisis levels, but the sector could still soak up some 40,000 skilled workers, industry players claim. Empty jobs were filled by mostly low-skilled workers. 

Construction companies and talented professionals left the country in masses after the economic crisis. 

Hungary's declining demographics is further aggravating the problem. The population will continue to drop 40,000-50,000 in the coming years. Despite an increase of the fertility rate from 1.2 to 1.44 in the last eight years, the percentage of women in reproductive age is now significantly lower than it was 5-10 years ago, which makes it a mounting challenge to overcome the demographic trap.

At current levels, Hungary’s population will fall to 8.5mn in 20 years from 9.8mn at present and this would amongst others would lead to a slowdown in economic growth but also the collapse of Hungary's pay-as-you-go pension system.

Last year, 109,000 people, or 2.5% of the workforce, said they worked abroad. The number of Hungarians working abroad dropped by 7,000 over a year but this was still 29,000 higher than five years ago, according to KSH figures.

The majority of workers abroad were men aged between 25 and 44 with vocational diplomas and 85% worked in Austria, Germany, or the UK. Most left for abroad from the  capital, western counties and from the poorer north-eastern regions.

The government claims that the trend has reversed and more people are coming back than leaving Hungary. The dynamic increase in wages and lower living costs has made some young people decide to move back to Hungary, the government says. 

One out of 20 people aged between 15 and 74 said they would be willing to move abroad to work in the next two years, the statistics office said. The largest group who said they would move abroad were single males and skilled workers aged between 20 and 39.

Among those who want to work abroad, 46% plan to go for more than two years and 14% have no intention of returning to Hungary.

The fact that four out of five Hungarians would not move even within the country for work signals the very low mobility of the workforce.

Despite freezing wages of fostered workers, there are still half a million inactive. Their lack of skills and willingness to work make them unlikely candidates to fill the gap.