Electronic Resource Centre for Human Rights Education:
| - | Critical Choices for Hungary || Contents || Introduction || Unemployment... || Unemployment Contents
Writer, editor: Ferenc Hammer 10% of Employable Hungarians Are Out of Work: What Is to Be Done? "The demand for low-skilled workers will not increase in the future, but will decrease or remain static. As a result, we can predict that there will come to be a surplus of unskilled workers in the next decade or two, and that this surplus will prove to be unemployable." Istvan Kemeny (1972) According to public opinion Hungarians feel unemployment is the country's most serious problem. In contrast, it appears that the unemployment rate (the percentage of employable adults currently out of work) has stabilized, and recently has even declined. In fact, the current unemployment rate, when compared to the rest of Europe, does not seem exceptionally high. However, unemployment in Hungary differs from unemployment in the developed industrial countries in at least three ways:
No matter what their political stance, experts agree that Hungary's main economic problem is not unemployment but the decline in production which has caused unemployment. But when asked the question "what will it take to increase production?", opinions begin to diverge. Some feel that what is needed is an American-style "New Deal". Others feel that the role the state plays in the economy is still too great, and that only a strong private sector can lead the country out of its economic crisis. Still others feel that no matter what the state of the economy, there will always be a need for a highly trained work force. They advocate an employment policy which would allow workers to retrain themselves, or at least help them retain what is most important in the labor market: skills, knowledge and motivation. Most people are best able to consider the world according to their own experiences. However, when considering the fate of other people, we must try place ourselves in their shoes. When discussing unemployment we should imagine the impact our policy choices may have. The roles and responsibilities of forum participants are similar to those of Members of Parliament or other decision-making bodies: issues must be discussed in a manner in which no one's point of view is ignored. One of the reasons for deliberation is to show that everyone's opinion is of value. Another reason for deliberation is to reach a decision based not only on the sum (or majority) of individual opinions, but on a group. consensus. In the following pages, you will read about 3 choices, each of which deals with the unemployment question differently, and thus offers a different policy option. A well-founded solution to unemployment in Hungary today must deal with each of these options. We will all find some of the choices to be advantageous, and some not. The task for the forum participants is to think and talk through all three choices, and then to develop a personal, group standpoint. In a sense our thoughts and words will dictate the direction we take in the future. In the course of deliberation we will not only attempt to establish common ground, but will practice civil discourse, and perhaps even develop a civic culture. Without such a civic culture, attempts at democratic development can hardly be more than cynical and naive.
"The state is an incompetent businessman" The economic bankruptcy of the previous regime proved that even a meticulously planned economy cannot replace the market. The government economic programs may have established a framework for the economic process, but, as funny as this may sound, an economy cannot be expected to "behave" in a logical or predictable manner. Only a functioning market can react to "unpredictability". It is in company offices and shops, not in ministries, that the decisions which get the economic wheels turning again are made. Of course we long-ago left the classic age of liberalism (18th-19th cent.) when the elemental institutions of capitalism such as banks, railways, stock markets and press agencies were established. A victorian Englishman would be very surprised today to see general suffrage, and a government which plays a role in social security, job creation, and the control of exchange rates. In the twentieth century the state has taken many new roles once handled by the private sector: children learn life's necessities in state schools, people are born and die in state hospitals, and ministries dictate economic regulations. But there is one thing the state is incapable of: managing the economy profitably. Only the private sector is capable of carrying out this task. Harvard University economics professor Jeffrey Sachs developed the concept of shock therapy, which has reshaped the Polish economy in the past few years. Says Sachs "In all of Eastern Europe, Poland began from the worst position, yet today it has the strongest economy in the region. In the former socialist state-run economies, only reforms encouraging the private sector can conceivably allow development. To do this, state property must be put in private hands. Tax cuts can also help improve the private economy. In Hungary the state still spends too much, and spends inefficiently. According to experts, companies still in state hands have 30- 50% over employment, that is to say, inner unemployment. Half of everyone's salary returns to the state purse through social security payments and taxation. With such burdens, entrepreneuerialism cannot be competitive. A dynamic economy would ensure that a large portion of the unemployed will find work, and will also increase the amount of money available for social programs." To summarize, those who support choice one believe that unemployment will recede automatically as the private sector grows. Jeffrey Sachs summarized the points of a program which would lead Hungary out of its current crisis and which in turn would reduce unemployment the following ways:
"People should be given chances- but they must control their own fate." It is not the responsibility of the state to take the unemployed by the hand, and lead them to a desk or a machine. As in any market, in the labor market "it takes two to tango." The unemployed worker himself must take steps to improve his situation. Also, people must get used to the fact that, as with every commodity, labor has a market value that can rise as easily as it can decrease. The state's role in the labor market should be to assist the private sector. For people to have any hope for the future, they should have access to loans, not handouts. Opposing Views
"Unemployment must not break out again." Choice one may have accurately defined the future direction of economic development, but we are far from the day when the private sector will soak up all the unemployed. No matter how much Hungarian unemployment differs from unemployment in industrialized countries, it is certain that in our transitional phase the state must play a large role (perhaps larger than in the west) in regulating the labor market. In the press we often see conflicting reports about the number of unemployed people in Hungary, but experts agree that many with jobs today are in danger of becoming unemployed tomorrow. State-run enterprises are burdened with 30-50% overemployment. Some of today's job-holders have survived two or three waves of downsizing in their companies. Many have survived the last few years by undergoing retraining, educating themselves, or because they already had unique skills which made them 'irreplaceable'. Because we cannot expect the long-term unemployed to find work in the near future, the goal now should be to keep those who are currently employed on the job, and to make sure young people don't begin their careers at the unemployment office. The following steps can ensure the stabilization of the unemployment rate, and its long-term decrease:
Protecting Employees In order to achieve the goals set out above better use must be made, of existing but scarce resources. Resources might be protected if the following recommendations were followed:
Female Employees Unemployment among women deserves particular attention. The fact that almost as many women seek full-time employment as men is the source of many social problems. Hungarian women, despite our high unemployment rates, work 18% more than the European average. Many family problems could be eased, and unemployment could be reduced, if women had the option of working part-time in such a way that their remaining income could be subsidized. Also, the wide-scale introduction of part-time employment is likely to be popular. Opposing Views
Long-term unemployment destroys human capital The first two choices are most attractive to those who have the money to invest, and the skills, knowledge, and (not least) the will to act to improve their futures. But the question arises, what do we do with the one-third of the unemployed who have little chance of being retrained - the unskilled workers who were the first to lose their jobs. During their unemployment any of the skills they might have may be lost. Many of them have given up all hope of finding work. They live off assistance and odd-jobs, and when they do turn up at the factory gate their unkempt appearance makes it unlikely that they will be hired. But the real danger lies in their not making it even to the factory gate, in the loss of their values, security, and hope. For them assistance, counseling, and retraining programs now available offer little. This is why they need programs in which employment offices work out local strategies with local economic actors to ease unemployment in addition to offering assistance and job-search services. Communal Work An unemployed Hungarian has a 20-40 times lower chance of landing a job in a year than an unemployed American. For many, unemployment is not a temporary phenomenon, but a permanent trap. Therefore, one expert has suggested that: "In the current situation we must employ the unemployed. We don't need to manufacture products - we should develop infrastructure instead. People would use their salaries to buy inexpensive Hungarian goods. Domestic production can satisfy most Hungarians' needs. This would take a great burden off the budget, as we would not need to pay unemployment assistance. The model we should follow is the American New Deal. In the 1930's the unemployment rate in the United States was 30%. As an effect of Roosevelt's economic policies real wages rose by 70%. This was due to the fact that people were not standing in soup kitchen lines, but working, building roads, dams, schools. Their incomes increased, they consumed, and the economy began to grow. How Much Assistance? Compared to equally or better developed countries, Hungary targets more money on assistance, retraining, and job creation. When measured against others, Hungary's support system seems generous, There are few other industrialized countries where the unemployed receive 70% of their last wages in benefits. The comparison can be misleading, though. In Hungary the unemployment benefit system is often a substitute for anti-poverty policies. Although the benefit system may seem to be beyond the country's economic means, it must be kept at a high level as market economics cannot be built when entire social strata are impoverished. Benefits may be insufficient to sustain a family, but they are at times an obstacle to employment. Many jobs do not pay as well as the benefit system does, and therefore employment opportunities are often passed up. The unemployed cannot be blamed for not taking such job 'opportunities' - this is as rational as any decision made by other players in the economy. Opposing Views
There are those who feel that the unemployment problem, as an economic and socio-political phenomenon, should not be addressed by the public. They feel that it should be more influenced by economic indicators than by the deliberation of a few citizens. It is true that specific economic strategies should not be finalized in citizens' forums, but we must be clear on just what it is we can and cannot expect from a market economy. The free market is not a self-sustaining, problem solving machine. Some of its critics claim that the free market does not necessarily lead to the development of respect for rights and broad political participation. As an example, Latin American dictators effectively presided over free markets, and respected private property. It may be that we cannot imagine a future without a free economy, but by the same token, the free market system can only be a part of what we imagine as tomorrow's Hungary. Many feel that as an economic dilemma, unemployment is too complicated an issue for the public. Others disagree, saying that in nuclear physics it was rarely the physicists who decided where to deploy nuclear weapons and reactors. That was a job for the political system, and public opinion formation is an integral part of the political process. Citizens should play their part in the formation of public policies, specifically in areas like unemployment. The three choices presented in this booklet each approach the definition of unemployment differently. Competing and even contradicting statements in the choices make it difficult for anyone to go through one argument and say "There's the answer!" It is the responsibility of the forum participants to examine and question the arguments in order to establish a common ground which may not reflect any one individual's views, but will be acceptable to the group as a whole. In this sense the forum is an experiment. With hard work and some luck the group can be witness to the fulfillment of the goal of democratic politics: the definition and recognition of the common good. The various choices present noble but conflicting values: entrepreneurial freedom, help for the disadvantaged, fairness, individual responsibility, open competition, clear thinking, efficiency, social responsibility, economic realism, and so on. The three choices are not three different stories, but the same story told from different points of view. Our job is to make the participants familiar with all the questions surrounding unemployment to enable them to judge the worth of various opinions. For many, the loss of a job comes as a shock. As many justifiably do not
claim responsibility for losing their job, they in turn do not take responsibility for
finding a new one. Some actually hope for the day when a wise leader will come and put an
end to this anarchy, so that everyone can make a living. Unfortunately, real life is this
simple in only two places: dictatorships and fairy tales. Public deliberation is necessary
to help us avoid finger pointing and grandiose promise-making, and instead to rationally
discuss our options. None but the citizenry can fulfill this role. || Contents || Introduction || Unemployment... || |
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Electronic Resource Centre for Human
Rights Education:
Critical Choices for Hungary