'Club of Economics in Miskolc' TMP Vol. 7., Nr. 2., pp. 3-12. 2011. Changes in the Regional Differences of the Labor Market in Hungary During the Millennium Change, Especially the Employment Impact of Financial Crisis in the First Decade of the 21th Century ZSUZSANNA DABASI HALÁSZ, Ph.D. ASSOCIATE PROFESSOR e-mail: [email protected] SUMMARY The paper attempts to reveal the causes of labour market inequalities in Hungary after the system change, with special regard to the changes caused by the financial crisis. The current labour market trends were determined by the situation emerged by the time of the regime change, as I will discuss it later. Besides general employment relations, it focuses on changes in social positions and on migration processes and examines what kind of possibilities the crisis and the period afterwards may offer for the development of lagging regions. Keywords: labour market, employment conditions, crisis, social situation, lagging regions. Journal of Economic Literature (JEL) code: R58, J42, J48. According to Nemes Nagy and Németh, regional changes facilitating social renewal has caused major harm differences in the Hungarian labour market have been recently because outdated thinking and the lack of increasing ever since the regime change in 1989. The appropriate regulatory instruments harm nature and the new, more fragmented spatial structure of employment base necessary for our life (Nováky 2011). The conditions took shape in the early to mid-nineties. Since researcher's responsibilities are not only to determine the then, only small quantitative movements have been facts and relationships, but to seek for constructive observed (Nemes Nagy and Németh 2005). I agree only solutions, and to aid applied economic policy. This is not with the first part of this statement, as economic necessarily a political attitude, even though it is consolidation was followed by the extreme intensification indisputable that the economic analysis of public policy of regional and territorial disparities as well, which has includes the use of substantive – normative and positive – not been modified significantly by the 60 months so far theories, but on the other hand, it requires a specific of the economic crisis. The subsequent reversal of labour- theory-building strategy (Csontos 1997). market differences seems to have become persistent. The study reviews the causes of regional labour Since the initial period of economic transformation up to market disparities, looking back to the time of regime present, significant regional differences emerged in the change, and analyses the effect of the 2008 financial rate of the unemployed and in the standards of crisis on regional employment. employment. The explanation of this could contribute to the development of future economic policy. DEVELOPMENT OF DISPARITIES IN The crisis is a sign that current driving forces of development are wearing out, and the former mentality REGIONAL LABOUR MARKET, ITS can no longer be successful. The crisis highlights that HERITAGE AND EXPLANATION new driving forces should be found and a different mentality is necessary to build an acceptable future for the major part of the society. Although the crisis itself is a Unemployment was an unknown concept for the socialist negative process, it incorporates the possibility of future economy; it was considered as an example of the faults of recovery and the hope of a new beginning. The lack of the capitalist system. Economists of the regime change, 3 Zsuzsanna Dabasi Halász however, proved that corporate management, not 18.3%. Although the differences among the counties are requiring economic efficiency, employed “space fillers”. clearly not negligible, within this, there are also There are only estimations about the rates of significant differences in the employment situation. The unemployment inside the gates of the socialist labour market situation can be examined territorially by enterprises. According to some surveys, the same several aspects: by regions, by counties, by micoregions production level could have been achieved with 80% of and by settlements. Differences in the labour market are the applied workforce (Dövényi and Tolnai 1993). This present not only at the county and regional level, but also may not clearly imply a hidden unemployment of 20%, at sub-regional and district level. In March 1992, the Encs but explains the fast emerging employment crisis. As far district had the highest unemployment of 27-28% (this as I am aware, however, estimates do not mention was approximately 7 percentage points higher than the whether the socialist labour market had any hidden county average(Aradi 1992). This decreased to 18.99% unemployment of regionally varying degree. by 2002 (which, however, was still more than a 10- In contrast, even in summer of 1990, Borsod-Abaúj- percentage-point deviation from the average), and due to Zemplén County provided one-fifth of the total the crisis, it rose to 26.99% again in 2010. Disparities unemployed of Hungary. The extremism is shown by the between settlement types and settlements show even fact that, while in 1993 Nógrád County had an average greater differences (Fazekas 2002). The economic policy unemployment rate of 21.5%, Győr-Moson-Sopron of the past twenty years has not been able to reduce these County had only 8.2% over the same period: the differences. As an effect of the economic conjuncture difference is 13.3 percentage points. The gap continued to between 2000-2004, territorial disparities kept widen by 2008, when the difference between the lowest strengthening, which can be considered as a Hungarian and highest unemployment rate of the counties was speciality. Source: own compilation based on the repository of HAS, Institute of Economics1 Figure 1. Employment rate in the labour market districts of Hungary in 1990 and 2001 (The 5-quantiles are called) 1 Resource map is a software developed by HAS, IoE, www.econ.core.hu 4 Changes in the Regional Differences of the Labor Market in Hungary During the Millennium Change In developed market economies, regional differences in employed in electricity, gas and heat supply remained labour market are decreasing through the adjustment unchanged. The crisis in heavy industry affected most processes. In our country, however, differences are large severely the labour market of the north-eastern regions and became permanent and the developed order has (Schwertner 2002). In Borsod, Baranya and Nógrád remained unchanged (Fazekas 1994). The official territories, formerly regarded as great centres of socialist economic policy has kept treating the reduction of industry, higher unemployment and lower employment regional differences as a priority in its communications, became constant. but its actions have not been effective enough and its The different educational level of the population has tools have not been synergistic. The causes of regional also been held responsible for the development of differences are only to be examined as a process, because regional disparities. The educational level of the more and more new factors were added through the population at the regime change was lower than the different periods. This did not imply that the causes of the national average in the eastern and southern counties and post-1989 situation ceased, but it implies that based on in the counties of the Great Plains, as it is illustrated in them, the subsequent disadvantages kept aggravating. the following figure. The stability in regional discrepancies of unemployment and in the position of regions suggests that the emerging 40 differences do not come from short-term, ad hoc reasons, 35 but from stable indicators that have a long-term effect. 30 This implies that long-term treatment may become less than 8 possible by identifying the causes. 25 class 20 vocational percent training 15 CHANGES IN THE matura EXPLANATORY CRITERIA OF THE 10 5 Bsc Msc DEVELOPMENT OF REGIONAL 0 LABOUR MARKET DIFFERENCES Dél Alföld Dél Dunántúl Észak Alföld Közép DunántúlNyugat Dunántúl Following the change of regime in the early nineties, as Közép Magyarország Észak Magyarország seen, higher unemployment and lower employment 2 emerged in the labour market of certain geographical Source: own compilation based on HCSO data areas. The reasons for this include the developed Figure 2. Number and proportion of economically active differences in the industrial structure of socialism, population by education level differences in educational attainment and differences in the infrastructure. The regional differences in the While in 1910, 18% of the Hungarian population did not unemployment of the Central and Eastern European attend school – i.e. they were illiterate – in 1990, this countries was attributed mostly to the concentration of figure was only 2%, and at the very end of the century, it large socialist industrial enterprises. The change to a became less than 1%. By 1994, the rate of high school market economy brought along the collapse of the graduates increased from 2% to 20%, and the rate of socialist economic structure and the transformation of higher education graduates increased from 1% to 8%. The labour market demand, to which the slowly responding, rate of high school graduates in the 18 years and older inflexible supply could not respond for a long time . population increased from 4% to 32% between 1920 and Between 1990 and 1997, the largest decrease in the 1994. Although the schooling of worker-peasant-born, number of the employed belonged to agriculture. This rural children had a major role in propaganda in the sector lost one-third of its workforce, compared to the socialist system, and the people's colleges and the average decrease of 11%. This can partially be explained scholarship system actually improved the education level by the organizational transformation of the sector, by the of the country's population, some segregation has begun loss of the sector’s traditional external markets, by the in the last 20 years. The hegemony of the capital is decline in domestic consumption and by the sharpening undisputed in the field of higher education institutes.