Hungary: Skills shortages a major challenge for employers

A lack of skilled workers is threatening Hungary’s competitiveness and longer-term economic development, argue employers. Many positions created by the government with EU funding go unfilled, although recent statistics indicate a decreased mismatch between job-seekers and available vacancies. The social partners and the government agree more should be done to improve skills, although priorities differ.

Mismatches and shortages

According to the National Employment Service, there were 339,000 registered job-seekers in Hungary at the end of August 2015, 15.6% down on the previous year. However, more than half of them were unqualified, while only 6% had a higher education. At the same time, employers reported 50,100 vacancies, 53.5% fewer than the previous year.

Employers continue to report difficulties in finding enough workers with the appropriate skills. In a Talent Shortage Survey by recruitment consultants Manpower in mid-2015, 47% of Hungarian employers said they had unfilled vacancies because of a lack of candidates with the right skills (6MB PDF). This is the highest figure since 2010, and shows an increase of two percentage points on the previous year. Workers most difficult to find include accounting and personnel staff, IT personnel, supervisors, doctors, machine operators, sales representatives and restaurant and hotel staff.

The level of recruitment difficulties varies by sector. For example, in the ICT sector, there have been more than 10,000 positions unfilled for decades. This sector, providing 10%–12% of Hungarian GDP, has been expanding by 4.5% annually since the economic crisis, according to the Central Statistics Bureau (KSH), and the labour supply has not been able to keep up.

Hospitals and healthcare institutions have experienced a severe shortage of doctors and nurses for some years. The government decree on post-secondary vocational training in healthcare identifies several ‘shortage occupations’ (where additional financial sources will be provided for both students and vocational education institutions in 2016). These occupations cover infant care and paediatrics, forensic medicine, oxyology, traumatology, radiology, psychiatry, radiotherapy, pulmonology, infectology, pathology, neurology and laboratory diagnostics.

Migration and training

Recruitment difficulties are caused by a complex set of factors. Most experts, however, agree that talented, skilled people tend to look for employment abroad because wages in Hungary are much lower than in other EU countries. Indeed, by the end of 2015, there will be more than 600,000 Hungarians living and working abroad. In 2014, Hungarians working abroad sent home a total of USD 4.5 billion (about €4.2 billion as at 30 November 2015).

All parties agree the mass migration of skilled labour is a loss for the national economy and a sign of declining competitiveness. A country and its employers can rarely recover the cost of educating and training people who migrate.

The Ministry for National Economy (NGM) has launched the ‘Come home, youth’ scheme which helps young Hungarians to return by providing them with housing and relocation subsidies, and an appropriate job. The government is also committed to supporting Hungarian enterprises and has set aside HUF 18 billion (about €58 million) for enterprises that generate new jobs.

Experts also argue that skills shortages can be traced back to poor training. Employers have repeatedly complained that recent graduate recruits do not have the technical skills they require.

The reform of Hungary's vocational education and training (VET) system has already started. The government has introduced a dual classroom/work placement system of vocational training, and intends to expand it by increasing the number of companies (mostly small and medium-sized enterprises) where practical training is provided. From 2016, the structure of secondary-level education will undergo a complete transformation. Students at vocational secondary schools (szakközépiskola) will be able to acquire a ‘certificate of trade’ within three years and can also study for GCSEs (General Certificates of Secondary Education).

Trade unions' stance

National trade union confederations say skills shortages are caused by intolerably low wages. They would therefore like to see an increase in public sector wages and the minimum wage. Trade unions agree that the output of the secondary VET system is unsatisfactory; however, they feel that the planned restructuring will not lead to an improvement in the quality of training. They also consider that the ‘Come home, youth’ programme will not appeal to highly qualified Hungarians.

However, trade unions are tackling skills shortages in practice by making jobs more attractive. For example, in October 2015 the Trade Union of Railway Workers (VDSS) signed an agreement with the Hungarian railways company, MÁV Zrt. to increase the maximum possible amount of annual overtime (in Hungarian) from 231 hours to 300, and agreeing a bonus (215% of regular daily wages) for voluntary overtime.

Employers’ stance

The Confederation of Hungarian Employers and Industrialists (MGYOSZ) say businesses’ low profit margins stop them from increasing wages enough to stop or reverse the workers’ economic migration. Like the unions, MGYOSZ is also convinced that restricting young graduates’ mobility or launching programmes to lure Hungarian workers back home will not be sufficient to solve the shortage of skilled labour. The consensus among employer organisations is that labour shortages can be offset only by increasing the supply of skilled people coming out of Hungary's education system, especially at secondary level.

MGYOSZ emphasises the need to improve the quality of education at all levels and argues that it is vital to integrate people with disabilities into the labour market. Dual vocational training needs to be fully implemented, while education and training in general should receive much more attention. The untapped, so-called 'additional' labour sources should be better used by making support for repatriation a priority, expanding the employment of the Roma significantly, raising the employment rate among younger and older workers, and supporting selective labour migration.

In the short term, employers deploy various measures to respond to the shortages they experience. Sometimes companies start their own in-company vocational training courses. More and more employers are also offering benefits such as cafeterias, paid overtime and bonuses to attract workers. Sometimes, the skills shortage is so pressing that employers will dispense with a requirement for formal qualifications and accept practical experience.

Conclusions

A skills shortage is partly a matter of perspective. Employers who are unable to recruit the workers they want for the wage they are willing to pay may conclude there is an overall labour shortage. If the workers they do hire lack the range of skills and competencies required, their attention shifts to the quality and responsiveness of education and training systems. They seldom consider whether their job offers are attractive enough to a sufficient number of qualified people. Low wages, demanding working conditions, long and anti-social working hours, a lack of good career prospects, as well as long and expensive commuting are all factors that encourage job-seekers to hold out for the best possible job they can find, and this exacerbates the problem. 

The relationship between successful individual recruitment and the wider economic, social and educational environment is extremely complex. Concerted action is needed by all relevant parties, bearing in mind that while the skills employers require evolve with the economy, so too do the expectations of skilled workers who have access to the enlarged European and even global labour market. 

The government has made efforts to ease the problem. Although significant changes have been made in public education and many more are planned in the VET system, it is still open to question whether future school-leavers’ skills will better match the requirements of the jobs they want. It can be argued that the government spends too little on education and training, and is spending less and less in proportion to GDP.

Skills shortages could be also mitigated by active labour market measures, but the possibilities here seem to be fairly limited. The government continues to give preference to public works programmes as a means of helping the long-term unemployed, and these mainly recruit people with few or no skills and competencies. These programmes are run on a mass scale, leaving only limited resources to ease other labour market imbalances. 

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