Thematic feature - unskilled workers

This article gives a brief overview of the industrial relations aspects of the topic of unskilled workers and unskilled work in Hungary, as of February 2005. It looks at: national definitions of unskilled workers or work; the number of unskilled workers and workers in unskilled jobs, and the extent of unskilled work; employment and unemployment among unskilled workers; the regulatory framework; trade union organisation among unskilled workers; pay and conditions; recent initiatives to improve the situation of unskilled workers; and the views of trade unions and employers' organisations on the issue and its implications for collective bargaining.

In recent years, labour market developments have altered the demand for labour. Increasingly, employers are looking for adaptable workers, with more 'transversal' and 'relational' competences. The nature of skills required to be considered efficient in a job has thus evolved. In this situation, there is a growing risk of exclusion among unemployed workers whose profiles do not match the job characteristics needed, while the low-skilled or unskilled workforce is more at risk of unemployment.

In this context, in February 2005 the EIRO national centres were asked, in response to a questionnaire, to give a brief overview of the industrial relations aspects of the topic of unskilled workers. The following distinctions are used, where applicable:

(a) an unskilled job is a job which requires, for its proper execution, hardly any formal education and/or training and/or experience;

(b) a worker in an unskilled job is a worker doing such a job, irrespective of their level of qualifications or competences (especially under conditions of high unemployment, a significant share of those occupying unskilled jobs may be 'overeducated' for them, or 'underemployed'); and

(c) an unskilled worker is someone who has only the lowest level of qualifications or education (however defined).

The questionnaire examined: national definitions of unskilled workers or work, including those used or provided in laws, statistics or collective agreements; figures or estimates on the number of unskilled workers and workers in unskilled jobs, and the extent of unskilled work; employment and unemployment among unskilled workers; the regulatory framework, including any specific laws or collective agreements, and trade union organisation among unskilled workers; the pay and conditions of unskilled workers and workers in unskilled jobs, or for unskilled jobs; any recent initiatives to improve the situation of unskilled workers; and the views of trade unions and employers' organisations on the issue and its implications for collective bargaining. The Hungarian responses are set out below (along with the questions asked).

Definitions and extent

(a) Please provide a definition of unskilled workers or work (see distinctions above) in your country. Are there any definitions provided in laws, statistics or collective agreements?

The legal definition of unskilled worker is set by the 'intersectoral job classification system', enacted by ministerial decree No. 6/1992 (VI.27 MüM). The scope of the decree embraces all workplaces under the jurisdiction of the Labour Code (Act XXII of 1992), ie the so-called competitive sphere: the public utility, manufacturing and service sectors, regardless whether a given undertaking is state owned or privately owned. According to this regulation, the categories of unskilled workers are defined by the requirements of the job. The regulation distinguishes between unskilled worker and semi-skilled worker:

  • an 'unskilled worker' ('segédmunkás') is a person whose job needs a maximum of one month's on-the-job training, and the job does not require a formal vocational certification. Generally, a newly-hired employee may begin work in such a job immediately, without any training; and
  • a 'semi-skilled worker' ('betanított munkás') is a person whose job needs more than one mont'sh on-the-job training, but the job does not require a formal vocational certification.

The decree lays down two subcategories for each manual work definition: one with 'regular' working conditions and one with and unfavourable physical workload or extreme conditions.

The decree authorises sectoral and company-level collective agreements to establish different or more detailed job categories, but at the same time they must determine the equivalent ones defined by the decree. Thus the regulation, in practice, is the basis for collective agreements in defining job categories and related wage schemes.

For statistical purposes, the 'elementary occupations' category of the International Standard Classification of Occupations ISCO 88 is also used. Nonetheless, most statistics include breakdowns according to educational attainment only. In general, employees with education at or below the eighth grade are considered unskilled workers.

(b) Are there any figures or estimates available on the number of unskilled workers and workers in unskilled jobs, and the extent of unskilled work. How have these figures changed in recent years - have changing skill needs or improvements in education/training systems led to a reduction in the numbers of unskilled jobs, unskilled workers and workers in unskilled jobs? Please break all figures down by gender where possible.

The most accurate data on the number of unskilled workers (employed in elementary occupations) are provided by the 2001 census. Altogether, 256,000 people were recorded in this category, which was 6.9% of the employed population. A slightly higher share is estimated by the Labour Force Survey conducted by the Hungarian Central Statistical Office (Központi Statisztikai Hivatal, KSH). Time series data from the survey give a more detailed picture of the dynamics and sex distribution - see table 1

Table 1. Number of people employed in elementary occupations, and as % of total employment, 1998-2004
Year Men Women Both sexes
Number % Number % Number %
1998 137,500 6.8 172,900 10.3 310,400 8.4
2000 138,500 6.6 161,500 9.6 300,000 7.7
2002 122,300 5.8 162,500 9.2 284,800 7.4
2004 129,600 6.1 166,700 9.3 296,300 7.5

Source: KSH.

The trend towards a slight decrease in the number of people in elementary occupations might be attributable: on the one hand to the ongoing shift to more value-added manufacturing processes and the resulting increased skill needs of companies; and on the other hand to changes in the composition of the workforce. Long-term data series show that the formal educational attainment of the population has increased faster than the skill needs of the economy; according to the 1980 census, 93.7% of those employed in elementary occupations had finished only the eight grades of primary education or had an even shorter education, a proportion that fell to 85.1% in 1990 and 65.4% in 2001. Furthermore, as the low-educated are over-represented among the unemployed, changes in the government’s labour market policy (for instance, recent changes in subsidised job schemes) may also cause short-term fluctuation in the numbers of employed unskilled workers.

(c) Please provide figures on employment and unemployment rates for unskilled workers, compared with higher-skilled groups. Have unskilled workers/workers in unskilled jobs been particularly affected by industrial and company restructuring? Have new jobs created in recent years been filled by unskilled workers? Please break all figures down by gender where possible.

The unskilled have always been over-represented among the unemployed. The Labour Force Survey registers whether the unemployed had a previous job, and if so, what sort of position they had held last. The share of jobless respondents who had previously been in elementary occupations was 16.9% in 1998, 17.1% in 2000 and 17.7% in 2003. It is well known that the 'transition recession' in the early 1990s hit low-skilled older workers hardest. Many of them could not find a new job and have withdrawn from the labour market completely. These people do not qualify as unemployed, and there is no data available on the previous jobs of the 'inactive', therefore there is no data on the employment level of unskilled workers either.

On the other hand, many new unskilled assembly jobs have been created by multinational enterprises, especially in manufacturing industries (for instance at car component and electronics manufacturers). Although statistics are not available, case studies have found that these new factories typically employ large numbers of female employees in unskilled jobs, which certainly contributes to the maintenance of the traditional pattern of a higher share of unskilled workers among women in Hungary. The upsurge in the construction industry in the second half of 1990s provided jobs to male unskilled employees.

Regulation and conditions

(a) Is there a specific regulatory framework in your country concerning unskilled workers and workers in unskilled jobs (however defined)? Are there specific laws or collective agreements? Are there specific trade union organisations for them, or are they represented in 'normal' union structures. Have there been any changes in these area reflecting the changes referred to in question (b) under 'Definitions and extent' above?

(b) Please provide any figures available for the pay of unskilled workers and workers in unskilled jobs, or for unskilled jobs, and the relationship of this pay with the average or with higher-skilled groups. Do collective agreements contain specific pay grades for unskilled workers, or workers in unskilled jobs? Please break all figures down by gender where possible.

Although there are no specific regulations on the wages of unskilled workers in the competitive sector, the annual negotiations on minimum wages in the tripartite social dialogue body, the National Interest Reconciliation Council (Országos Érdekegyeztető Tanács, OÉT) (HU0502105F), has a major impact on their wages. The radical increase of the minimum wage in 2000-1 considerably raised the wages of unskilled workers. Nonetheless, this also contributed to the deteriorating employment capacity of industries dominated by low-wage, low-skilled jobs as well as to the chances of re-employment of unskilled unemployed people.

Some sectoral and company-level collective agreements include stipulations on the annual wage raise, and these so-called 'wage agreements' often determine sectoral or company minimum wages. For instance, 7% of the wage agreements concluded in the first six months of 2004 contained stipulations on the company minimum wage, covering 137,000 employees (HU0501105F). As of 1 January 2004, the monthly national minimum wage was raised to HUF 53,000 while the abovementioned collective wage agreements set company minimum wages at HUF 55,135 on average.

Although the original aim of ministerial decree No. 6/1992 (VI.27 MüM) (see above under 'Definitions and extent') was to establish the legal framework for compulsory wage tariff regulations or collective agreements, sectoral and company agreements in practice very rarely stipulate wage tariff systems covering all the employees of the given sector or company. For instance, the 2004 wage tariff agreements covered only 114,000 employees (HU0501105F).

In the public sector, public service employees’ salaries are set by law, including the wages of unskilled workers.

While the basic wages correspond the skill level on average, the actual pay for unskilled or semi-skilled female workers is sometimes higher than for skilled workers - see table 2 below. Arguably, this is basically due to the growing demand of multinational firms for unskilled work, most typically in assembly plants and shopping malls, while the majority of skilled jobs are at other companies or public sector employers, which can not afford comparable wages. This fact also explains the migration of workers from skilled jobs into unskilled ones, and the statistics show a growing share of workers in elementary jobs with secondary education, not rarely with vocational qualifications in other industries or public services. Another possible reason for compressed wage differentials could be that in many micro and small enterprises skilled workers are reportedly employed at the minimum wage and receive additional income informally, evading taxation and social contribution payments.

Table 2. Gross monthly basic and total wages of manual workers, by skill and sex, in HUF and as a % of wages of skilled workers, competitive sector, 2002-3
. 2002 2003
Basic wages (HUF) % of skilled workers Total wages (HUF) % of skilled workers Basic wages (HUF) % of skilled workers Total wages (HUF) % of skilled workers
Unskilled workers Women 55,338 91,3 63,529 90,0 57,576 91,9 65,818 88,6
Men 57,990 78,4 67,569 71,9 60,364 76,9 71,979 70,3
Semi-skilled workers Women 59,466 98,1 74,053 104,9 62,043 99,0 80,508 108,3
Men 65,987 89,2 87,281 92,9 69,599 88,7 95,028 92,8
Skilled workers Women 60,588 100.0 70,592 100.0 62,676 100.0 74,326 100.0
Men 73,952 100.0 93,953 100.0 78,484 100.0 102,412 100.0

Source: Individual wage survey, National Employment Office (Foglalkoztatási Hivatal, FH).

(c) Are there any differences between unskilled workers/workers in unskilled jobs and higher-skilled groups in terms of access to other benefits, social security, pensions, etc? Please break all figures down by gender where possible.

Unskilled workers’ access to other benefits, social security and pensions is generally the same as for other workers of the given company.

Actions and views/comments

(a) Please describe any recent initiatives taken jointly or separately by companies, public authorities (national or local) or the social partners (eg collective agreements) to address the situation and improve the situation of unskilled workers in terms of pay, working conditions, training, employability, unemployment etc.

(b) Please summarise the views of trade unions and employers’ organisations on the issue and its implications for collective bargaining.

The relatively small (or sometimes even negative) earnings gap between skilled and unskilled workers is partly a result of the huge increase in the minimum wage in 2000-1. The compressed wage scales within the companies inspired both company managers and trade unions to do their best in order to re-establish traditional wage differentials among employees based on skill and/or seniority; as a consequence, in many workplaces low-paid workers received no raise or only a small one in the following years as both managements and union negotiators preferred to increase the wages of skilled worker. (HU0401103F). Similarly, during the 2004 bargaining round on wage recommendations for 2005 in the national tripartite body (HU0501102N), both unions and the government recommended companies to give more remuneration for skilled workers in order to increase the social status of employees with vocational training. These views are basically in line with employers’ long-held concerns relating to skill shortages.

The rapid growth of wages, especially of the minimum wage, makes unskilled work increasingly uncompetitive in Hungary. The coming accession of Romania and Bulgaria, with considerably lower wage levels, to the EU may accelerate the relocation of low-skilled jobs from Hungary. Trade unions’ wage strategies, which concentrate on pay increases and harmonisation of the Hungarian wage level with the European average, also contribute to the flight of low-skilled jobs. Arguably, this union strategy is partly due to the composition of union membership. According to the Labour Force Survey, in 2004 16.9% of employees were trade union members while the union density among workers in elementary occupations was only 8.6% (HU0501103F). Employers seem to be more divided on wage policies. Important groups of employers, especially in the small and medium-sized enterprise sector and in work-intensive manufacturing sectors, are against any major increase in the minimum wage level, fearing that it would outprice them. As for government policies, on the one hand there are special programmes to help older long-term unemployed people or people with a low education, especially among the Roma minority, return to the labour market. On the other hand, the current focus is on facilitating the upgrading of Hungarian manufacturing industries to more skill-intensive production, while fostering an increase of the educational level through the improvement of the school system and lifelong learning programmes. (László Neumann and András Tóth, Institute of Political Science, Hungarian Academy of Sciences)

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