Chapter

Chapter 7B. Hungary

Editor(s):
Kalpana Kochhar, Sonali Jain-Chandra, and Monique Newiak
Published Date:
February 2017
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Author(s)
Eva Jenkner

Hungarian women are more educated than men on average and do not face discriminatory legal restrictions when it comes to owning property, starting businesses, or participating in the labor force (Gonzales and others 2015). Also, as in most of Europe, proportionally more women than men hold tertiary degrees.

Despite these relative advantages, women in Hungary are significantly behind others in Europe when it comes to employment and earnings, as well as representation in decision-making bodies in business and politics (Figure 7.10). For example, only 12 percent of board members of the largest companies are women, compared with a European Union (EU) average of 20 percent; and Hungary’s share of female lawmakers (at 10 percent) is the lowest in the EU.1

Figure 7.10.Hungary: Gender Gaps in Education, Business, and Politics

Notes: Data labels use International Organization for Standardization (ISO) country codes. PISA = Programme for International Student Assessment.

Female labor force participation in Hungary is below EU and Organisation for Economic Co-operation and Development (OECD) averages and also lags participation rates in peer countries in Eastern Europe. Across the EU, the impact of parenthood on labor market participation is very different for women and men—only about two-thirds of women with children under age 12 work, as opposed to more than 90 percent of men (European Commission [EC] 2015). However, even against this backdrop, employment of mothers with small children is extremely low in Hungary. For instance, barely 10 percent of mothers with children under age three were employed in 2007 (OECD 2011a; Figure 7.11).

Figure 7.11.Maternal Employment Rates by Age of Youngest Child, 2007

(Percent)

Source: Organisation for Economic Co-operation and Development (OECD) 2011a.

Note: OECD figure is average of 26 member countries. Data labels use International Organization for Standardization (ISO) country codes.

In addition—unlike in most of Europe—Hungarian women have been losing ground in recent years. In politics, women in Hungary have been practically shut out of the government: the share of women among government ministers dropped to zero between 2009 and 2012 and again at the middle of 2014 (EC 2014a). In the workplace, Hungary has been one of only a few countries where the gap in earnings between women and men went up (based on various metrics) between 2009 and 2012 (Figure 7.12). Hungarian households defied the almost universal European trend toward greater earnings equality by becoming more reliant on male sole-income earners between 2007 and 2010 (EC 2014b).

Figure 7.12.Gender Gaps in Earnings in Hungary

(Difference between 2009 and 2012, percent)

Sources: Eurostat; Organisation for Economic Co-operation and Development.

Notes: The gender pay gap (unadjusted) represents the difference between average gross hourly earnings of male paid employees and of female paid employees as a percentage of average gross hourly earnings of male paid employees. The gender wage gap (unadjusted) is measured as the difference between male and female median earnings expressed as a percentage of male median earnings.

These trends are worrisome, including in light of the fact that increasing female participation in the labor force is essential to promoting long-term growth in Hungary. With an aging population and low fertility rates, Hungary faces the prospect of a shrinking labor force—and thus reduced economic growth potential—in coming decades unless a greater share of women enters and stays in the workforce.

Women and the Labor Market: Explained and Unexplained Factors

Although the female labor force participation rate picked up over the past decade, this aggregate trend masks important differences across education levels and age groups. Analyzing trends in participation rates for each level of educational attainment separately shows that, between 2000 and 2013, the rate increased only among women with a primary education (Figure 7.13). In contrast, the labor force participation rate of women with tertiary or secondary degrees declined overall. In terms of age groups, participation rose most significantly in older cohorts (between ages 55 and 64), while the participation of women under age 24 trended down.

Figure 7.13.Trends in Hungarian Female Labor Force Participation, 2000–13

Figure 7.14 helps explain how the headline participation rate improved while important subgroups of the female workforce actually decided to participate less. It shows that, during 2008–13, the overall increase of 2.8 percentage points in the female labor force participation rate was driven primarily by the growing share of women with higher education among the working age population (or “demographics”). Young entrants to the female labor force are better educated, on average, than cohorts that left to retire. As the likelihood of working increases with the level of education more generally, this demographic shift provided the most significant boost to the aggregate labor force participation rate—despite the apparent paradox that the share of highly educated women taking up employment declined over those years.

Figure 7.14.Drivers of Change in Hungarian Female Labor Force Participation

(Decomposition of the change in participation between 2008 and 2013 by education level, controlling for changes in labor force composition)

Sources: Hungarian Statistical Institute; and IMF staff calculations.

The decomposition of factors underlying recent trends in female labor force participation indicates that the impact of recent activation policies has been uneven. Specifically, activation policies seem to have induced a significant increase in participation among women with a primary education or less: whereas the share of women with a primary education in the female labor force decreased substantially, their participation rate went up significantly, possibly induced by measures such as tightened access to social benefits and participation requirements in the public works program. At the other end of the spectrum, the participation rate of women with higher education decreased. While more research is needed, this may call into question the efficacy of activation policies aimed at the higher end of the income spectrum, including tax incentives.

What is Holding Women Back?

A number of policies can affect women’s participation in the labor market. Common obstacles to female labor force participation in both advanced and emerging market economies include financial incentives inherent in the tax system, lack of flexible work options, lack of affordable childcare options, and poorly designed parental leave policies. For example, women are found to be more responsive to financial incentives than men in their labor supply decisions (OECD 2011b). As a result, the high second-earner tax wedge in tax systems that are based on family income (instead of individual income) can act as a strong deterrent for women to enter the labor market (Jaumotte 2003).

In Hungary, disincentives to work predominantly arise from the design of parental leave policies and a shortage of affordable childcare; these primarily affect mothers. The Hungarian tax system works on an individual basis and is therefore relatively neutral in its impact on female labor force participation (OECD 2014). In addition, there is a tax reduction for employers that reemploy mothers of small children under the Job Protection Act,2 and the revised labor code offers more flexible employment options. However, a number of obstacles to female labor force participation are inherent in the design of family policies and practices in the workplace (Figure 7.15).

Figure 7.15.What Is Holding Hungarian Women Back?

Note: Data labels use International Organization for Standardization (ISO) country codes.

  • Parental leave—Paid leave policies are generally found to boost female labor force participation, but extended leave periods beyond 24 months tend to have a negative impact, including by weakening mothers’ attachments to the labor market and putting them at a disadvantage from a prospective employer’s point of view (OECD 2012; EC 2014b). Evidence shows that long periods of parental leave are also associated with a wider pay gap (Arulampalam, Booth, and Bryan 2007). In Hungary, parents can take up to three years of leave, and the overwhelming share of caregivers are women (Korintus 2014). Moreover, benefits are tilted toward mothers of young children staying at home: maternity leave and the insurance-based childcare benefit known as “GYED” can be taken by mothers only until the child’s first birthday, and a parent receiving childcare benefits cannot work until the child’s first birthday.3

  • Extended parental leave—Options tend to coincide with low availability of formal childcare, severely constraining women’s ability to take up paid employment outside the house (OECD 2012; Blau and Kahn 2013). This phenomenon is especially prevalent in Hungary: more than 70 percent of children below age three are cared for only by their parents, representing the second-highest prevalence in the EU (Eurostat 2014).4 At the same time, there is a significant shortage of affordable childcare facilities for children under age three (EC 2014a).

  • Job flexibility—Job flexibility, including the availability of temporary parttime employment, can have a strong positive impact on female labor force participation (OECD 2012). Although the Hungarian labor code promotes flexibility in theory, workplace practices still seem to lag behind, with workers reporting to have little control over their hours. Also, few women take advantage of part-time work opportunities to stay more connected to the labor market while their children are small; Hungary has one of the lowest rates of part-time employment in the EU.5

There are also obstacles to the employment of older women. Their activity rates are constrained by domestic obligations: apart from grandchildren, they often care for sick elderly relatives in light of the limited availability of long-term care. Also—in contrast to highly successful efforts to roll back early retirement schemes in general—a new early retirement program for women was established in 2011.

Honing in on the Pay Gap

The large unexplained component of the gender pay gap in Hungary points to the presence of biases against women in the workplace. Throughout the EU and OECD countries, women tend to earn only 84 cents on each euro earned by men (EC 2014a). Up to a degree, differences in pay between men and women can be explained by differences in occupations, experience, education, and hours worked; with education almost always reducing the pay gap in favor of women. For example, as Figure 7.16 illustrates, the large share of women employed only part time in the Netherlands or Germany explains a significant part of the pay gap in these countries. However, the large disparity in earnings that cannot be explained illustrates a persistent bias against women (Duflo 2012). Although the absolute level of Hungary’s gender pay gap is low in cross-country comparison, it has the second highest unexplained component in the OECD.

Figure 7.16.The Large Unexplained Component of the Pay Gap in Hungary

(Percent)

Source: Organisation for Economic Co-operation and Development 2012.

Note: Countries are arranged from left to right in descending order of the proportion of the unexplained gender pay gap. Data labels use International Organization for Standardization (ISO) country codes.

Surveys confirm that traditional views on gender roles are still very much espoused in Hungary:

  • A woman’s place—Along with other European countries, such as Germany or Poland, Hungary espouses a traditional view of gender roles: more than half of Hungarian parents with children under 15 agree or strongly agree that “women should be prepared to cut down on paid work for the sake of the family” (European Social Survey 2010). As a reflection of unequal expectations on housework and childcare, Hungarian women do more than twice as much unpaid work as men (Miranda 2011).

  • Unequal expectations for girls and boys—Also, there is a significant gap between parents’ expectations for boys and girls, with more than half of male students expected to be working in science, technology, engineering, and mathematics (STEM) occupations versus less than a fifth of girls (OECD 2015; Figure 7.17).6 Although the share for girls is relatively high in absolute terms, the gap in expectations can undermine girls’ confidence vis-à-vis their male peers and exacerbate their relatively weaker performance in STEM subjects.

Figure 7.17.Parents’ Expectations for Their Children’s Careers

(Percentage of students whose parents expect them to work in STEM occupations)

Source: Organisation for Economic Co-operation and Development 2015.

Notes: All gender differences are statistically significant. STEM = science, technology, engineering, and mathematics. Countries and economies are ranked in descending order of percentage of boys whose parents expect that they will work in STEM occupations when they are 30 years old.

Attitudes and behaviors are drivers of policymaking (Kamerman and Moss 2009; Lewis 2009), but they can also reinforce and permeate gender inequities even where policy changes open a window of opportunity. This is reflected in low take-up rates for paternity leave, for instance, and in the unequal burden in unpaid work and childcare responsibilities that continues to hold back women at the workplace (Moss 2014).

Implications for Growth

Improvements in gender equality can affect growth outcomes through three main channels: labor, human capital, and total factor productivity.7 First, traditional gender roles and women’s disproportionate share of domestic unpaid work hamper their ability to participate in paid labor (Miranda 2011). This constrains their productivity and the size of the active labor force. Second, discrimination against women and girls can affect human capital accumulation: women may have less access to higher levels of education, and lower female contributions to household earnings further reduce female bargaining power in families, potentially resulting in less being spent on human capital accumulation (Sen 1990; Klasen and Wink 2003; Duflo 2003).8 Third, the efficiency of overall resource allocation and total factor productivity in the economy is expected to rise once women can fully develop their human capital and participate more fully in the labor force and the political process (Stotsky 2006; Cuberes and Teignier 2012).

Increasing female labor force participation is a key priority for shoring up long-term growth in Hungary. In many advanced and emerging market economies, population aging and low fertility rates are compressing the size of active labor forces. This issue is also very acute in Hungary. Taking into account current trends, Hungary’s labor force will shrink by about 10 percent by 2030 (Figure 7.18). Increasing low female labor force participation rates will be essential to help offset these adverse trends and boost long-term growth. The OECD estimates that full convergence in participation rates by 2030 can increase average annual growth rates per capita in Hungary by 0.6 percent (OECD 2012).

Figure 7.18.The Effect of Converging Labor Force Participation Rates (LFPRs) between Men and Women on the Size of the Labor Force

(Thousands)

Source: Organisation for Economic Co-operation and Development.

In addition, keeping a large share of highly productive workers out of the labor market is economically inefficient. Family policies that favor extended career interruptions and discontinuous employment of mothers are likely to have a negative impact on overall productivity. In this regard, the drop in labor force participation by women with tertiary degrees described earlier is a particular concern; and higher employment of women with primary education or less in work-fare programs is unlikely to compensate in terms of contributions to long-term growth.

Further research needs to determine how women’s weakened positions in households and government may be affecting resource allocation. As described, household surveys indicate that women’s shares of household earnings have declined, and female representation in the executive and legislature is exceptionally low. Further analysis should explore the extent to which these shifts may have affected policy priorities and resource allocations—with potential repercussions for human capital accumulation and productivity, and, as a result, Hungary’s long-term growth potential.

Toward a More Level Playing Field

Significant gender gaps, in particular in the labor market, need to be addressed more effectively. Although Hungary fares relatively well on a number of indicators—including its legal framework, women’s education and the neutrality of the tax system—growing gender inequities are a source of concern. In particular, policies to encourage female labor force participation (such as the option to receive childcare allowances while working) appear to have only had partial success, and de facto workplace flexibility remains constrained. Also, despite the government’s commitment to expand the availability of childcare facilities, significant geographical gaps remain.

Key measures should aim at expanding women’s choices in reconciling work and family life. This could be done in a fiscally neutral manner as savings in universal leave benefits are used to expand childcare options:

  • Childcare—Affordable childcare for children under age three should be made widely available.

  • Work-friendly leave policies—The work prohibition for recipients of child-care benefits should be lowered further, and the total duration of leave that parents can take (including maternity, paternity, and parental leave) should be capped at two years.

  • Equitable parental leave policies—GYED should be made fully gender-equitable—that is, it should be made available to fathers before the child’s first birthday.

  • Flexible employment options—Workplace flexibility should be promoted in support of women’s continuous employment and career progression.

Progress will also require creating a more level playing field and tackling biases that reinforce the gender division of labor:

  • Reduce the pay gap—A shortening of leave periods and greater availability of childcare, as recommended here, should have a positive impact on the disparity in earnings. In addition, equal pay provisions should be strictly enforced, and public awareness of antidiscrimination laws and pay transparency should be strengthened.

  • Encourage fathers to take advantage of parental leave options—More fathers should be encouraged to take parental leave, including by reserving a share of parental leave for exclusive use by fathers (as done in Iceland, Sweden, and Norway) or bonus parental leave if fathers take up a minimum amount (Germany, Portugal).9

References

A version of this analysis was previously published as Jenkner 2015.

On average, women accounted for almost 30 percent of members of the single or lower houses of parliaments in the EU countries—almost three times as much as in Hungary.

With the objective of “balancing out” the advantage that men hold because they “leave their work-related duties less frequently than mothers” (Prime Minister Orban, quoted in Nacsa 2014)

There are two types of childcare benefits: GYES is universally available (and equal to the minimum old-age pension); GYED is insurance-based (and equal to 70 percent of average daily earnings, capped at 70 percent of twice the minimum daily wage).

The average across all 28 EU members is 50 percent; Bulgaria has the highest share at 80 percent (Eurostat 2014).

Temporary part-time employment can help parents stay connected to the labor market; at the same time, targeted measures should facilitate the transition back into full-time work.

Expectations are unrelated to actual performance (OECD 2015).

Based on a basic growth decomposition framework. This sets aside reverse-causation arguments.

In addition, this can perpetuate inequality, as male children may be favored over female ones. Outside crises, evidence of this phenomenon is mixed, however (Duflo 2012).

As a result of these policies, the proportion of fathers taking parental leave increased to about 25 percent in most of these countries (OECD 2012). Evidence shows that fathers who took time off after the birth of their child were also more likely to care for the child later on (Nepomnyaschy and Waldfogel 2007).

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