Abstract
Our analysis focuses on gender gaps in Hungary and their potential implications for growth. The key channel through which gender inequities affect growth outcomes in Hungary is low female participation in the labor market, in particular of mothers. To a large degree, disparities in labor outcomes reflect a widely-held preference for traditional gender roles that is reinforced by government policies, such as extended parental leave. Policy recommendations focus on measures to encourage female labor force participation by expanding women’s options in reconciling work and family life and creating a more level playing-field (including through the reform of parental benefits, greater availability of childcare, and steps to reduce the gender wage gap).
Our analysis focuses on gender gaps in Hungary and their potential implications for growth. The key channel through which gender inequities affect growth outcomes in Hungary is low female participation in the labor market, in particular of mothers. To a large degree, disparities in labor outcomes reflect a widely-held preference for traditional gender roles that is reinforced by government policies, such as extended parental leave. Policy recommendations focus on measures to encourage female labor force participation by expanding women’s options in reconciling work and family life and creating a more level playing-field (including through the reform of parental benefits, greater availability of childcare, and steps to reduce the gender wage gap).
A. Introduction
1. Gender gaps are pervasive and can have a significant impact on economic outcomes. Gender inequities transcend the political, social, legal and economic realms across the globe. While economic development tends to be associated with a reduction in gender gaps—in particular with regard to educational attainment or legal impediments—development in itself has shown to be insufficient to eliminate persistent inequalities at the workplace, at home, and in political representation. At the same time, these inequities can have a substantial impact on economic outcomes, including by constraining the size and productivity of the labor force and affecting the decision-making and resource allocations of households, businesses and governments (Chattopadhyay and Duflo, 2004; Miller, 2008; Duflo, 2012).
2. Hungarian women are more educated than men, on average, and do not face discriminatory legal restrictions; however, gender gaps are sizeable in politics and at the workplace (Figure 1). Women in Hungary do not face legal restrictions when it comes to owning property, starting businesses, or participating in the labor force (Gonzalez and others, 2015). Also, like in most of Europe, a higher share of women than men holds tertiary degrees. However, despite their good education, women are significantly behind when it comes to employment and earnings, as well as their representation in decision-making bodies in business and politics. For example, only 12 percent of board members of the largest companies are women—compared with an EU average of 20 percent; and Hungary’s share of female lawmakers (at 10 percent) is the lowest in the EU.2
Hungary: Gender Gaps in Education, Business and Politics
Citation: IMF Staff Country Reports 2015, 093; 10.5089/9781484314555.002.A004
Hungary: Gender Gaps in Education, Business and Politics
Citation: IMF Staff Country Reports 2015, 093; 10.5089/9781484314555.002.A004
Hungary: Gender Gaps in Education, Business and Politics
Citation: IMF Staff Country Reports 2015, 093; 10.5089/9781484314555.002.A004
3. In addition—unlike in most of Europe—women have been losing ground over the last years. In politics, women in Hungary have been practically shut out of the executive: the share of women amongst government ministers dropped to zero between 2009 and 2012, and again at the middle of 2014 (EC, 2014a). At the workplace, Hungary has been one of only a few countries where the gap in earnings between women and men went up across various metrics between 2009 and 2012 (Figure 2). This appears to have transcended to households, with Hungarian households beating the almost universal European trend towards greater earnings equality by becoming more reliant on male sole income earners between 2007 and 2010, on average (EC 2014b).
Gender Gap in Earnings
(Difference between 2009–2012, percent)
Citation: IMF Staff Country Reports 2015, 093; 10.5089/9781484314555.002.A004
Note: 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.Sources: Eurostat; OECDGender Gap in Earnings
(Difference between 2009–2012, percent)
Citation: IMF Staff Country Reports 2015, 093; 10.5089/9781484314555.002.A004
Note: 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.Sources: Eurostat; OECDGender Gap in Earnings
(Difference between 2009–2012, percent)
Citation: IMF Staff Country Reports 2015, 093; 10.5089/9781484314555.002.A004
Note: 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.Sources: Eurostat; OECD4. This paper focuses on gender inequities in Hungary that have the most direct impact on economic outcomes, including growth. It is organized as follows. Section B provides a short overview of gender gaps in Hungary, focusing on the labor market, and analyzes underlying factors and the efficiency of current policies. Section C discusses potential implications for growth and presents some estimates of the impact of gender gaps on long-term potential growth. Section D concludes by laying out policy options for reducing gender gaps in the labor market.
B. Women and the Labor Market: Explained and “Unexplained” Factors
Background
5. Female labor force participation (FLFP) in Hungary is low; in particular of mothers. FLFP in Hungary is below EU and OECD averages, and also lags participation rates in its 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 12 work, as opposed to more than 90 percent of men (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 2 were employed in 2007 (OECD, 2011a; Figure 3).
Maternal Employment Rates by Age of Youngest Child, 2007
(Percent)
Citation: IMF Staff Country Reports 2015, 093; 10.5089/9781484314555.002.A004
1/ Average of 26 countries.Source: OECD (2011a)Maternal Employment Rates by Age of Youngest Child, 2007
(Percent)
Citation: IMF Staff Country Reports 2015, 093; 10.5089/9781484314555.002.A004
1/ Average of 26 countries.Source: OECD (2011a)Maternal Employment Rates by Age of Youngest Child, 2007
(Percent)
Citation: IMF Staff Country Reports 2015, 093; 10.5089/9781484314555.002.A004
1/ Average of 26 countries.Source: OECD (2011a)6. The female labor force participation rate (FLFPR) picked up over the last decade, but 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, over the past decade, only participation amongst women with primary education increased (Figure 4). In contrast, the LFPR of women with tertiary or secondary degrees declined overall. In terms of age groups, it was older cohorts between 55 and 64 years of age that increased their participation most significantly.
Hungary: Trends in Female Labor Force Participation, 2000–13
Citation: IMF Staff Country Reports 2015, 093; 10.5089/9781484314555.002.A004
Hungary: Trends in Female Labor Force Participation, 2000–13
Citation: IMF Staff Country Reports 2015, 093; 10.5089/9781484314555.002.A004
Hungary: Trends in Female Labor Force Participation, 2000–13
Citation: IMF Staff Country Reports 2015, 093; 10.5089/9781484314555.002.A004
7. Disentangling behavioral changes from underlying trends illustrates that the increase in FLFP over the last 5 years was primarily driven by the growing share of women with higher education in the working age population. Between 2008 and 2013, the FLFPR increased by 2.8 percentage points, to 50.6 percent in 2013. However, controlling for changes in the composition of the female labor force confirms that the increase in the FLPR was largely due to the growing share of women with tertiary education (shown in blue in Figure 5). In other words, as new entrants to the female labor force were better educated, on average, than cohorts that left to retire, this demographic shift provided the most significant boost to the LFPR.3
Decomposition of the Change in FLFPR between 2008 and 2013 by Education Level, Controlling for Changes in Labor Force Composition
Citation: IMF Staff Country Reports 2015, 093; 10.5089/9781484314555.002.A004
Source: Hungarian Statistical Institute and IMF staff calculations.Decomposition of the Change in FLFPR between 2008 and 2013 by Education Level, Controlling for Changes in Labor Force Composition
Citation: IMF Staff Country Reports 2015, 093; 10.5089/9781484314555.002.A004
Source: Hungarian Statistical Institute and IMF staff calculations.Decomposition of the Change in FLFPR between 2008 and 2013 by Education Level, Controlling for Changes in Labor Force Composition
Citation: IMF Staff Country Reports 2015, 093; 10.5089/9781484314555.002.A004
Source: Hungarian Statistical Institute and IMF staff calculations.8. The decomposition of factors underlying recent trends in FLFPRs indicates that the impact of recent activation policies has been uneven. Specifically, activation policies seem to have induced a significant increase in participation amongst women with primary education or less (Figure 5): while the share of women with primary education in the female labor force decreased substantially, their participation rate went up significantly, possibly induced by measures such as tightened access to benefits and participation requirements in the public works program. At the other end of the spectrum, participation of women with tertiary education decreased, calling into question the efficacy of activation policies aimed at the higher end of the income spectrum, including tax incentives under the Job Protection Act (JPA) and the limited increase in flexibility for recipients of childcare allowances.
What is holding women back?
9. A number of policies can affect women’s participation in the labor market. Common obstacles to FLFP in advanced and emerging economies that are discussed in the literature include financial incentives inherent in the tax system; lack of flexible work options; lack of affordable child care options; and poorly designed parental leave policies.4 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).
10. In Hungary, work disincentives predominantly arise from the design of parental leave policies and a shortage of affordable childcare and primarily affect mothers. The Hungarian tax system works on an individual basis, and is therefore relatively neutral (OECD, 2014a). In addition, there is a tax reduction for employers that reemploy mothers of small children under the JPA;5 and the revised labor code offers more flexible employment options. However, there are a number of obstacles to FLFP inherent in the design of family policies and practices in the workplace (Figure 6):
Parental leave: While paid leave policies are generally found to benefit FLFP, 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 and others, 2007). In Hungary, parents can take up to 3 years of leave, and the overwhelming share of caregivers are women (Korintus, 2014). Moreover, benefits are tilted towards mothers of young children staying at home: maternity leave and the insurance-based childcare benefit GYED can only be taken by mothers until the child’s first birthday; and a parent receiving childcare benefits cannot work until the child’s first birthday.6
Childcare: 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 three are cared for only by their parents; representing the second-highest prevalence in the EU (Eurostat, 2014).7 At the same time, there is a significant shortage of affordable childcare facilities for children under the age of three (EC 2014a).
Job flexibility: Studies have shown that job flexibility, including the availability of temporary part-time employment, can have a strong positive impact on FLFP (OECD, 2012). While 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 European Union.8
Hungary: What is Holding Women Back?
Citation: IMF Staff Country Reports 2015, 093; 10.5089/9781484314555.002.A004
Sources: OECD.Hungary: What is Holding Women Back?
Citation: IMF Staff Country Reports 2015, 093; 10.5089/9781484314555.002.A004
Sources: OECD.Hungary: What is Holding Women Back?
Citation: IMF Staff Country Reports 2015, 093; 10.5089/9781484314555.002.A004
Sources: OECD.11. There are also obstacles to the employment of older women, however. Older women’s activity rates are also constrained by domestic obligations: apart from grandchildren, they often care for sick elderly relatives in light of 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
12. The large unexplained component of the gender pay gap in Hungary points to the presence of biases against women at the workplace. Throughout the European Union 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 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). While 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.
The Unexplained Component of the Pay Gap in Hungary is Large
(Percent)
Citation: IMF Staff Country Reports 2015, 093; 10.5089/9781484314555.002.A004
Note: Countries are arranged from left to right in descending order of the proportion of the unexplained gender pay gap.Source: OECD (2012).The Unexplained Component of the Pay Gap in Hungary is Large
(Percent)
Citation: IMF Staff Country Reports 2015, 093; 10.5089/9781484314555.002.A004
Note: Countries are arranged from left to right in descending order of the proportion of the unexplained gender pay gap.Source: OECD (2012).The Unexplained Component of the Pay Gap in Hungary is Large
(Percent)
Citation: IMF Staff Country Reports 2015, 093; 10.5089/9781484314555.002.A004
Note: Countries are arranged from left to right in descending order of the proportion of the unexplained gender pay gap.Source: OECD (2012).13. Surveys confirm that traditional views on gender roles are still very much en vogue 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 than men (Miranda, 2011).
Unequal expectations for girls and boys: Also, there is a significant gap between parents’ expectations for girls and boys, 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 (Figure 8; OECD, 2015).9 Though 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 further.
Parent’s expectations for their children’s careers
(Percentage of students whose parents expect that they will work in STEM occupations)
Citation: IMF Staff Country Reports 2015, 093; 10.5089/9781484314555.002.A004
Note: All gender differences are statistically significant. STEM stands for 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.Sources: OECD (2015)Parent’s expectations for their children’s careers
(Percentage of students whose parents expect that they will work in STEM occupations)
Citation: IMF Staff Country Reports 2015, 093; 10.5089/9781484314555.002.A004
Note: All gender differences are statistically significant. STEM stands for 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.Sources: OECD (2015)Parent’s expectations for their children’s careers
(Percentage of students whose parents expect that they will work in STEM occupations)
Citation: IMF Staff Country Reports 2015, 093; 10.5089/9781484314555.002.A004
Note: All gender differences are statistically significant. STEM stands for 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.Sources: OECD (2015)While attitudes and behaviors are drivers of policymaking (Kamerman and Moss, 2009; Lewis, 2009), 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 of 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).
C. Implications for Growth
14. There are three main channels through which improvements in gender equality can affect growth outcomes: labor, human capital, and total factor productivity.10 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).11 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 hold more decision power (Stotsky, 2006; Cuberes and Teignier, 2012).
15. Increasing FLFP is the main priority for shoring up long-term growth in Hungary. In many advanced and emerging economies, population ageing 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 around 10 percent by 2030 (Figure 9). Increasing low FLFP will be a necessity 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 per capita growth rates in Hungary by 0.6 percent (OECD, 2012).
The Effect of Converging Participation Rates between Men and Women on the Size of the Labour Force
(Thousands)
Citation: IMF Staff Country Reports 2015, 093; 10.5089/9781484314555.002.A004
Source: OECD.The Effect of Converging Participation Rates between Men and Women on the Size of the Labour Force
(Thousands)
Citation: IMF Staff Country Reports 2015, 093; 10.5089/9781484314555.002.A004
Source: OECD.The Effect of Converging Participation Rates between Men and Women on the Size of the Labour Force
(Thousands)
Citation: IMF Staff Country Reports 2015, 093; 10.5089/9781484314555.002.A004
Source: OECD.16. 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 LFP of women with tertiary degrees as described in Section B is a particular concern; and higher employment of women with primary education or less in workfare programs is unlikely to compensate in terms of contributions to long-term growth.
17. Further research needs to determine how women’s weakened positions in households and government may be affecting resource allocations. As described in Section A, household surveys indicate that women’s shares in household earnings have declined; and female representation in the executive and legislature is at an exceptional 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.
D. Conclusion: Towards a More Level Playing Field
18. Significant gender gaps, in particular in the labor market, need to be addressed more effectively. While Hungary fares relatively well on a number of indicators, including its legal framework, women’s education and the neutrality of the tax system, growing inequities are a source of concern. In particular, policies to encourage FLFP (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.
19. 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 3 years of age should be made widely available.
Work-friendly leave policies: the work prohibition for recipients of childcare benefits should be lowered further; and the total duration of leave 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 (i.e., it should be made available to fathers before the child’s first birthday).
Flexible employment options: promote workplace flexibility in support of women’s continuous employment and career progression.
20. Progress towards higher FLFP 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 above, should have a positive impact on the disparity in earnings (see Section B). 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 enticed to take up 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).12
References
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Blau, F. and L. M. Kahn, 2013, “Female Labor Supply: Why is the United States Falling Behind,” American Economic Review, 103(3): 251–56.
Chattopadhyay, Raghabendra, and Esther Duflo. 2004. “Women as Policy Makers: Evidence from a Randomized Policy Experiment in India.” Econometrica 72 (5): 1409–43.
Cuberes, D., and M. Teignier, 2012, “Gender Gaps in the Labor Market and Aggregate Productivity,” Sheffield Economic Research Paper SERP 2012017.
Duflo, Esther. 2003. “Grandmothers and Granddaughters: Old-Age Pensions and Intrahousehold Allocation in South Africa.” World Bank Economic Review 17 (1): 1–25.
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Elborgh-Woytek, K., M. Newiak, K. Kochhar, S. Fabrizio, K. Kpodar, P. Wingender, B. Clements and G. Schwartz, 2013, “Women, Work, and the Economy: Macroeconomic Gains from Gender Equity,” Staff Discussion Note 13/10 11 (International Monetary Fund, Washington, D.C.).
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European Commission (EC), 2014a, Report on Equality between Women and Men 2014, DG for Justice, Consumers and Gender Equality, Brussels
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European Commission (EC), 2015; gender equality data portal; http://ec.europa.eu/justice/gender-equality/gender-decision-making/index_en.htm)
Eurostat, 2014, Living Conditions in Europe 2014 Edition, Eurostat Statistical Books, Brussels.
Gonzales, Christian, Sonali Jain-Chandra, Kalpana Kochhar, and Monique Newiak, 2015, Fair Play: More Equal Laws Boost Female Labor Force Participation, IMF Staff Discussion Note 15/02
Jaumotte, F., 2003, “Female Labour Force Participation: Past Trends and Main Determinants in OECD Countries,” OECD Economics Department Working Papers No. 376 (Paris: Organisation for Economic Co-operation and Development).
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Prepared by Eva Jenkner (FAD).
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.
See e.g. OECD (2012); EC (2014b); or Elborgh-Woytek and others (2013) for further discussion.
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 EU-28 average 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).
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 around 25 percent in most of these countries (OECD, 2012). Evidence shows that fathers that took time off after the birth of their child are also more likely to care for the child later on (Nepomnyaschy and Waldfogel, 2007).
