As Hungary roars ahead, Orbanomics leaves some of the poorest behind
The pre-election fanfare over Hungary’s stellar growth and surging wages hardly registers with Laszlo Reisch, an employee in a government works program who is stuck on the wrong side of a growing social divide.
Prime Minister Viktor Orban is widely credited for putting public finances on a sustainable path after 2010 to save Hungary from what he said would have been a Greek-style economic collapse under a tower of debt.
Fueled by a construction boom, foreign investment and European Union funds, the economy grew by 4 percent in 2017, the fastest pace in three years — good news for the 54-year-old premier as he targets a third term on April 8.
The turnaround in headline economic figures has not benefited all Hungarians, however.
The introduction of a flat tax, curbs to social benefits and Orban’s focus on building up the middle class means the gap between rich and poor in Hungary is widening, economists say.
The program is the government’s main tool to boost employment among mostly low-skilled Hungarians but the 165,000 it employs have missed out on double-digit wage rises because their salaries were frozen at 2017 levels, meaning their relative income has deteriorated steadily over the years.
In theory, the freeze should have nudged people toward the private sector, but government data shows few of the participants have found long-term jobs elsewhere and many remain stuck, lacking the sufficient skills, or savings, to move ahead.
Most of the participants have only a primary education so the government runs training courses, partly financed by the EU, alongside.
Monthly pay under the scheme is just over half the minimum wage at 81,530 forints before tax but it gets hit by the same 15-percent income tax rate applied to the highest salaries.
The flat tax and cuts in jobless and other benefits have contributed to what the European Commission said in a 2017 report is one of the biggest rises in inequality across the EU since the financial crisis.
The government’s revenues from consumption-related taxes, such as VAT and excise taxes on tobacco and alcohol, relative to household spending is the highest in the EU, exceeding levels even in Denmark, which has much higher living standards.