When the Orbán Government took office in 2010, it set about building a new, labor-based economy that would replace welfare checks with work opportunities. Today, Hungary’s unemployment rate has dropped to its lowest in 27 years. At 4.5 percent, according to the latest data, the country’s jobless rate is less than half of the EU average of 9.8 percent and beats most other Member States.
“Hungarian reforms are working,” we say, referring to a package of government policy changes that have paid off state debt, cut taxes and spurred GDP growth. But the Hungarian economy is working, because Hungarians are working.
That wasn’t always the trend on the jobs market. Following the first Orbán Government (1998-2002), during the eight years of Socialist-led governments and while the global economy was humming along, Hungary’s unemployment rate grew from 5.8 percent to 11.8 percent.
Over the past six years, the conservative Fidesz-led government reversed that trend and brought Hungary its lowest unemployment rate since the country’s transition to democracy in 1989.
Prime Minister Viktor Orbán sounded ambitious when, in 2010, he promised that his government would see the economy create 1 million jobs by 2020 in a country of less than 10 million. Today, that doesn’t sound so far-fetched. The record-low unemployment means that 700 thousand of that 1 million have already been created.
How did the Hungarian government achieve this growth?
First of all, the government phased out progressive taxation and replaced it with a low, flat tax on income – 15 percent. People who work are no longer penalized for working more and trying harder.
Secondly, the government slashed taxes on profits. Hungary’s corporate flat tax is the lowest in Europe at 9 percent.
Thirdly, for those in regions hardest hit by uneconomic downturn, where the unemployment for some has lasted decades and spanned generations, the government created a public work program. Instead of a welfare check, the program has brought those who are able to work back into the real labor market, giving them experience and self-respect.
At the end of last year, Prime Minister Orbán described the government’s goals like this:
“I would just like to tell you that right from the beginning, in 2010, our philosophy – which I learnt from large employers in various meetings – has been that economic policy principles are not complex economic theories but simple facts. And ever since 1990, we have built our economic policy on the simple fact that if there is work, there is everything. If there is no work, if there are no jobs, there is nothing else worth talking about. I think we can now say that everyone in Hungary who wants to work can find employment…And this is a great achievement. But now that is all in the past, and this agreement is about the future. It is no longer about how to find a job, but about work being financially worthwhile.”
The prime minister was speaking just after signing an agreement with associations of employers and employees to increase the minimum wage by 15-25 percent in 2017 and by another 8-12 percent in 2018.
Hungary has made remarkable progress over the past 6-7 years. Despite tough odds and the criticism that denounced our economic policies as “unorthodox,” the Orbán Government is helping Hungary get back to work.