1 LABOUR MARKET PROGRAMMES ON YOUTH EMPLOYMENT IN HUNGARY "Productivity, Investment in Human Capital and the Challenge of Youth Employment Comparative Developments and Global Responses Bergamo (Italy), December 2010 Attila Kun Ph.D. Associate Professor, Deputy Head of Department Károli Gáspár University, Budapest, Hungary Faculty of Law, Department of Labour Law and Social Security

2 The labour market situation of the years age group - Employment rates continuously decreasing employment continuously decreasing employment compared to 2000, employment rates among youth decreased in most EU MSs - the most significant decrease was in Hungary: the overall youth employment rate dropped by almost 14 % compared to 2000, employment rates among youth decreased in most EU MSs - the most significant decrease was in Hungary: the overall youth employment rate dropped by almost 14 % 33.5% (2000) 20% (2008) almost 80% of this age group is inactive almost 80% of this age group is inactive NEET-rate: only slightly below 20% (7. worst rate in EU-27) NEET-rate: only slightly below 20% (7. worst rate in EU-27)

3 The labour market situation of the years age group - Unemployment rates increasing unemployment increasing unemployment strong rise in the youth unemployment rate between 2000 and 2006, but it is still not considerably far from EU average strong rise in the youth unemployment rate between 2000 and 2006, but it is still not considerably far from EU average 2006: 19,1 % 2006: 19,1 % 2007: 18 % 2007: 18 % 2008: 19,9% 2008: 19,9% Young unemployed by educational level 40% Low- educated 18% Vocational education 33,7% Middle- educated 8,3 % ( among all unemployed: 4,6%)! Graduates

4 Targeted labour market policies PASSIVE BENEFITS 1991 (Employment Act): school- leavers unemployment benefit 1991 (Employment Act): school- leavers unemployment benefit - till 1996 Currently: no specifically targeted passive benefits Currently: no specifically targeted passive benefits ACTIVE MEASURES Until 1993: no real targeted active measures Until 1993: no real targeted active measures more and more active measures (e.g. Give a chance) more and more active measures (e.g. Give a chance) 1996: new targeted ALMPs (work- experience scheme, employment subsidy) 1996: new targeted ALMPs (work- experience scheme, employment subsidy) : paradigm-shift, reforms : paradigm-shift, reforms 2005-: START-Programme 2007-: modernisation, simplification, flexibilisation of wage subsidies, training, prevention etc. 2009: reintroduction of the work- experience scheme 2009: reintroduction of the work- experience scheme

5 START-Programme (valid from Oct. 2005) PURPOSES helping young persons to enter the labour market (stepping stone), helping young persons to enter the labour market (stepping stone), increasing employment opportunities in the target group, increasing employment opportunities in the target group, making it easier to hire young people and encouraging employers to recruit young workers, making it easier to hire young people and encouraging employers to recruit young workers, creating incentives for employers to follow employment regulations and employ workers lawfully creating incentives for employers to follow employment regulations and employ workers lawfully

6 START-Programme Main features UNIVERSAL, TRANSPARENT COVERAGE UNIVERSAL, TRANSPARENT COVERAGE all young entrants of the labour market (career starters with secondary education under 25 or with tertiary education under 30) all young entrants of the labour market (career starters with secondary education under 25 or with tertiary education under 30) who finished (or interrupted) their studies and who finished (or interrupted) their studies and who take up regular employment for the very first time. who take up regular employment for the very first time. EASILY ACCESSIBLE EASILY ACCESSIBLE Jobseekers themselves can apply for the START-CARD which they present to employers when applying for jobs. Free of charge Free of charge Administration: National Tax Authority Administration: National Tax Authority Valid for 2 years (1 year for university graduates) Valid for 2 years (1 year for university graduates) It can be applied for only once It can be applied for only once May be used by more employer May be used by more employer

7 START-Programme Main features BUSINESS-FRIENDLY: Universal reduction on social security contributions up to a certain wage limit: up to a certain wage limit: Generally: 150% of the minimum wage, Generally: 150% of the minimum wage, University graduates: 200% of the minimum wage University graduates: 200% of the minimum wage for a 2-year period (university graduates: 1 year) for a 2-year period (university graduates: 1 year) no obligation to maintain employment after the termination of the subsidy no obligation to maintain employment after the termination of the subsidy CONSIDERABLE SAVINGS by employers (approx EUR/year) CONSIDERABLE SAVINGS by employers (approx EUR/year) Social security contributions paid by the employer STARTGeneral First year (university graduates: months) 10% 10%27% Second year (uni. graduates: months) 20% 20%27% Additionally, employers are exempt from the monthly fixed-sum health care contribution for the whole period

8 START-Programme Main features WIN-WIN SITUATION WIN-WIN SITUATION BUSINESS: Savings on labour costs BUSINESS: Savings on labour costs YOUTH: Stepping stone, opportunities YOUTH: Stepping stone, opportunities STATE: new model of CSR (Corporate Social Responsibility)-related public policy / regulation: STATE: new model of CSR (Corporate Social Responsibility)-related public policy / regulation: The public goal (i. e. youth employment) is in fact implemented (semi-voluntarily) by businesses as a positive externality, backed by the enabling / facilitating policy of the state. The public goal (i. e. youth employment) is in fact implemented (semi-voluntarily) by businesses as a positive externality, backed by the enabling / facilitating policy of the state.

9 START-Programme Main features THE SCHEME IS POPULAR, SUCCESSFUL, WELL- KNOWN THE SCHEME IS POPULAR, SUCCESSFUL, WELL- KNOWN Between Oct and Feb. 2009, more than one hundred thousand (116,033) Start Cards were issued (from which 32,223 were issued for young people with tertiary education). Approx. 15% of firms avail of the possibility to employ school leavers with a Start Card. MODEL-VALUE MODEL-VALUE From July, 2007 new schemes were added to the expanded START FAMILY From July, 2007 new schemes were added to the expanded START FAMILY START Plus: for parents who received or receive child care allowance and want to return to the labour market START Plus: for parents who received or receive child care allowance and want to return to the labour market START Extra: for long-term, especially disadvantaged jobseekers (e.g.: older than 50 years of age, living in the most disadvantaged micro-regions) START Extra: for long-term, especially disadvantaged jobseekers (e.g.: older than 50 years of age, living in the most disadvantaged micro-regions)

10 Paid Internship Employment Originally introduced in 2004 as a specific stipendium or stagier programme. GOAL: to help young graduates of tertiary education to gain work experience under regular employment-like conditions (a specific form of employment). GOAL: to help young graduates of tertiary education to gain work experience under regular employment-like conditions (a specific form of employment). POTENTIAL BENEFICIARIES: POTENTIAL BENEFICIARIES: young graduates (up to the age of 30) young graduates (up to the age of 30) with college and university degrees (obtained in the preceding 2 years) with college and university degrees (obtained in the preceding 2 years) DURATION: min. 9 months, max. 12 months. It can be concluded only once, for definite period. DURATION: min. 9 months, max. 12 months. It can be concluded only once, for definite period. The minimum amount of the GRANT is defined by law. The minimum amount of the GRANT is defined by law.

11 Paid Internship Employment ADVANTAGES FOR EMPLOYERS: Backed by tax-incentives. Backed by tax-incentives. Can be combined with the START-Card. Can be combined with the START-Card. Possibility to recruit and train talented young people. Possibility to recruit and train talented young people. Uptake: Although it is also extended to the private sphere, it is much more popular in public administration (central administration bodies can recruit new civil servants from a wider pool of talented young people). Uptake: Although it is also extended to the private sphere, it is much more popular in public administration (central administration bodies can recruit new civil servants from a wider pool of talented young people). ADVANTAGES FOR EMPLOYEES: From the point of view of social security, participants are considered insured. From the point of view of social security, participants are considered insured. Smooth career-start, work experience, shortened transition between education and working life. Smooth career-start, work experience, shortened transition between education and working life. Guidance by a professional mentor (according to a pre- defined individual work experience-plan) Guidance by a professional mentor (according to a pre- defined individual work experience-plan)

12 SOME CONCLUSIONS Successful integration of youth into the labour market depends, for a big part, on the countries overall labour market performance. The unfavourable development of the Hungarian labour market has had effects in two opposite directions: on the one hand it weakens the motivation of those with lower school performance to continue in education and to gain qualifications; on the other hand more and more stay on in education without following specific career perspectives. (Youth Policy in Hungary, Report of the Council of Europe international review team, February 2008.) The mismatch between labour market needs and actual skills is deeply structural in Hungary. The mismatch between labour market needs and actual skills is deeply structural in Hungary.

13 SOME CONCLUSIONS Even if we have some notable, innovative targeted measures (like the Start Programme), the overall labour market performance of the country does not allow us to be optimistic. Even if we have some notable, innovative targeted measures (like the Start Programme), the overall labour market performance of the country does not allow us to be optimistic. Labour market policies in themselves can only have a limited impact. Labour market policies in themselves can only have a limited impact. New policies, such as VET-modernisation, reform in education, non-formal learning, lifelong learning etc. are still more programmatic than implemented or effective. New policies, such as VET-modernisation, reform in education, non-formal learning, lifelong learning etc. are still more programmatic than implemented or effective. Policies must be cross-sectoral and can not be successful without harmonising the complex interests of all related stakeholders (society / public policy; businesses, young workers etc.). Policies must be cross-sectoral and can not be successful without harmonising the complex interests of all related stakeholders (society / public policy; businesses, young workers etc.).

14 Thank you for your attention!