Data From the Tárki Household Monitor survey István György Tóth Effects of the crisis on the income distribution in Hungary (some initial results) Data From the Tárki Household Monitor survey

The context of the crisis in HU The crisis found a country with an already large debt service The country just passed a wave of budgetary adjustments (austerity measures) before the crisis Hu is a small and very open economy (multinationals producing a very large part of GDP) Among households, a large debt is taken in foreign currencies – large exposure to exchange rate volatility..

… has gone in the same direction. First: improvements Social policy measures affecting the shape of the income distribution in 2003-2007… Before Summer 2006 : Public sector wage rises Pension increases (indexation, 13th month pension) Redirecting family support to lower income groups (abolishing family tax allowances, raising family allowances) Other taxes: decrease of VAT rates After Summer 2006: Social insurance contributions: extension, increase PIT, EVA: special „solidarity” taxes, increase of top rates Other taxes: VAT, duties Layoffs in public sector … has gone in the same direction. First: improvements for the lower middle classes, then worsening for upper middle classes

Major economic indicators, Hungary, 2000-2009 GDP growth %, Inflation, %, HHold consumption Gross and net real earnings Note same quarter of the previous year=100

The data series CSO Income Surveys (- 1987) Hungarian Household Panel (1992-1997) TÁRKI Household Monitor (1998-)

Themes of the 2009 Tárki Household Monitor Major research questions: Income distribution, poverty, Labour market, social stratification and inequalities, Social and political attitudes. Sample: N= 2048 households, N= 3670 persons. Questionnaires: hhold and personal (16+ respondents). Field: 2010. February-March

Estimates of various inequality measures and their confidence intervals between 1987 and 2009 (person ekvivalent incomes P90/P10 S10/S1 Gini

Estimates for % of people and for 000 persons falling within the various median% brackets % distribution Well off (med 200%+) Upper middle (med 120-200%) Middle (med 80-120%) Lower middle (med50-80%) Poor (-med50%) total 000 persons Well off (med 200%+) Upper middle (med 120-200%) Middle (med 80-120%) Lower middle (med50-80%) Poor (-med50%) Poverty estimates, 000 persons con. interval Upper lower Total population, 000 persons *based on st err, 95% conf int

Share of per capita personal income deciles from total HH disposable incomes between 1962 and 2009 Source: 1962–1987: KSH income surveys, Atkinson–Micklewright [1992] Table HI1.; 1992–1996: HHP waves I–VI., 2000–2009: Tárki Household Monitor.

Change in average incomes of various income deciles (person equivalent Change in average incomes of various income deciles (person equivalent* income) between 2007 and 2009 Inflation (14%) Average income growth (7%) No change level * e=0.73

Polarization and shrinkage of the middle class between 1987 and 2005: distribution of persons in the 1987 per capita income deciles, based on current incomes deflated to 1987, percent Note: 1987 decile cutpoints are deflated median growth indices. Source: 1987: CSO Income distribution survey, 1996: HHP, 2003, 2005: Tárki Household Monitor.

Shifts between income groups, 2005-2007 and 2007-2009: income decile cutpoints fixed at 2005, deflated by median income growth) 2005-2007 2007-2009 2005 level Distribution of persons, current year Personal income deciles, based on 2005 equivalent incomes Source: Tárki Household Monitor 2005, 2007 and 2009 Notes: distribution of persons in 2005 and 2007, within incomes 2005 income decile brackets (deflated by median incomes dynamics for 2007)

Persons living in households with different emplyoment composition adults (estimate, 000 persons) head pensioner, no employed head pensioner, + employed Hh head empl, no other empl. Hh head empl, + other empl. Hh head inactive

Summary: the combined income effects in HU … … so far Lower real incomes, larger inequalities Stage I (2005- mid 2006): Winners: lower middle classes and public sector employees Stage II (mid 2006-2007): Loosers: upper middle classes and public servants Stage III (2008 - ): loosers: lowest and (somewhat less) the upper deciles

Further research: a potential frame of analysis for an intergenerational assessment of the effects of the crisis Crisis area Financial/banking Real/production Social/ employment Public finance Dimensions Savings, investments, pension assets Income generating jobs Human capital, social capital Tax/benefit systems and in kind services Affected groups now Asset holders, current and future pensioners, homeowners Employed (poor and non-poor) „Usual”/ Traditional vulnerable groups Cash and in kind benefit recipients Ways how these affect future generations Re-emerging claims to reconsider public/private pension portfolios increase strain on tax based public pensions Poverty risk of active age families (more likely with with children) Child poverty and deprivation in marginalised groups Potential access restrictions to quality in pre-school institutions, schools and healthcare