Today, Hungarian society does not have enough assets to deal with a lasting period of income loss, according to an analysis by private banking consultancy Blochamps. As more than 4,000 people are losing their jobs daily in Hungary, the Orbán government has announced its newest economic protection plan to mitigate the country’s economic damages and shield workers from massive layoffs.
Blochamps’ founding director and economic expert, István Karagich, told Forbes that only people in the top one-tenth wealth decile in Hungary have enough savings to get through a longer period of unemployment.
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In other words, 9 out of 10 Hungarians would not be able to pull through more than a six month period of unemployment.
Blochamps’ analysis is based on the Hungarian Central Statistical Office’s (KSH) data on domestic income and wealth deciles and their own databases.
Karagich outlined that if we divide the entire Hungarian population into ten equal groups, the gap between the two top deciles alone is enormous.
540,000 households and about 960,000 people with an annual income of HUF 4.4 million belong to the top income decile, with the next decile only 2.7 million forints, according to Karagich’s data assessment.
However, he added that the disappointing social outlook is similar in international comparison as well. “In the U.S., only 15% of the population could get by on their savings for 12 months, and more than half of American adults in terms of financial wealth have more debt than savings.”
The Government takes actions
Meanwhile, in recent weeks, several have criticized the Hungarian government that the economic measures introduced in March are only a small step, but more will be needed to avoid mass bankruptcy of companies and skyrocketing unemployment.
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Due to the coronavirus crisis, even the government estimates that 40,000 people have lost their jobs in a few weeks, while companies lay off around four thousand workers a day.
PM Viktor Orbán asked for some patience at the end of March, while promising the “most comprehensive economic action plan in the history of Hungary” to be put on the table in early April.
This announcement came on Monday, when Orbán presented his 5-point economic protection plan. As part of this, in order to preserve jobs, the government will subsidize the wages of employees whose working hours are reduced, representing a “special Hungarian form of wage support,” Orbán said.
On Tuesday, minister of innovation and technology, László Palkovics announced the details of the measures. According to this, the government will take over 70 percent of the wage costs of employees who work reduced hours at companies affected by the coronavirus pandemic.
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This is a similar solution to the already introduced methods in many European countries, often referred to as a “short-time work” scheme.
The scheme enables companies drastically affected in a downturn to either send their workers home or significantly reduce their work hours without having to lay them off. This way, people will still get a significant chunk of their wages, with the state helping to cover much of the shortfall. Because the employers do not lay off these staff members, the scheme helps to maintain permanent employment levels during the coronavirus epidemic.
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