Zoltán Pogátsa: If Companies Are Becoming More Transitional, Then Trade Unions Must Act Transnationally
Gabor Sarnyai 2019.02.11.
Labor shortages and the country’s economic growth could end the era of weak trade unions. According to economist Zoltán Pogátsa, both the state and smaller companies should increase employee wages. He believes Hungary offers foreign investors plenty of advantages aside from low wages.
Why do you think the current Audi strike has been so successful? Also, why haven’t we seen such worker-initiated protests before?
For the last thirty years the role of trade unions in the Hungarian market economy has remained unclear. The trade unions had jokingly compared themselves to Biblical Adam’s bellybutton: completely useless, but its absence would be weird. Hungarians thought about the unions in a similar way. They were unsure what role they played in the economy but were aware the newly capitalist Hungary would look silly without them, as the West also had them. For a long time, people hoped employers would raise the wage rate in response to a better performing economy. Obviously, this hasn’t happened. Hungary’s wages did not converge with those in Western-Europe. If that wasn’t enough, they even began to lag behind the rest of the Central-European region. But, the current labor shortage has affected the situation. This is largely due to the fact that more than 300,000 people left to work in Western Europe. In addition, 200-220,000 people were pushed into public work schemes, and they aren’t exactly doing meaningful tasks. Furthermore, there isn’t enough skilled labor, the education system is broken and retraining is practically non-existent. According to a KPMG study, 170,000 people work in jobs created by European Union projects. Such initiatives drain workers from the job market. In this environment, it’s much easier for trade unions to make themselves heard. International companies simply can’t replace people as easily as before. The value of skilled workers has increased significantly. Therefore, their bargaining positions have also strengthened. But, of course, automotive industry unions cover a higher proportion of employees than in the economy as a whole.
Can a successful strike give workers at other international companies the confidence to do the same?
Absolutely. For thirty years, workers were plagued by a psychological obstacle concerning self-organization. They didn’t see the point of joining a trade union if it couldn’t actually accomplish anything. On the other hand, the trade unions blamed the unwillingness of workers to join the unions. This mutual stalemate is now over. There have been several demonstrations in recent years and not only have the employees of private companies acted, but public sector employees have also demanded to be heard. The minimum wage was increased, signaling that trade unions have grown stronger. In fact, Mercedes in Kecskemét granted its workers a 30 percent two-year wage increase. The events at Audi have only received more media attention because they happened after the introduction of the ‘slave law.’
How do different wage levels in different sectors affect each other? For example, a teacher with 20 years’ experience earns around 300,000 forints, whereas an Audi engineer takes home 800,000. International companies already offer better salaries than Hungarian companies do. Can we really blame them for not offering even more?
Wage levels depend on the level of productivity. This is an issue that economists debate thoroughly and it’s difficult to produce accurate statistics. I think it’s absurd to expect Audi to take into account what is happening in other segments of the economy or how much people are earning at other companies; they should not have to care. For twenty years, liberal economists claimed the economy would be overwhelmed and that companies would downsize if wages were to rise—but it hasn’t happened. During 2001 and 2002, the minimum wage increased and we barely lost any jobs. It isn’t their responsibility to keep an eye on the wage differences across sectors. But, on the other hand, we also don’t know how SMEs will react to substantial wage growth. When the minimum wage increased, we saw that enterprises were not automatically going to collapse into bankruptcy on a vast scale. In the case of public works programs, we certainly know they could afford to raise wages. It’s evidenced by the amount of money they’ve spent on various stadiums and representative projects.
During the minimum wage negotiations, many were concerned that such a steep increase might eat up the amount meant to cover overall wage-related costs. According to this argument, an elevated minimum wage would have endangered the salaries of higher qualified and more experienced workers.
In Hungary, even skilled workers earn a minimum wage. Companies should pay their workers fairly. I’ll give you an example: my friend who owns a coffee shop was paying his employees 190,000 Huf ten years ago. His competition paid their staff just half that amount. I asked my friend why he’s so generous and he said it makes him feel more secure. He experiences lower staff turnover, happier and more productive employees and can go on holiday without worrying about his employees stealing from the cash registers. Undoubtedly, he will get rich slower than an entrepreneur who exploits his employees. Yet, his business is still far more stable. These are the two distinct models.
So, the argument claiming that wage growth drives out foreign companies is untrue?
If this were true, Bulgaria would have the highest employment rate and Sweden’s would be the lowest in Europe. Of course, in reality, it is the other way around.
What can we offer German companies aside from cheap labor?
Despite the recent increases, Hungary’s wages are still a third of Western Europe’s. Also, no Hungarian government has ever provided as much in terms of direct subsidies to transnational investors as the current one does now. Corporate taxes are at a record low—one of the lowest in Europe. We also have loose environmental rules. For example, a Natura 2000 area was freed up for Audi to build a new plant on. Our location is central: being just five hours from Ingolstadt, Győr is closer than Hamburg. We have good infrastructure, a skilled workforce, security, political stability and are in the EU. There are no duties or border controls. The list could go on and on. Hungary offers plenty of advantages aside from low wages.
All Audi trade unions appear to identify with the Hungarian claims. Are German workers also interested in increasing the wages in Hungary?
It’s in their interest to do so. The greater the differences between wages, the more likely German companies are to outsource their production to Eastern Europe. It’s not just about salary. General working conditions in Eastern Europe—including workplace safety, industrial relations and the cafeteria—are also far inferior. If this continues to worsen, it threatens what the German trade unions had been fighting for during the course of the twentieth century. If the headquarters see that these measures are successful in the Eastern part of the union, they may spill over to the West. Nowadays, companies are becoming more transnational. Hence, trade unions also have to act transnationally.
Do personal factors play a role in this process?
Of course. More and more Hungarian workers are exchanged for short periods to Western Europe. While there, they come to realize that a Belgian worker, for example, receives 3.6 times more money than they do for the same work. When they see this with their own eyes, they wonder why they’re earning less.
And why do Slovaks really earn more?
Because they fought for it by striking. In the Czech Republic, unions have recruited 100,000 people within just the past few years. These organizations have begun to revive the entire Visegrad region.
Could this successful strike send the message that wage tensions should be solved at the micro level between the employer and employee?
It could start something among the workers of big companies, but it’s practically impossible for SME employees to organize a strike because they would be fired. Suzuki stated that trade unions can’t exist and fired the person who tried to organize one. Therefore, at the level of small and medium-sized enterprises, the government should stand up for employers rights. The government has to balance between the two interests. It must represent the interests of its own voters and citizens, but also be able to ensure the survival and development of the companies. Unfortunately, the Hungarian government openly took the multinational companies’ side, against its own citizens. The incredible liberalization of labor law in 2012, the overtime law, and statements by the Prime Minister’s advisor, László Parragh, all prove whose side the government is really on.