Procreation and pensions in Hungary

In the last month or so article after article appeared about the conclusions of a group of economists and demographers who have been discussing possible solutions to the interrelated problems of the low Hungarian birthrate and the eventual depletion of the state pension fund. This group, the Népesedési Kerekasztal (Demographic round table), seems to have the support of the Orbán government. It is deeply conservative and a promoter of family values.

One of the most vocal proponents of pension reform among the group is Katalin Botos, an economist who was a member of parliament between 1990 and 1994 and also served as minister without portfolio in charge of the banking sector in the Antall government. Prior to the change of regime she was a department head in the Ministry of Finance (1971-1987). Lately, she has been teaching economics at various universities.

The Hungarian media acts as if this is the first time the public has heard about the outlandish plans of Katalin Botos. But in May 2012 Népszava ran the following headline: “One must give birth for one’s pension.” At that time Katalin Botos and her husband József Botos were active in the Working Group for a Family Friendly Hungary, which was organized under the aegis of the Ministry of Hungarian Economy. The study that appeared at that time was entitled “A középosztály gyermekvállalási forradalma” (The revolution of childbearing of the middle classes). In it, the Botoses explained the logic behind the introduction of a sliding scale of pension payments depending on the number of children. After all, pensions are being paid by current wage earners, and if a couple did not produce at least two children they are freeloaders.

At that time the group made calculations on the basis of 2010 maximum, minimum, and average salaries and came to the conclusion that an employee earning an average salary would get 14.4 points but only if he/she produced at least two children. Extra points would be earned for each additional child. On the other hand, employees with one or no child would be docked a certain number of points. According to this system, someone with an average salary of 113,000 forints with no children would receive a pension of 70,000 forints while a person with four children would get 142,000!

The more the merrier

Members of the working group did address the problem of couples who cannot have children for physical reasons but somewhat heartlessly remarked that “the fact still is that there is no one behind them who is responsible for their pensions.”

When this study was made public the vast majority of experts found the scheme unacceptable and ineffectual. To hope for a higher birthrate by linking it to higher pensions thirty or forty years later is totally unrealistic.

The public reception was anything but friendly, and the government promptly announced that they have no intention of introducing it in the near future. But, as we can see, this plan has remained on the government’s agenda because the latest scheme released by the Demographic Round Table is practically the same as the one in 2012. The few additions to the new report in fact make it even less attractive.

As far as the government was concerned, the original Botos plan had one huge flaw: in the Roma population families are large and girls begin to reproduce early. Surely, the argument went, you don’t want to encourage them with a pension system that might increase family sizes. So, an additional restriction was added: only children who finished high school (matriculation) or trade school would count. Not surprisingly, this was considered by critics of the plan as anti-Roma.

This time around the authors of the scheme also addressed details that were not considered in the 2012 version. For example, a person whose child died before he could finish high school would be exempt. The same would be true of children with a mental disability. But many questions remain. What will happen to young people who decide to work abroad? Will their departure be accompanied by a drastically reduced pension for their parents?

Although the plan was fleshed out a bit, by and large the “mad” scheme, as many commentators called it, remained intact.

Across the whole spectrum of the Hungarian media the reaction was uniformly negative. And real panic set in when Péter Harrach, leader of the Christian Democratic parliamentary delegation, announced that the report of the Demographic Round Table was in line with the thinking of the government and therefore there was a good possibility that the suggestions will be adopted, perhaps as early as September.

This was unfortunate from the government’s point of view. Right before the municipal elections such an announcement could have disastrous consequences, especially among those under the age of 35 whose pensions would be directly affected by the new law. Mihály Varga, minister of national economy, quickly reassured the voters after Harrach’s unfortunate interview that “it will not be necessary to have more children for higher pensions.” The Hungarian pension system is stable and there is no need to make any changes before 2030. But then why all the talk about a scheme that has been on the table for at least two years?

Well-known experts on the pension system, like György Németh, are convinced that the entire economic framework that lies behind the Botos couple’s scheme is wrong. In fact, in Németh’s opinion, it is unacceptable. Raising the birthrate is desirable, but it can be achieved only by the introduction of government measures that lower the expenses of child rearing. Compensation forty years down the road for the heavy financial burden of bringing up children today will not achieve anything. It is no coincidence that this interview appeared in Magyar Nemzet.

I would like to believe that this madcap idea will not be adopted, but I have a strong suspicion that in spite of Varga’s assurances to the contrary something is afoot. I would not be at all surprised if within a few months parliament passes a law that links procreation with pensions. If such law is passed, even more people will leave Hungary and settle elsewhere where the state does not interfere in their private lives. Oh well, at least the state won’t have to worry about their pensions.

Another Friday morning “non-threat” from Viktor Orbán

According to some analysts, Viktor Orbán’s latest Friday morning interview was perhaps one of the most revealing and most frightening. On such occasions the prime minister sometimes unwittingly reveals facts about himself and the country that would perhaps best remain hidden.

I already mentioned his inappropriate quip about the unwelcome German tanks in 1944. He went on to make a “non-threatening” remark about those who do not embrace Fidesz. In connection with the clearly fraudulent tobacconist shop concessions, he said: “I am a mild-mannered person, so I am not saying this to threaten anyone, but if we wanted to enforce political considerations in such a tender, there would not be a single left-wing winner.” As Erik D’Amato wrote on politics.hu,  “if Viktor Orbán wanted to he could crush you like an ant, but he won’t, because he’s chill.”

Threat / commons.wikimedia.org

Orbán again beat the drum about his government’s accomplishments, starting with the country’s fantastic economic achievement that by now “the whole world recognizes.” Please, anyone who’s heard such praise, stand up! I also learned from this interview that Hungary’s economic growth was respectable in 2011 but then came a “second wave of economic crisis in Europe” that caused all the trouble in Hungary. Thus, the Hungarian government’s unorthodox policies had nothing to do with the recession that followed two years of small economic growth.

Orbán actually boasted about his illegal seizure of private pension accounts from millions of citizens when he described how “we reorganized the system of pensions and took away the money from the financial markets,  taxed the banks, forced the multinationals to pay taxes.” He admitted that he could do all that because of his party’s super majority. The truth? The pensions were taken away from the people and not the markets. Both the banks and the multinationals had paid taxes before; what he and his right hand, György Matolcsy, did was to levy crippling additional taxes on them.

The untrue statements didn’t end here. Orbán claimed that the European Union wants to force the Hungarian government to “take away from ordinary people … lower pensions … lower social welfare, decrease child support.” Orbán categorically stated that he will never satisfy such demands from the European Union because they amount  to an austerity program, a concept whose very mention is forbidden by Fidesz.  But the fact is that every time the chips were down Orbán gave in to the demands of the European Union concerning the budget deficit. Except the Orbán government refuses to use the word “austerity” (megszorítás). All sorts of other words are substituted for the austerity packages that followed each other in rapid succession throughout 2011 and 2012. One of these synonyms is “zárolás” (sequestration, freezing of funds), which according to Orbán “doesn’t take money away from people.” So, if the Ministry of Human Resources must spend less on education or healthcare it does not affect, according the economic wizardry of the Hungarian prime minister, the well being of the country’s citizens.

It is also clear that Orbán is unwilling to begin serious structural reforms. If Hungarians don’t like to hear about austerity they are equally leery about “reforms.” Their experience in the past has been that reform means a diminishment of their income or their access to social welfare benefits. Instead, Orbán is ready to contemplate such suggestions as spending less on government bureaucracy, further raising taxes on banks and the multinationals, and even increasing the transaction tax rate “if the European Union insists on a lower deficit.”

And finally, a few words about Viktor Orbán’s attitude toward his own role as prime minister of the country. Ever since 2002  Orbán has often repeated that “the nation cannot be the opposition.” He equates his own political side with the nation. Those who have a different set of political views are outside of the nation. At the end of the interview this interpretation of his own role became clear: he considers himself the prime minister of those who are Fidesz supporters.

I already mentioned this gentle soul’s words about his limitless power to grant tobacconist licenses based on political considerations. Orbán explained further: “I would like to make it perfectly clear that I will never turn my back on our supporters. Why is it wrong if entrepreneurs who share our values and otherwise fulfill the requirements win these tenders?… To turn our backs on our own voters, our followers (hiveink), our supporters just because we politicians will receive less criticism  this way, that I will never accept. We have to endure these criticisms because if our followers cannot count on us, who can?”

It’s no wonder that last night Ágnes Vadai (DK) in an interview on Egyenes beszéd kept referring to Viktor Orbán as “the man who calls himself Hungary’s prime minister.”

What will happen to Hungarian health care?

More and more people are convinced that Viktor Orbán has lost his sense of reality and as a result is making decisions that may have grave consequences for the country and even his own party’s popularity.

Just lately he underestimated student reaction to his hasty introduction of tuition fees and the lowering of the number of scholarships available. He insisted to the very end on the introduction of voter registration, although surely many people must have warned him that it might have serious international consequences.

His latest foray into unreality is the decision that public employees who due to their age are entitled to receive pensions must be discharged from their jobs beginning on January 31, continuously as the law specifies. This law affects a lot of people,  including all employees of elementary and middle schools, medical personnel, judges, prosecutors, and members of the armed forces. The only exceptions are college instructors and researchers employed by state financed colleges and universities. Anyone who wants to contest this ruling must make a request in writing; from the wording of the law that was published in Magyar Közlöny (no. 184; December 29, 2012) it sounds as if individual exceptions will be hard to come by.

Actually, the bill proposing this legislation was already voted on by the Hungarian Parliament on December 17, but it went pretty well unnoticed until Viktor Orbán met the so-called Council of Elderly Affairs. At the time I read the newspaper articles on this meeting, but most of the reporters concentrated on some silly expressions of Orbán, according to whom the Hungarian economy is like a wasp that has a big abdomen yet still can fly and, mixing metaphors, like a live fish that can swim upstream and the dead one that goes with the current. The articles said little about how Orbán replied to a question about the dire situation that might result from this decision in the medical profession.

The question came from Dr. László Iván (age 80), a Fidesz member of parliament who seems to be extremely fit both physically and mentally. Mind you, he doesn’t have to worry about the new law because politicians are exempt. We learned, for example, that Sándor Pintér, who was a policeman before he became a politician and who retired from the police force at the age of 48, now receives 150,000 forints in addition to the millions he makes as a minister. Today, thanks to new Orbán governmental policy, policemen and soldiers cannot retire early.

László Iván, a doctor and a university professor, was particularly interested in the medical profession. It is a well known fact that there is a serious shortage of physicians and that many practicing doctors are over the retirement age. He asked Orbán to extend the compulsory retirement age to 70 for doctors. Orbán eventually met Iván “halfway.” Doctors will still have to ask permission from the government to stay until the age of 70. They will not, however, be able to draw both their salaries and their pensions. He promised to raise their salaries to compensate for their financial loss. (Would they really be so naive as to believe this promise?)

I noted earlier that college teachers and researchers employed in institutes of higher learning are exempt, but it is not at all clear whether research institutes financed by the state directly or indirectly but not attached to a university are exempt. The Union of  Scientists and Innovators interpreted the law as applicable to, for example, research institutes attached to the Academy of Sciences. They considered the decapitation of the research institutes to be the death of Hungarian science. Can you imagine scientists and researchers being kicked out of their labs at the age of 62 and being forced to sit with their grandchildren on a bench on the playground? Lunacy!

The various medical organizations frantically ran to the undersecretary in charge of health care, Miklós Szócska, but he wasn’t moved. He announced that any fear of the collapse of Hungarian health care is baseless. “There is no danger to the functioning of  the public health system.” (Three years ago Szócska was the hope of the medical establishment, but since then physicians came to realize that their hope in Szócska and in Orbán was misplaced.) At the meeting everybody asked for a blanket exemption from the regulation for the entire medical profession. Orbán refused to budge. They will have to make individual requests, and by the grace of Viktor Orbán perhaps they can stay.

So, by January 31, up to 15,000 requests will have to be processed. The situation currently is as follows. There are 35,000 practicing physicians and a quarter of them have already passed retirement age while another 42% will have to retire within ten years. In addition, about 3,500 nurses will have to retire unless there is some kind of resolution to this impasse. Perhaps the physicians will gather their courage and, learning from the activism of the students, express their dissatisfaction in some more forceful way. One must add that last year almost 1,000 younger doctors left Hungary and 1,600 physicians and nurses indicated their desire to work abroad.

Young doctors on the move

The situation is a bit better in elementary and high schools, but even there 7,000 people will have to be discharged. In certain schools it might cause problems. I heard of a school where about half of the teaching staff is over 62. But at least here there is the hope that they will be required to leave only at the end of the school year.

All this doesn’t seem to phase Viktor Orbán. Alas, when everything depends on one man who can act without restraint this is what happens.