Hungarian growth in peril in face of anti-migrant campaign

Hungarian businesses are increasingly concerned that Viktor Orbán's xenophobia is hurting the country's economy. [EPP/Flickr]

At peak harvest time, Hungarian winemaker Sandor Font has enough work for 30 people at his vineyard south of Budapest – if only he could find enough grape-pickers.

On a recent sunny day, he was expecting 20 to show up. In the end, he had to make do with about 10, mostly guest workers from Romania. “We are really sweating blood to find enough people. This is an enormous challenge,” he says.

His struggles are a symptom of a wider problem for countries like Hungary, Poland and the Czech Republic, where years of heavy emigration to western Europe have created labour shortages that make it tough for businesses of all kinds to recruit.

That has the potential to curb economic growth and make it harder for these countries to catch up to Western European living standards. To plug the gaps, some of them are trying to poach workers from poorer, non-EU neighbours.

Orbán says EU should deport all illegal migrants, attacks UK

Hungary’s prime minister said the European Union should round up and deport all illegal immigrants and assemble them in EU-supervised refugee camps beyond the bloc’s borders where they can then file for asylum.

Prime Minister Viktor Orbán, who has reinforced Hungary’s borders to keep out more than a million mostly Muslim migrants who have flowed into Europe since the start of 2015, has called a referendum on Sunday (2 October) to seek support for that stance. He plans instead to entice “culturally similar” workers from countries such as Ukraine or Serbia.

They should have a similar “cultural and historical” background to Hungarians, Economic Minister Mihaly Varga told Hungarian newspaper Heti Valasz.

The remarks read like a thinly-veiled code for “non-Muslim.” If looking for labor, Hungary might have turned to the hundreds of thousands of desperate asylum seekers from Syria, Iraq and Afghanistan who turned up on the border last year — especially the 177,130 people who officially applied for asylum. Instead, many of them were greeted with water cannons, tear gas, and a razor wire fence.

In fact, Orbán, riding a wave of popular support, has doubled down on his anti-refugee stance, refusing to comply with EU refugee quota guidelines and drawing criticism from NGOs, the UN and other European governments. In July, the advocacy group Human Rights Watch slammed Hungary for “breaking all the rules for asylum seekers.” Earlier this year the European Commission threatened to fine member countries like Hungary who don’t step up to help with a fair share of the refugee influx.

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Nordic nations on Wednesday (21 September) called for the EU to take “measures” against Hungary over its reluctance to take in registered asylum-seekers.

“Right now in many places there is a shortage, not just of those with specific skills, like welders, or machinists, chefs or waiters, but also semi-skilled workers who are on production lines and who over time can be trained to increase their skills,” the vice president of a Hungarian manufacturing association told EuroNews in July.

Even McDonald’s is having trouble hiring. Usually known for bottom-of-the-barrel wages, it recently rolled out a generous incentive package in Hungary that includes free housing and perks to entice workers.

Hungary’s paradox is a familiar game of hot and cold that plays out around the world: sometimes, countries that vehemently eschew immigration actually have a structural, economic need for newcomers willing to work for low wages.

Yet, for foreign investors, doing business in Hungary is looking a lot less attractive these days. There are job openings across many industries, including the always in-demand IT and technology sectors, as well as the manufacturing and restaurant industries.

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Hungary’s right-wing Prime Minister Viktor Orban on Tuesday (26 July) described the arrival of asylum seekers in Europe as “a poison”, saying his country did not want or need “a single migrant”.

Laugh in my face

Since the collapse of Communism, Poland has lost 2.5 million workers to western countries, compared with about half a million for Hungary and 3.5 million for Romania.

“If you look at our history after 1989, the main problems of the Polish job market were high unemployment and low availability of jobs,” said Andrzej Kubisiak, a press official at Work Service, Poland’s biggest human resources company.

“The situation has reversed,” he said. “The challenge becomes finding a candidate, not a job.”

After years of steady economic growth, jobless rates are at their lowest in recent memory – 4.9% in Hungary and 5.3% in the Czech Republic. At the same time, vacancies in the two countries have risen to 55,000 and nearly 140,000 respectively, despite employers offering wage hikes of up to 20% in some cases, at a time of very low inflation.

Peter Szabo runs a business producing powdered paprika, one of Hungary’s best-known staples.

“The harvest gives me the creeps every year,” said Szabo, who runs a labour-intensive operation to avoid the use of chemicals. “When there is a job to do, such as loading, and I offer people 800 or 1,000 forints ($2.91 or $3.63) per hour, they simply laugh in my face and say, look, the government is taking care of me.”

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By comparison, the minimum wage in Britain is £7.20 ($9.37) an hour.

Szabo wants the government to help farmers during harvest by suspending its public works programme, a scheme that has hoovered up nearly a quarter of a million jobless people to work on projects like road maintenance and flood defences.

The shortage of labour is so widespread that Sandor Baja, general manager at staffing company Randstad Hungary, has a hard time pinpointing the most worrying areas.

“I cannot highlight any because nearly all jobs are problematic,” Baja said in his office in Budapest. “It is very hard to find good professionals.”

Even attracting workers from Romania’s Transylvania region, home to the biggest ethnic Hungarian community in the region, is difficult, he said, because they tend to move on to the West.

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A Hungarian official indirectly admitted that the poster campaign ordered by the government last summer to discourage immigrants from coming into the country was aimed at generating hate towards them.

Baja said companies would need to hike wages by “very close to double digits” per year in the short-term to stem emigration to richer neighbouring countries.

Growth at risk

Economists say that in the long run, the exodus of skilled people and their replacement by low-skilled guest workers risks damaging the quality of the labour force and deterring foreign investors. Hungary slipped six places to 69th in a 2016 Global Competitiveness Report compiled by the World Economic Forum.

The labour crunch also jeopardises the ability of central European economies to sustain the growth model they have maintained for the past two decades.

In a July report, the International Monetary Fund estimated that continued net emigration from central, eastern and southeast Europe from 2015 to 2030 could lower the region’s economic output by nearly 9 percent altogether.

Poland, where the 8.5% unemployment rate is the lowest in a quarter of a century, is relying on more than a million workers from Ukraine to fill vacant jobs this year in areas like production, logistics or construction. It is working on new rules to allow guest workers to stay longer.

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“Without them, many firms would have problems fulfilling their contracts. Many would have to close their doors,” said Kubisiak at the Polish Work Service.

Big foreign investors in Hungary, such as German car makers Audi and Daimler, resort to sponsoring university faculties to ensure their hiring needs are met. Both declined to say how much they fork out on such programmes.

Istvan Hollos, who runs a car repair shop on the outskirts of Budapest, is at the sharp end of the jobs crisis. He would like to expand, but cannot hire enough people.

“We can put up a job advert for months and have one or two applicants,” he said. “Far from being able to select from a crop of quality workers, you need to make do with what you get.”

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