Chapter 7: Hungary: Crisis Coupled with a Fiscal Squeeze – Effects on Inequality
János Köllő* 1. INTRODUCTION This chapter summarizes the available evidence on how the global crisis affected the labour market and social inequalities in Hungary in the first years of the crisis. Most of what is presented is based on longitudinal micro data covering firms and individuals observed in 2008 and 2009. The effect of labour market developments on social inequality was ambiguous. In the public sector, real wages fell by more than 10 per cent in 2009, while employment remained practically unchanged (it even grew thanks to increased inflows to public works schemes). Given that public sector employees are better educated and older, on average, than private sector workers, the cutting of their wages diminished rather than augmented inequality of earnings. At the same time, their better prospects of remaining in their jobs had an inequality enhancing effect. In the private sector, employment was cut by almost 7 per cent in 2009, while real wages fell only marginally. Once compositional changes are controlled for, we find no statistically significant links between firm-level average wage changes and firm characteristics (size, sector, ownership, unionization), apart from an effect of a rise in the basic minimum wage in January 2009. Likewise, the individual panel data suggest that the distribution of earnings remained virtually unchanged except for the shift of minimum wage earners from the old to the new mandatory floors. Monthly working time was slightly shortened by a magnitude of about 1 per cent. Working time reductions probably did not extend...
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