A social catastrophe in the making: Social policy in Hungary since 2010

An increasing number of news reports and opinion articles in the international press recently have raised awareness of Hungary’s slide toward authoritarianism. The most thorough of these have been Princeton University scholar Kim Lane Scheppele’s series of articles (published on Paul Krugman’s blog) on the constitutional reconfiguration of the Hungarian state and the newly implemented biased electoral system. A recent example is an editorial by The Washington Post concluding that Prime Minister Orbán “has excluded himself from the democratic West; he and his government should be treated accordingly.”

In July 2013, a resolution adopted by the European Parliament on the situation of fundamental rights in Hungary signalled concern over the Hungarian situation at the otherwise quite oblivious European Union. In September, former American President Bill Clinton referred to Orbán as an admirer of “authoritarian capitalism” who never wanted to leave power, and when President Obama recently listed states that are suppressing civil society groups, Hungary was the only European country named.

What these critical accounts of political developments in Hungary remain mostly silent about, however, is that it is not only constitutional democracy, separation of powers, the rule of law, and fair elections that Viktor Orbán’s regime treats as its enemy; the Hungarian government has also launched a comprehensive and forceful attack on the welfare state. Essentially all of the legislative changes enacted since 2010 in the areas of social policy, education, housing and taxation have entailed the retrenchment of the welfare state. This article provides a concise overview of these reforms, and assesses their consequences for poverty and social inequality.

Policies: retrenching the welfare state, punishing the poor

Many of the serious deficiencies in the Hungarian welfare state predate the 2010 political changes, and a pronounced anti-poor policy turn was evidently on its way already in 2008, especially concerning income protection for the long-term unemployed. The new government, however, has brought anti-poor policies to a new level.

Severe austerity measures were implemented with respect to both the availability and level of social benefits, which has led to a significant decline in the poverty-reduction effect of cash transfers. Eligibility for disability benefits has been severely restricted and tens of thousands of former beneficiaries have partially or entirely lost this support—frequently in unfair revaluations—and approximately half a million long-term jobless citizens do not receive any social benefits at all. The incomes of those living in deep poverty were further decreased by setting the wages paid in the ever-more-extensive workfare programmes below the statutory minimum wage.

Of the 32 OECD member states, Hungary and Greece are the only ones where real public social spending has decreased since the onset of the economic crisis. The implementation of a flat tax alongside the elimination of low-income tax credits has also increased poverty and social inequality: the new tax system has benefited mostly the top 20 percent of income distribution, with a striking increase in disposable income among the top 10 percent, while the tax burden of those earning near the minimum wage has doubled on average.

more: Heinrich Böll Stiftung