The Realities of Entrepreneurship in Hungary

Have you ever wonder what its like to be an entrepreneur in Hungary, to run your own business? Well, about a year ago, a Hungarian blogged about the realities of what it means to have your own business in Hungary. It was then translated earlier this year into English. Here are some excerpts:

On maternity leave:

“I wouldn’t hire a woman because when she gets pregnant, she goes for 3 years maternity leave, during which I can’t fire her. If she wants two children, the vacation is 6 years long.

Of course, work has to be done, so I would have to hire somebody who works instead of her… But not only couldn’t I fire her while she’s away, I couldn’t fire her when she comes back either. So I would have to fire the one who’s been working instead of her the whole time.”

On those aged 50 and above:

“I wouldn’t hire people over 50 either. I wouldn’t hire them, because they are soon in the protected age… You can’t fire people in the protected age, so I would have to pay the salary … but someone would have to do the  job right; so I would have to hire another person.”

On salaries:

“The state takes away less than half of your salary everywhere else [in a Deloitte study of European countries]. It’s annoying that I pay you more than €1500, but you only receive a little less than half of it. Especially since you will not get any better medical care than anybody registered with a minimum wage income.”

A few of these situations I have stumbled upon myself. The extended maternity leave for example, is something I learned of from my boss who recently had a child. The information about the protected age is something that I haven’t heard about in great detail. The comments on salaries is one that I have heard a lot about. Because of the high taxation rate, in reality employees only receive less than half of what the companies pay out.

I realize that some of the statements in the post come across as sexist and discriminating, but if you push all of that aside, its only good business sense. Because of how the law is set up and the systems put in place by the government, entrepreneurs are forced to make these decisions or else they will ultimately fail. The system is set up to discourage entrepreneurship more than anything (which is something I regularly run into at work), and it sets up its citizens to fail. Starting a business is risky enough as it is, but with all these regulations and laws against you, its a wonder that there is any entrepreneurship here at all.

There is no incentive to create jobs in this country, making it more and more difficult for people to find jobs. No jobs means no disposable income to spend, no money spent on the economy and its a vicious cycle. Competition for work is high, especially among the younger generation to find jobs. So where do they go? They leave the country. Every young person I know can speak another language be it English or German. The best way for them to find a job is to go somewhere else in the EU.

Minimum wage in Hungary is 92 000 Ft. a month, or roughly $400 CAD. Compare that to the neighbouring countries of Austria (€1000 or $1300 CAD), and Slovenia (€748 or $968 CAD) that is nothing. Granted, Slovakia isn’t doing so well either with a minimum wage of €327 or $423 CAD. Certainly the cost of living is lower here compared to our neighbouring nations, but in many cases, things are the same exact price. When I first arrived here, that was one of the first things I noticed. The cost of a Big Mac is more or less the same here as in Canada, but here you earn significantly less and as a result, you have lower purchasing power.

These systems and processes are remnants of Hungary’s communist past, which is now under the guise of democracy. Something needs to change, but as long as politics in this country stays the way it is (right now the ruling party has almost a 3/4 majority), nothing is going to change. I see nowhere for the economy to go except down.

Adelina’s Note: Some laws may have changed since the writing of the original article (July 2011) and then translated earlier this year. For further insight and analysis, I recommend reading this article as well.

I also realize that I am commenting on a rather controversial topic in Hungary. I have tried my best to gather facts as well as I could in English to gain a full understanding of what is happening. But I also recognize that I am not an economist and I am bringing an outsider’s perspective to the situation, and that any information I do find in English will tend to be biased.