The following article is an analysis of how the Orbán government transformed the form of conditional distribution in Hungary over the past 12 years. How did the support system for the poor become the support system of the middle and upper middle class and how did it exclude the most disadvantaged groups from almost all benefits?
Origin of Conditional Cash Transfers
Conditional transfers were originally created with the aim of mitigating generational poverty and integrating social groups struggling with exclusion into mainstream society. To promote this goal, the states provide financial support to those affected who meet the specific aid conditions of the given state.
In other words, the main difference between unconditional distribution and conditional distribution lies in the fact that, while in the first case, the state entrusts the use of financial support to the beneficiaries, in the second case, the entitlement can be obtained in connection with the presence or absence of certain forms of behavior. However, it also entails the entry of the state as a controlling body that prescribes socially desirable behavior and rewards its citizens in return for compliance.
The social challenges that create conditional distribution are changing in many parts of the world. While initially in Brazil and Mexico, the Bolsa Família and Oportunidades programs were created to eradicate extreme poverty in peripheral areas that were significantly affected by poverty, later in Bangladesh and Cambodia, they were created to improve the educational situation of women, and in the Sub-Saharan region, which was hit by the AIDS epidemic, an attempt was made to improve the situation of orphans and suppress other diseases.
If we look at the spread of conditional transfers, a clear trend is that the number of countries in which they are used is increasing. While in the 1990s it was the typical social policy method of only a few countries, in the 2010s it became the most significant tool in the states of Central and South America, but it also became a feature of many African, Asian, and even Eastern European countries. Today, this type of distribution can be found in more than seventy states.
Social Changes in Hungary
In Hungary, the spread of conditional distribution is linked to the Orbán governments. The period before 2010 was characterized by the fact that the provision of social benefits was the responsibility of local governments, but the system functioned insufficiently in several aspects. On one hand, it created great dependency between the administrators and the beneficiaries, and on the other hand, the level of need of the beneficiaries did not decrease, but rather is was permanently conserved.
Therefore, it seemed clear that after replacing the socialist government, the Orbán government would try to reform the system of social benefits. Back then, perhaps no one thought that this process would lead to an ultraselectional method.
Public Work Program, Solution to All Problems?
The spread of conditional social distribution began in 2011, when the Fidesz government announced the sound-sounding but impossible aim of full employment. In practice, this meant that the capacity of the previously existing public employment program was expanded on.
In 2013, the number of people working under public employment contracts exceeded 130 thousand people (about 2% of population). This made public employment the government’s most important and resource-demanding employment policy project. The new direction entailed the narrowing of extensive benefits. In 2011, by amending the social law, the government sent a clear message to its citizens: instead of passive benefits, they must primarily obtain their income from the labor market. The condition of obtaining welfare benefits is work, including public employment for those who previously received passive benefits.
In 2011, the public employment act also underwent significant changes. This new, previously unknown, special legal relationship made it possible to significantly reduce the wages of those entering public employment after September 1, 2011. In practice, it looks like the public employment wage is worth 76-88 percent of the net minimum wage – depending on the year in question, or approximately 84-86 percent of the net minimum wage in the guaranteed public employment wage payable to those employed in jobs requiring a minimum secondary education or vocational qualification.
This step is indicative from two points of view: on the one hand, it is a clear decision that from now on the state will only finance the survival of citizens in return for performance, but on the other hand, the lower minimum wage is also a clear signal from the point of view that the state does not consider public employment equal value of work with the positions held in the primary labor market.
We could view this as an incentive for the long-term unemployed to return to the workforce, but this idea is flawed from several perspectives. It does not provide further training for those who do not have the appropriate professional skills, and many cannot find work again after the termination of their public employment relationship due to the isolation of their residence and the lack of jobs in the region, which results in the proportion of those stuck in public employment reaching 80 percent in many settlements.
However, this type of legal relationship is finite. Anyone who cannot find a job on the primary labor market within a year and a half will lose benefits. They are left with unregistered labor or being dependent on others. The latter acquired a completely new meaning in 2022, but more on that later.
Family Support, Government’s Love Project
Every state that operates a pay-as-you-go social system knows that the essence of maintaining a stable structure is that there are more contributors than beneficiaries and that the amount paid is higher than the amount spent. In Hungary, the population has been decreasing since the 1980s, which is already causing noticeable problems in the operation of the pension system.
The Hungarian government’s series of plans to halt population decline and encourage childbearing provides families with numerous discounts that did not exist until now. But not for every family. In recent years, the government has introduced a number of credit-based discounts which contain a significant number of constraints.
For example, the homemaking benefit for families (CSOK) or the loan for expecting families imposes conditions on the beneficiaries, such as an age limit, no criminal record, no public dept, existence of a social security relationship, having at least three children, etc. And marriage, which we can say is a purely and exclusively political, ideological requirement. If the government of a country is proud of its (dubious) conservative ideas and values, then the number of marriages that take place in a year is definitely a good indicator of that, isn’t it? After all, we remember that this is the state where it was included in the constitution that the father is a man, and the mother is a woman.
It is clearly visible that the use of family subsidies is associated with conditions that exclude certain lower social groups from the outset, but we must also see that the subsidies that help start a family and create a home, which can be used in Hungary today, also require considerable self-reliance. In the case of the CSOK (homemaking benefit for families), HUF 10+10 million (~ EUR 26,500+26,500) is a very modest amount for the purchase of an apartment in urban conditions, not nearly enough coverage to buy property in itself.
Over the years, as a result of the high demand due to family allowances, real estate prices have skyrocketed, and in the case of the capital or other big cities, prices per square meter are now approaching HUF 800,000 – 1 million (~ EUR 2,100-2,650). However, anyone who has three children for HUF 20 million (~ EUR 53,000) ll need a home of at least 60 m2.
Discrimination of social groups and the punitive effect of poverty are also decisive in other family support formats. The amount of support given to mothers after birth depends significantly on whether the mother had an employment relationship before giving birth, and if so, how much her earnings were. In the case of CSED (which is a financial support for 168 days after the birth of child) and GYED (which is a monetary child-rearing support until the child is two years old) the amount is calculated from previous income, and in the case of the former there is not even a maximum limit.
The situation is similar in the case of the family tax allowance, the amount of which varies depending on the number of children, but we can say that in low-income families with many children, the beneficiary may not be able to make maximum use of the allowance due to their low income. (In practice, it looks like, for example, a maximum HUF 165,000 (~ EUR 430) tax discount can be claimed for 5 dependents, but this would require an income of HUF 1,500,000 (~EUR 3,970)).
Examining the universal, unconditional family support forms that are available in Hungary today may also provide some insight. These are GYES and the family allowance. GYES is a subsidy that can be used until the child is 3 years old, it is equal to the minimum old-age pension, that is HUF 25,500 (~ EUR 70) er month. The amount of family allowance – which is actually not universal, as it can be withdrawn due to the child’s unexcused school absence – is HUF 12,200 (~ EUR 32) or one child and two parents. Since 2008.
In practice, this means that while high-income families can receive family support of up to hundreds of thousands of forints although CSED and GYED are considered health insurance cash benefits – practically regardless of the number of children, low-income families who live from month to month receive barely a few tens of thousands (a few tens of euros).
Life Is Expensive
From 12 February 2021, the amendment to the CXXII of 2019 law states that persons who have not paid social security contributions for at least six months or are not in a special legal relationship that exempts them from this payment obligation, their social security number is invalid, so they are not entitled to any state health care for free, not even to life-saving surgeries. Until the outstanding debt is paid, the actors of the health care system must refuse to provide care for free, and the provision of emergency care has also become repayable afterwards (the cost of this can be maximum HUF 750,000 (~EUR 2 000).
Although the law provides the opportunity for the most disadvantaged to receive a need-based discount from the tax office in a fair procedure, which exempts them from the payment obligation (which since 2012 is already a social contribution tax and not a social security contribution), the experience is that these people have no knowledge and their opportunity to enjoy such discounts, so according to estimates, there may be 600,000 people in Hungary (about 6,5% of the population) who do not have a living social security relationship. This is a big problem because it can be assumed that they are members of those social groups who may be in an insufficient situation in terms of their health status.
Let’s just imagine that if a person is unable to pay a check of approximately HUF 8,000 er month for free healthcare, how would they be able to pay for medicine, vitamins, health products, or even healthy and sufficient food? For this reason, the affected people don’t even use medical care, since until now they only had to pay for it, and today they refuse it. Moreover, the fear of heavy care fees can prevent them from receiving the most necessary care, which can easily be a death sentence.
We Have Taken Our Hands off You, Said The State
At the end of December 2022, the text of the social law was amended again. According to this, everyone is responsible for themselves in the first place. The essence of the amendment to the law is based on the fact that until now, according to the law, the individual, the individual’s family, the municipality, the charitable, civil and church organizations and the state were equally responsible for the social security of the individual, now a sequence has been established regarding the distribution of responsibility.
In other words, from now on, the individual is primarily responsible for themselves, followed by the family, the municipality, the state and charitable organizations. All this was necessary because “(…) it is a communist tradition to think that it is the duty of the state to take care of its citizens.” At least this is what Hungary’s State Secretary of Care Policy said in an interview. The name of Attila Fülöp’s title is also shows how deeply terrified the government is about any word that begins with social. However, it is quite clear that the word social and socialist mean completely different things, even if both words originate from the same branch.
It is difficult to know anything about what this amendment to the law means in practice. The individual cannot be held responsible if they cannot take care of themselves, nor can be the family if it is unable or unwilling to do so. The local governments are currently spending a much greater sum on social spending than what the state finances for them, and as a result of the current energy crisis, the local governments of many small towns have drifted to the brink of bankruptcy. Not to mention the fact that in many villages the mandatory basic services are provided by church organizations, because the local governments are unable to provide them.
It can therefore be seen that setting up the sequence will not bring significant changes in practice, but it does predict one thing: the government will continue to narrow down the range of those entitled to benefits and will increasingly force its citizens to take care of themselves. In the near future, according to the plans, inpatient care units will be abolished, so instead of hospitals, it will be the task of social service providers to care for those patients who do not require active specialist care but require constant attention and care.
All of this means that the responsibilities of the already horribly overloaded system will be expanded with new activities, which may have the consequence that those who do not get a place in public care will need private care. However, other services in social institutions often fail due to insufficient staffing which is a result of underpaid social professionals leaving the field. Although the number of such patients may be 6-8 thousand people per year, it predicts that the long-term goal the Orbán government is to minimize the role of the state in the financing of social and health care.
The purpose of my article was to present how and why the system of conditional transfers was developed, and how, Hungary, as a member state of the European Union, uses it today. As we have seen, the goal of the conditional transfers was to help the permanently disadvantaged catch up in the long-term and to raise their living conditions to an acceptable level.
In Hungary, this system works in the exact opposite way. The Orbán government’s social policy defines factors that exclude the most vulnerable groups from distribution. On the one hand, this policy creates greater inequalities between social strata, and on the other hand, it shows a victim-blaming attitude towards the downtrodden.
In this sense, according to the government, ability and willingness are one and the same thing. At the same time, we must see that a national government that does not know solidarity results in a society that does not know solidarity in the long run either. This is an immense problem because crisis of solidarity in a society presupposes that social groups are separated from each other not only in terms of status, but also at the level of human relations.
However, the government’s current social policy results in social groups drifting apart from each other. Examining mobility, we see that there are groups that have successfully emerged from extreme poverty in the period from 2010 to 2021, but this is primarily a result attributable to the economic prosperity and the use of EU funds. Moreover, those escaping poverty on paper are those that were already closest to the poverty line, while the poverty of those most unfortunate deepened, as is evident from looking at the increasing poverty gap.
We cannot say that the clear intention of the government’s social policy is to send people into poverty, but we also cannot say that the measures that are constantly introduced do not have a conserving and sinking effect on those living in poverty. Yet the government’s biggest immorality is the conscious discrimination, on the basis of which the most vulnerable are excluded from nearly all social subsidies.
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