Hungary: the latest policy in the fight against depopulation

Lots of money for parents (if they build a new house).

Marcus Roberts | Jun 10 2016 | comment

In 1980 Hungary had a population of 10.7 million. In the thirty-five years since then, its population has dropped by nearly a million people to 9.8 million. At the same time, Hungary's total fertility rate (the number of children a mother will bear on average in her lifetime) has fluctuated between 1.8 and 1.3, well below the replacement-rate of 2.1 children per woman. At the moment the fertility rate is a bit over 1.4: thus there is a long way to go before Hungary's population decline will stabilise naturally, let alone reverse.

With that background in mind, it is not surprising that the Hungarian government is trying to put measures in place to encourage its citizens to have more children (in a similar way to Italy’s attempts that we blogged about last month). As an aside, if the Italian Health Minister describes her country’s demographic outlook as an “apocalypse” one wonders what word she could use to describe Hungary: a country that has seen its population drop by 8.5% over three decades. That’s one problem of using words like “apocalypse”, once things get worse you’re in a lexicographical cul-de-sac: there’s not much worse and more final than the "apocalypse". But I digress…

The Hungarian government has set its face against large-scale immigration as a solution to its demographic decline (it faced hundreds of thousands of refugees and economic migrants trying to cross into or across its territory over the last year or so and was not enamoured of the German open-door policy). Instead, the government has implemented a payment scheme for parents who have children and build a house or buy a flat. As Euronews reports:

“This lucky family [the Guta family from Szeged in southern Hungary] is going to get ten million Forints, or nearly 32,000 euros to make a third child, and as a reward unlocking their personal dream.

Compared to the Hungarian average income level of 800 euros per month this ‘baby bonus’ seems generous. But there is a catch. Only families planning to buy a new flat or to build a house qualify.

The Guta family lives in 60 square meters and space is tight. A third child would turn the flat into quite a cramped place. To make some extra money, Gabor even volunteered for missions in Afghanistan. But finally it was the new family support scheme that triggered the upcoming changes expected to change the Guta family’s life, as mother Erzsébet explains:

‘Our dream is an own house with a garden, and our other dream is to give birth to a third child. This new family support scheme enables us to turn our dream into reality and to give birth to a third child.’”

The amount given by the government (3.5 times the Hungarian yearly average income!) is certainly very generous, but does come with a number of conditions. Not only do families need to buy a new property, the applicants must also be married, have work and have contributed to the social security system for a number of years. If families commit to the scheme they get paid, but must have one child in four years, two children in eight years and three children within ten years. If they fail to make this commitment then they must pay the money back. This must make it hard for those who fully intend to have children but cannot do so for medical reasons.

Further, there are concerns that this policy is really about helping the housing industry which does not supply enough new homes to meet demand (I fail to see the problem with this this policy trying to help the housing shortage nor why one policy cannot aim to address more than one problem). A potentially larger problem is that the government will favour its business contacts and builders in favour with the government will get the contracts. Surely there will be some sort of government licensing scheme so that the homes built are up-to-scratch (there was the same thing in New Zealand when the government subsidised insulation of houses – only some insulators were eligible for the licenses). However, some argue that this will lead to cronyism between builders and the government. Perhaps, but that would be a separate issue and does not undermine the worth of this scheme by itself. The other concern is that, when announced, it drove real estate prices up 10-20% overnight, which obviously made it hard for those who do not have governmental support. How this happened when the scheme is to provide more housing, I’m not sure…

Finally there are those arguing that the government is making rules about the number of children Hungarian women should give birth to and the government has no right to stick its noses into it. Of course, the Hungarian government is not as draconian and evil as the Chinese government and has not mandated how many children to have on pain of fines, having your house pulled down, having your baby killed inside you and perhaps incidentally killing you. In fact the Hungarian government is not telling any Hungarian family how many children to have. It is trying to reverse the demographic struggles the country has been grappling with for over 30 years. It is spending 4% of GDP on family support (the OECD average is 2.55%) and it is promising those who commit to having three children a substantial sum of money. Of course, if you can't fulfill that commitment, then you have to pay the money back...Since population decline in Hungary is so entrenched and advanced, I'm sure many other nations (including some near neighbours to Hungary) will be looking on with interest to see whether this policy has any impact.

A day after the slaughter of 50 people and the wounding of 50 others at a gay bar in Orlando, it is impossible to say nothing at all about it. But there is little the editors of this publication can say, or even ought to say at this stage beyond condemning the shooting as a terrible crime. Already political adversaries are slapping competing labels -- “gay hate crime” vs “Islamic terrorism” -- on the attack. Can’t it be both?

In any case, we prefer to wait for all the facts, and in the meantime pray for the victims and their loved ones.