Should Hungary be funding population growth?

Grace Dean discusses PM Viktor Orban's controversial announcement.

Grace Dean
15th February 2019
Image: Pxfuel
Hungary has recently attracted global media attention following Prime Minister Viktor Orban’s announcement to introduce generous financial incentives to promote the country’s population growth.

In a state of the nation address on 10 February, Orban announced a range of new benefits offered by the government, including guaranteeing that women with four or more children will never have to pay income tax, offering cheap mortgages to families buying new homes and promising cheap loans and a lifetime exemption from income tax for married younger under 40. In a move divergent from sustainability policy in many other countries, he also announced that the government would subsidise £6850 towards the purchase of seven-seater vehicles for families with three or more children.

These policies are all aimed at raising Hungary’s birth rates to reverse population decline , with Orban hoping to reach a fertility rate of 2.1 by 2030. An analysis of Hungary’s demographics is necessary to see whether Orban’s measures are justified. As of 2017, Hungary has a fertility rate of 1.50, which actually shows a substantial rise from previous years; there has been a sustained year-on-year increase in fertility rate since 2011 when the rate was 1.23, the lowest on record, presumably in the aftermath of the financial crisis. Records suggest a very gradually ageing population, which is something reflected across many developed countries globally, and thus, despite the rise in fertility rate, Hungary has seen a considerable fall in total population from 9,850,845 in 2017 to 9,825,704 in 2018.

While Orban’s policies seem incredibly generous, it appears that government officials don’t expect the population to take up these offers all too easily; the government estimates this umbrella of policies will cost the state $500m, or 0.3% of GDP, in 2020, which seems surprisingly low considering the vast financial benefits on offer. This ultimately reflects Hungary’s benefit system prior to the introduction of these new policies; currently there is already a broad range of family benefits on offer, which have ultimately seen only limited success.

Orban has a clear anti-immigration stance, even arguing that “immigration means surrender” and heavily criticising the EU. This is reflected in the results of a microcensus from 2016; 98.3% of the Hungarian population is of Hungarian nationality. Arguably his beliefs echo those of many other who similarly oppose globalisation and the influx of workers and students that it brings; thank God he isn’t planning on building a wall. However, by discouraging immigration he is limiting Hungary’s economic development. Furthermore, simply introducing generous financial subsidies does not target the root of the problem. Orban should instead be focusing on why people don’t want to have further children, rather than simply paying them to do so. By focusing on the economic incentives for childbearing, he is not addressing any core structural problems in his country which may additionally be contributing to the problem. Increasing the fertility rate is of little impact when many of them simply grow up to emigrate to other countries, thus facilitating the development of an infamous brain drain in Hungary. Why encourage a higher birth rate if the job market and university system are not attractive enough to actually retain these children as they grow up?

Ultimately people are questioning the morality of a system which so strongly encourages having children for financial benefits. Will these children grow up happy with parents who were tempted by the offer of subsidies on cars and cheaper mortgages? Only time will tell, but recent opinion polls suggest that Orban and his team will remain in power for a while yet; Orban faces elections later this year following unrest and protests against their rule, but these polls suggest that his party will win close to 40% of the popular vote, leaving it in a much more favourable position than many of its rivals.

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AUTHOR: Grace Dean
Editor-in-Chief of the Courier 2019/20, News Editor 2018/19, writer since 2016 and German & Business graduate. I've written for all of our sections, but particularly enjoy writing breaking news and data-based investigative pieces. Best known in the office for making tea and blasting out James Blunt. Twitter: @graceldean

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