The labour supply of older workers in Hungary
Scharle ÁgotaMinistry of Finance, HungaryDepartment of Economic Policy
Activity rates drop after age 45
0
20
40
60
80
10015
–19
20–2
4
25–2
9
30–3
4
35–3
9
40–4
4
45–4
9
50–5
4
55–5
9
60–6
4
age group, years
activ
ity ra
te, %
men women
This is very low compared to EU, even CEE levels
01020
30405060
7080
Hun
gary
Ned
erld
s
Slov
ak R
Pola
nd
Cze
ch R
EU25
EU15
Latv
ia
Ger
man
y
Swed
en
activ
ity r
ate
for 5
5-64
, % 1999 2003
An experiment: increase activity rates for men aged 45-54 and 55-64
65
67
69
71
73
75
77
79
81
83
85
1998
1999
2000
2001
2002
2003
2004
activ
ity ra
te, %
adding 55-64adding 45-54actual: aged 15-64
And it is threatening the balance of the Pension Fund
0
4
8
12
16
20
24
1999 2000 2001 2002 2003
total expenses, % of GDP
tax financed, % of totalexpenses (right scale)
Activity would need to increase by 12 % points to balance PF
1150000
1175000
1200000
1225000
1250000
1275000
1300000
1325000
0 2 4 6 8 10 12 14 16 18 20 22 24
increase in activity rate of 45-64, % point
Pens
ion
Fund
reve
nues
and
ex
pens
es in
200
3 (m
illio
n H
uf)
Pension F expenses
Revenues from Soical Sec.
Reasons behind low activity rates in old age
• Low qualifications• High unemployment• Pension receipt• Attitudes
Disability pension receipt has hardly declined since transition schock
0
2
4
6
8
10
12
14
16
18
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
in %
of p
opul
atio
n ag
ed 4
0-59
, %
total (below pensionable age)new claimsnew recipients
Possible solutions
• Increase statutory retirement age (62->65)
• Tighten eligibility for disability pension• Premium for later retirement• Integrate taxes and social support• Subsidies for low wage employment and
old age workers• Minimum wage legislation