Sized Down Hungary

The birth of a second child would be prevented if child benefits were whittled down

Anita Élő
Last updated:
21:28 13-03-2014
Created:
13:00 12-02-2009

It could cause serious damage if the prime minister continues to support a whittling down of child benefits, as it will further diminish people’s enthusiasm to have children, claim demographers. However, the present number of children being born is so low that within a lifetime the population could halve in number.

Although we like to think that having children is a private matter, this issue is actually not only decided upon in the bedroom. How many children there are in a family depends upon numerous factors and the role politics plays among these cannot be ignored. Demographic research provides some shocking evidence: according to a study written by Balázs Kapitány on the effect of maternity benefit (gyed), in the first 11 years after it was introduced in 1985 123 thousand children were born who otherwise would not have seen the light of day. The reason is that childcare allowance increased the chances that people would have a second, a third and a fourth child.

However, politics can also be harmful: a consequence of gyed being withdrawn and child benefit and family allowance benefits (gyes) being tied to an income threshhold in 1996 was an 18 percent drop in the number of births in the second half of the 90s compared with the first part of the decade. The number of annual births, which had stood above 110 thousand, plummeted to below 100 thousand in a three-year period and since this time has not risen to its earlier level.

Change in the family model

The plan announced by the prime minister, according to which child benefit would be included in the taxable personal income, and the news that the period when gyed and gyes can be received will be shortened, will be faced by the country at a critical time. Until the change in the system, Hungary followed the "eastern" family model whereby women were married, gave birth early and normally had two children. However, in the nineties, Hungary converted to the western model: the number of marriages decreased, women no longer had their first child in their early twenties but instead in their late twenties at an average age of 27.5, according to data from 2007. Thus, in the last 10-12 years the birthrate has fallen, since women in the older generations no longer gave birth and those in the younger generations have not yet done so. The big question is whether women are really just delaying having children or will not have them at all.

According to the experts, those women who put off giving birth in the second half of the nineties have some five to six years of fertility remaining to them; we are therefore at an exciting moment in time in which any perceived uncertainty in support for families could have disastrous consequences. According to the demographer Gabriella Vukovich, despite falling fertility rates, Hungary is nevertheless in an advantageous position.  People still attribute merit to the family and dream about having children, but unfortunately do not actually realize their dreams.

More than half of families with children are bringing up just one child, and it has never happened before in Hungarian history that 40 percent of women over the age of thirty are still childless - Heti Válasz was informed by Ferenc Kamarás, the Central Statistical Office's (KSH) chief advisor. According to Gabriella Vukovics, there is still a way out of this, but instead of creating new obstacles, the ones that already exist should first be cleared.

There is a plethora of existing obstacles, one of the most important of which is insecurity. Many experts agree that the outstanding birthrate in France is not only attributable to the generous family policies there, but also to the national consensus that has lasted since the 70s, according to which no matter what happens, support for families will only be changed for the better. However, in Hungary child policies have oscillated between granting more and then cutting down: what one government gives (usually a right-wing one) is withdrawn by the next (usually a left-wing government). Ferenc Gyurcsány's package presently under preparation is novel because in 2006, it was the left-wing liberal coalition that built regular child protection support into the child benefit, and along with this, unnecessarily increased provision for well-off families with one child. According to the latest news, the government would revise child benefit under the dubious title of "renumeration free of tax", as a result of which the more children somebody has, the lower their income level will be at which they are affected by the restrictions. It is now known about the 19 percent "child tax" levied on those in the top tax bracket that a major demographic price will be paid in the future for the present slight increase in state revenues.

Ecomomic interests

A rise in the birthrate is in Hungary's long-term economic interests. For a long time demographers have believed that the solution will be brought about by the birth of a third child (this point is reflected in an article by Balázs Győffy on pages 27-28). And in actual fact, it is the most uneducated and the most highly qualified who tend to have big families. The rest - including the largest group who have a secondary school leaving certificate - are hindered in having a third child by an important factor: i.e. they do not even have a second child. One of the reasons for this is that they postpone having a child for so long that they finally run out of time. In Scandinavian countries people are renumerated if the second child is born within two years of the arrival of the first. All of these policies should be introduced in Hungary.  It would not cost a great deal but it would nevertheless enbolden families - according to Ferenc Kamarás.

The problem would also be alleviated if women brought forward the time when they give birth to their first child. In Slovakia, support is tied to the age of a mother when the child is born in order to discourage uneducated women from giving birth too early and to encourage the highly educated from not establishing a family too late. But it is not necessary to provide benefits for the whole population. The German example proves, for example, that the so-called baby programme launched in universities, and as a part of which housing assistance is provided, can be successful.

The birthrate could also be increased if the government did not place common law marriages in a favourable position, but rather marriages. It is a mistake to refer to the Scandinavian model where a great many of those living in common law marriages opt to have children, since in that part of the world marriage is substituted by the common law form, while in Eastern Europe an engagement has been replaced by moving in together.  This is far less secure and therefore those living in this kind of relationship do not have as many children. These days 37 percent of newborns are born out of wedlock, but the chances that these babies will have a sibling are just 50 percent. At the same time, the firstborn children of married couples have an 87 percent chance of eventually having a little brother or sister.

It is no coincidence that in Romania, which is suffering from the same changes as Hungary, marriage is supported: an amount of 200 Euros is paid if a marriage licence can be produced because from the state's point of view this is far more advantageous. Indeed, according to articles in the Romanian press, the measure has permeated through the whole of society and some people have got married about whose existence nothing was known, since at the time they forgot to register their birth.

According to Tiborné Pongrácz, KSH's chief advisor, registered common law marriages should not be encouraged and married people should be granted advantageous rights, for example, when they take out loans. This is in the country's interests simply because more children are born out of relationships where the partners are married. A problem is also caused in Hungary by the fact that widowed and divorced people are treated under one category. This is how it could happen that the support system became so generous with divorced people in a country with one million widows and widowers. This explains why, in crisis-hit regions, people are queueing up to dissolve their marriages on paper in order to receive the benefits given to people living alone. (see our article in the frame).

"It is a big mistake of legislation to treat families like consumers when it is the family that gives society its future," said László Bíró, the official in charge of family matters at the Conference for Catholic Bishops, to our magazine. The bishop called attention to an interesting point that was raised at the family conference held in Mexico City: economic experts pointed out that the family also creates value. According to Maria Sophia Aguirre, an economist for the University of Chicago, the worsening performance at workplaces and schools because of divorce can be expressed in millions of dollars of damage.

However, the most worrying tendency appears to be the increase in young people living alone. According to the research of Tiborné Pongrácz and Zsolt Spéder, 68 percent of the 20-24 age group have no partner, although it is at this age that they should be having their first child, while 36.5 percent of 25-29-year-olds are still living alone. According to the sociological research of Ágnes Utasi, only some ten percent of these consciously chose independence as a lifestyle, while the others simply cannot find a partner. All of this indicates that similar to most of the other former socialist countries, a level of individualisation has set in that actually endangers the viability of society.

It would appear that decision-makers are not concerning themselves with demographic problems, no matter how low the birthrate falls.  They merely focus in a short-term way on the rise in the birthrate in recent years due to the fact that girls who were born in the 50s - a period stamped with the name of the minister Anna Ratkó and when abortion was illegal - reached the age when they could become mothers in the mid-70's. There is also some comfort in the fact that the country's population has still not fallen below ten million, although this has been feared for decades. However, the 106 thousand ethnic Hungarians from beyond the borders who settled in the motherland in the 90's made up the shortfall in the children that were never born. This source of people is slowly drying up; moreover, increasing numbers of couples where one of the partners is from the mother country and the other is from Transylvania are choosing to reside in Romania because of the generous child support they can receive there.

Running dry

Managing the demographic crisis would require money, but these days there is none to be had. According to Gabriella Vukovics, the sources could be ensured if after some years of transition in the case of children born "late", at least one part of family benefits were to be tied to a preliminary legal status linked to work or study. This can be justified by the fact that low birthrates mask enormous tensions - namely that among those living in poverty the only income received is through their children: child support and benefits.       


BEING MARRIED IS A DISADVANTAGE - IT PAYS TO DIVORCE ON PAPER

It has been a phenomenon for several years now that people living in crisis-hit settlements are getting divorced on paper because they receive better benefits in this way. A single parent with two children receives three thousand forints more per month in child benefit than if they lived with a partner in a marriage. When one of the partners "drops out", they become eligible for regular social security benefits since they fall below the income threshold. The children of divorced couples are eligible for bigger grants and can get into dormitories easier. However, the most important reason why many people opt for this solution is to escape the consequences of the property credit crisis. In the Borsod villages the bondsmen of those that ended up in this critical situation do this to avoid losing their own houses.


There is a way out of a demographic disaster

by Balázs Győrffy

The author is a demographer and a researcher at the Hungarian Academy of Sciences.

Europe is shrinking. Immigration offers no solution even in the richest Western European countries. The growth in the proportion of retired people results in the costs paid per worker towards maintaining the state becoming steeply higher. Thus, the ever diminishing numbers of the next generation will have to shoulder a greater burden. A spiral will set in, the end result of which will be the cessation of an organised welfare state. The train of thought below demonstrates that a solution to this problem exists.

1. National consciousness

Let's first take a look at the up-to-date fertility tables for 24 OECD states, i.e. the average number of births per woman. The first five places are occupied by Israel, Turkey, the United States, France and Ireland. It does not require such sharp eye-sight to notice that national consciousness kept alive and supported at state level is by far more efficient than any social and economic measure.

Since nowadays the opportunities to strengthen national consciousness are limited, the question arises: what economic measures could improve the situation? And are there any at all? The example of the two Germanies proves that there are solutions. The fertility rates in both countries plummeted until 1976, when significantly pro-family measures were introduced in the former GDR (longer maternity leave, interest-free credit for young couples, increased child benefit, etc.). The effect of this was that the average number of children per woman, which in 1976 stood at 1.54, rose to 1.94 by 1980.

2. Tax exemption for mothers

Let's try to identify the most critical economic factor that plays the most significant role in increasing people's desire to have children. A positive correlation can be observed in the OECD countries between the gross national product and the fertility rate. It is even more surprising if we compare the fertility rates with the proportion of working women with a child under six. The higher the proportion of working women, the more children they chose to have. The basis of this is the creation of economic well-being. Fertility can therefore be increased if a direct consequence of taking on children brings material improvement for the parents. How can this be realised in Hungary? At present a total of thirty percent of women with a child under six years old are working. In other words, their contribution to tax revenues is minimal. Let's assume that for six years after the birth of a child we exempt mothers from having to pay tax. Taking into consideration the Hungarian tax burden on workers, this would mean a salary increase of some 70 percent. For the sake of our hypothesis, let's assume that the effect would be that one woman would take on a job alongside each woman that presently works (thus the rate of employment in this group would rise to 60 percent). The country's GDP would not change, but mothers would feel that their work was worth much more because they would be taking home more money. If the proportion of working women were to grow from 30 percent to 60 percent and we increased net income by 70 percent, on the basis of the EU countries we can estimate how fertilility rates would change: by an increase of 0.4.

95-98 thousand children are born every year.  This means that at present scarcely more than 60 thousand people would receive this allowance. This is a very small number if we take into consideration that 4.21 million people work in Hungary. An important aspect of bringing in the measure would be that each child would bring equal "profit" for the family. Thus, a mother would receive six years of tax exemption per child, so for two children she would receive 12 years of tax exemption and for three children 18 years. The measure is expedient because it would help mothers bringing up children alone in the same way as those in a marriage.

3. The third child

In regard to the next factor, let's take a look at France. What are the French doing in order to achieve the highest fertility rate within the EU? The answer is simple: people are granted significant economic help upon the birth of a third child. The measures were introduced on a wide scale: a mother receives 916 Euros per month for a year, parents pay half for metro tickets and can travel by train for 30 percent less, and in addition, income tax concessions are granted for the use of a babysitter, for example. Financial support is given when a child starts school and the children of public sector workers even receive a Christmas present. The financial allowance given within the year of the third child's birth is equivalent to the value of a new car.

In Hungary it would be of prime importance to detach benefits based on the principle of personal needs from allowances based on civic rights, the aim of which would be to increase the number of children. (Giving aid-like benefits suggests to people that having children leads to poverty.) The average number of children is above one, which means that on average one child is born per family anyway. Supporting this is therefore completely superfluous. In 2006 46 thousand first children, 33 thousand second children and 13 thousand third children were born in Hungary. Let's follow the French example. Let's assume that we are so poor that there's no more money for further child support, and we direct the whole sum presently available for child benefit (which in Hungary comes to 370 billion forints) to those mothers who give birth to a third child. How much would a mother receive after the third child? The result of our simple calculation is that mothers would be entitled to 113 thousand forints for the third child.

4. My tax allowance is your tax

Family tax concessions emphasize the difficulties of having children and have a highly deterring effect on childless people. A more expedient solution would be to introduce a first tax-free bracket for those with children. Everybody else would have to pay a solidarity tax to support this. This would not increase the state's financial revenue at all and everybody would pay the same tax as now. A great benefit of this system would be that the picture formed in people's minds about the role of children would be different: the emphasis would be on the costs of not having children as opposed to having children. This is another type of measure which while incurring zero costs would be suitable for facilitating an increase in the number of children.        

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