Public works in Hungary: Actors, allocation mechanisms and labour market mobility effects
Public works in Hungary: Actors, allocation mechanisms and labour market mobility effects

Summary/Abstract: This paper reviews the past 10 years of the Hungarian public works system in an international context. It describes changes in the system of public works over time, its various forms, its regional allocation mechanisms and the decision-making and planning process. In that respect, it explores the motivations of the key players, including the central planner, the employment service and the municipalities, as well as their interactions. The analysis is based on interviews conducted in the competent ministries, at national public works providers, the county and district offices of the public employment system and municipalities on one hand, and quantitative data analyses on the entire public works database for the period of 2011-2014, on the other hand. Originally intended to be a labour market policy tool, public works programmes assumed more significant social and municipality management functions, partly because of the extraordinary expansion of their volume. None of their functions performs adequately in the regulatory environment developed; however, they play a key role in mitigating social tensions in disadvantaged rural areas. The planning and regional allocation mechanisms of public works are in many ways similar to the planning procedure of state socialism and provide scope for the of plan bargaining, based on information asymmetry. As a result, this mechanism creates impacts different from the stated objectives in some respects. The most disadvantaged municipalities thus have proportionately fewer public works participants than would be expected based on the number of long-term unemployed. The system of public works has had a considerable impact on local power structures and transformed the functions of mayors. The responsibility for tackling labour market problems was transferred from the competent employment services to municipalities without expertise, which also had a negative impact on the Public Employment Service.

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