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2 billion HUF (7.5 million EUR) compensation program to trigger job creation

Country of implementation
Hungary
General short description of the innovation
2 billion HUF compensation program to trigger job creation to offset the side-effects of the minimum wage increase in 2001/2002. / /
Target group
Total Population
Policy Field
  • wage
Type of Policy
  • public
Duration of the policy
2001
Scope of innovation
  • Scope: temporal
  • Budgets: 7.5 million EUR
  • Number of intended beneficiaries: n.a.
  • Spatial coverage: national
General description of (intended) objectives and strategies
?The fast increase of the statutory minimum wage in 2001 and 2002 decreased the employment probability in the low skilled/low wage segment of the labour market. Since unskilled/low paid workers were concentrated in high unemployment regions, the job-destruction effect of the minimum wage increase was the most obvious in backward regions. In order to avoid further deterioration of the labour market position of disadvantaged regions and workers, the Government decided that a substantial part of the Labour Market Fund should be re-arranged to finance a new scheme (minimum wage increase compensation subsidy) aimed at preventing the unemployment generating effects of the increase in the minimum wage. The Labour Market Fund provided support via tendering to the companies acting in ?high labour-participation? and ?low-wage-level? areas where the decrease of the contribution could counterbalance a part of cost-driving effects of the minimum wage increase. According to the estimation this support granted primarily to SMs contributed to retaining the jobs of 355 thousand employees in 2002. The minimum wage increase compensation subsidy involved significant resources and limited the funds available for traditional active policies.? / (http://econ.core.hu/file/download/HLM2004/TheHungarianLabourMarket_2004_onefile.pdf, pp.35) /
Nature of the innovation-short-term perspective
Preventing the unemployment generating effects of the increase in the minimum wage
Nature of the innovation-long-term perspective
n.a.
Type of ideal-typical strategy for the innovation
  • dualisation
Type of innovation
  • new policy, practice or measure
New outputs
  • wages (wage support)
Intended target group
Companies
Working age population
  • main source of income: paid work
Employers-private institutional actors
those affected by minimum wage increase
Actors involved in policy-making/implementation and/or evaluation
  • agency or national social insurance body (Labour Market Fund )
  • employers (organised or individual)
Clarification of the role of various actors
The Labour Market Fund provided support via tendering to the companies acting in ?high labour-participation? and ?low-wage-level? areas where the decrease of the contribution could counterbalance a part of cost-driving effects of the minimum wage increase.
Intended output
  • wages (wage support)
Did the innovation have any outcome related to job quantity?
increased, but decreased right away
Intended and unintended outcomes
retention of 355 thousand employees (estimation)
Clarification of outcomes in terms of impacting resilience and labour market inclusion
As a result of the minimum wage increase in 2001 and 2002, employment probability in the low skilled/low wage segment of the labour market decreased. Current measure aimed at to promote job creation through wage support and contributed to retaining the jobs of 355 thousand employees in 2002. Nevertheless, the measure involved significant resources and limited the funds available for traditional active policies.
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