ESPN Thematic Report on minimum income schemes 2015 Fruzsina Albert October 2015
EUROPEAN COMMISSION Directorate-General for Employment, Social Affairs and Inclusion Directorate C - Social Affairs Unit C.2 Modernisation of social protection systems Contact: Emanuela Tassa E-mail: Emanuela.TASSA@ec.europa.eu European Commission B-1049 Brussels
EUROPEAN COMMISSION European Social Policy Network (ESPN) ESPN Thematic Report on minimum income schemes 2015 Fruzsina Albert (Hungarian Academy of Sciences, Centre for Social Sciences and Károli Gáspár University of the Reformed Church of ) 2016 Directorate-General for Employment, Social Affairs and Inclusion
The European Social Policy Network (ESPN) was established in July 2014 on the initiative of the European Commission to provide high-quality and timely independent information, advice, analysis and expertise on social policy issues in the European Union and neighbouring countries. The ESPN brings together into a single network the work that used to be carried out by the European Network of Independent Experts on Social Inclusion, the Network for the Analytical Support on the Socio-Economic Impact of Social Protection Reforms (ASISP) and the MISSOC (Mutual Information Systems on Social Protection) secretariat. The ESPN is managed by LISER and APPLICA, with the support of OSE - European Social Observatory. For more information on the ESPN, see: http:ec.europa.eusocialmain.jsp?catid=1135&langid=en Europe Direct is a service to help you find answers to your questions about the European Union. Freephone number (*): 00 800 6 7 8 9 10 11 (*) The information given is free, as are most calls (though some operators, phone boxes or hotels may charge you). LEGAL NOTICE This document has been prepared for the European Commission, however it reflects the views only of the authors, and the Commission cannot be held responsible for any use which may be made of the information contained therein. More information on the European Union is available on the Internet (http:www.europa.eu). European Union, 2016 Reproduction is authorised provided the source is acknowledged
Contents SUMMARY... 5 PART I DESCRIPTION OF MAIN FEATURES OF MINIMUM INCOME SCHEME... 6 1 GOVERNANCE ARRANGEMENTS... 6 1.1 Levels of governance... 6 1.2 Delivery arrangements... 6 1.3 Rights-based versus discretionary benefits... 6 2 DESIGN OF MINIMUM INCOME SCHEME... 6 2.1 Level of benefit... 6 2.2 Eligibility conditions... 8 2.3 Conditionality rules... 11 2.4 Duration... 12 2.5 Transitions... 12 3 LINKS WITH OTHER SOCIAL BENEFITS AND SERVICES... 12 3.1 Components covered by minimum income schemes... 12 3.2 Other means-tested benefits... 13 3.3 Passport to other services and benefits... 14 PART II ANALYSIS OF MINIMUM INCOME SCHEMES... 15 1 ASSESSMENT OF ADEQUACY, COVERAGE, TAKE-UP AND IMPACT... 15 1.1 Adequacy... 15 1.2 Coverage... 19 1.3 Take-up... 20 1.4 Impact... 21 2 LINKS TO THE OTHER TWO PILLARS OF ACTIVE INCLUSION... 21 2.1 Inclusive labour markets... 21 2.2 Access to quality services... 22 3 SUMMARY TABLE... 23 REFERENCES... 24 3
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Summary is gradually moving away from a general minimum income scheme (MIS). The conditionality of provisions is increasing. The level of MI (minimum income) benefits was found to be inadequate even in 2009, and since then the situation has deteriorated even further, with a nominal decrease in certain provisions and the abolition of others. Regarding general minimum income schemes, the country lies at the bottom in terms of expenditure, spending the lowest amount (EUR 0.50) per inhabitant (Pena-Casas et al. 2013, p.49). Decisions in relation to MI schemes are made at the national level, while delivery has been the responsibility of the district-level government authorities (járási kormányhivatalok) since 1 March 2015. Some other related benefits are currently regulated by local government, as well as at the national level. Income compensation is mostly rights based: whoever meets the prescribed criteria and conditions receives the benefit. On the other hand, there are quite harsh sanctions and a growing number of conditions that can exclude people; and in the sanctioning process there are discretionary elements. Entitlement to MI benefits is not time limited: it is available so long as the eligibility conditions are met. Regarding expense compensation provisions, the regulations have been prepared by the various local governments, and thus there has been significant variation in them since March 2015. Formerly there were more regulations to enhance transition to employment. The contribution-based unemployment benefit (now called job-seeking allowance or álláskeresési járadék) is available for a maximum of 90 days the shortest duration of such provisions in the EU. Its amount is capped at a maximum of 100% of the effective minimum wage. After 90 days, unemployed people may apply only for the benefit for people of active age. If found capable of work, they may receive employment replacement subsidy (which is fixed, irrespective of the number of members and composition of the family, and which currently amounts to 80% of the statutory minimum for old-age pensions: HUF 22,800 a month (EUR 73.50) 33.6% of the at-risk-of-poverty (AROP) threshold for a one-person household) or else may be employed in public works for approximately 75% of the statutory minimum wage. Recipients of the benefit for people of active age are entitled to healthcare. At present, the eligibility conditions do not ensure that the MI scheme covers all the relevant population at risk. There are no studies on coverage or take-up of MI benefits, despite the fact that we know that approximately half of registered job-seekers do not receive any provisions: the working poor are not included at all in the MIS. Most probably take-up could be increased by easing behavioural conditions; but with the positive exception of the employment replacement subsidy, where the tidy living arrangements condition was removed from the regulations, the opposite tendency is more in evidence. The impact of the MI scheme on reducing the level of poverty can be regarded as moderate, and has been decreasing in recent years. The net replacement rates for long-term unemployment are among the lowest in the EU. Participation in public works increasingly comprises the work-incentive element of basic social provisions (minimum income) for those of active age and capable of work, but the data indicates that public works do not promote employment in the primary job market and cannot lift families out of poverty. There is a need for a legally defined minimum income level, which is based on research and takes into consideration the level of other related benefits. Based on this, the level of minimum income should be calculated as the difference between the available resources of the household and this level. The current level of minimum income should be significantly raised and indexed annually. Conditionality and sanctions exclude thousands in need from the current MIS. 5
Part I Description of main features of minimum income scheme 1 Governance arrangements 1.1 Levels of governance Decisions in relation to MI schemes are made at the national level, while delivery has been the responsibility of the district-level government authorities (járási kormányhivatalok) since 1 March 2015. Some other related benefits are currently regulated by the local governments, as well as at the national level. 1.2 Delivery arrangements Social provisions in cash and kind can be applied for at the local government where the applicant officially resides and the relevant district (either the járás an entity smaller than the county level or the kerület, a district of the capital Budapest). The districts provide income compensation, the so-called benefit for people of active age, which is further split into two separate categories that are financed from the central budget and based on nationally established criteria: (1) the present employment replacement subsidy (foglalkoztatást helyettesítő támogatás), received by those capable of work and of active age, when not working on a public works project, and (2) the current social assistance (for those of active age and incapable of work), which was renamed support for the health impaired and for child supervision (egészségkárosodotti és gyermekfelügyeleti támogatás). The benefit for people of active age can also be applied for at the public employment service where the client is registered; it then forwards the application to the relevant district office. Local governments provide expense compensation provisions, now a single provision called settlement support (települési támogatás) instead of the previous normative housing maintenance support, kindergarten support, debt management services, equity public health provision and nursing fee. 1 Local governments have had to promulgate decrees setting their own criteria for this provision. 1.3 Rights-based versus discretionary benefits Income compensation is mostly rights based: anyone who meets the prescribed criteria and conditions receives the benefit. On the other hand, there are quite harsh sanctions and conditions, which may exclude people from the provision; and the sanctioning process contains discretionary elements. Regarding expense compensation provisions, the regulations are prepared by the various local governments and thus there is enormous variation in them. There are settlements where it is completely arbitrary: it may be solely within the power of the mayor or the notary to decide, without any set of transparent criteria; elsewhere it may be governed by clear rules. 2 Design of minimum income scheme 2.1 Level of benefit The benefit is paid once a month to the eligible household member(s). The monthly amount of the employment replacement subsidy is fixed, irrespective of the number of 1 In Hungarian: lakásfenntartási, óvodáztatási támogatás, adósságkezelési szolgáltatás, méltányossági közgyógyellátás, méltányossági ápolási díj. 6
members and composition of the family, and currently equals 80% of the statutory minimum for old-age pensions HUF 22,800 (EUR 73.50) a month, received monthly by the eligible household member. It was reduced to this amount from 100% of the minimum pension HUF 28,500 (EUR 92) in 2012. The amount of the minimum pension has been the same since 2008: it is up to the government to adjust it. There is no official poverty line in, and most social provisions are tied to this arbitrarily set level of the statutory minimum for old-age pensions. As its adequacy has not been researched, it is not tied to any poverty level and is not indexed. Even this small amount was due to be reduced by 25% in 2015, though ultimately that did not happen. 2 Those who receive employment replacement subsidy may be employed as public workers 3 (they cannot refuse if they do not want to be excluded from this provision); in that sense, the wage for public workers could also be regarded as a kind of social provision and part of the MI scheme. If they are employed full time in jobs that do not require secondary education and skills, the gross wage for public workers from 1 January 2015 has been: Monthly HUF 79,155 (EUR 255) Weekly HUF 18,200 (EUR 59) Daily HUF 3,639 (EUR 12). In the case of part-time employment, the amount is decreased proportionately, though the monthly total net amount cannot fall below HUF 22,800. In case of jobs that require secondary or vocational education, the gross wage since 1 January 2015 has been: Monthly HUF 101,480 (EUR 327) Weekly HUF 23,330 (EUR 75) Daily HUF 4,666 (EUR 15). The special wage for public workers was introduced in 2012 and is around 75% of the minimum wage (or 85% if secondary education is a minimum requirement for doing some public work). In 2013, the wage of public workers was adjusted in line with inflation (raised by 5.2%), but its proportion compared to the minimum wage did not change. In 2014, the wage for public workers was raised by the rate of inflation again (2.4%), to a gross HUF 77,300 (EUR 249), net HUF 50,632 (EUR 163) a month for full-time employment (daily 8 hours) (or in the case of skilled public workers, to a gross HUF 99,100 (EUR 320), net HUF 65,000 (EUR 210)). In 2015, the monthly salary for public workers is, as indicated above, gross HUF 79,155 (EUR 255). 4 Those receiving employment replacement subsidy may be employed in simplified employment (egyszerűsített foglalkoztatás) or housework (háztartási munka) while they receive the full amount of the provision. The monthly amount of the support for the health impaired and for child supervision is the difference between the family income limit and the total family income, but it cannot exceed 90% of the lowest net monthly public salary, presently HUF 46,662 (EUR 150), received monthly by the eligible household member. If a family member in the recipient s household receives employment replacement subsidy, then the provision cannot exceed the difference between 90% of the net wage for public workers (HUF 46,662) and the employment replacement subsidy; thus the maximum 2 At the end of 2014, the prime minister announced a planned further 25% decrease from March 2015, together with the planned complete eradication of this provision by 2018, though ultimately this was not introduced (http://www.vg.hu/kozelet/politika/orban-kozeledunk-a-teljes-foglalkoztatottsaghoz-438113). 3 For the sake of clarity, the term public worker refers to those who are unemployed and working in public works (közfoglalkoztatott) not those workers in the public sector (közalkalmazott). 4 http://www.afsz.hu/engine.aspx?page=allaskeresoknek_ellatasok_osszegei_es_kozterhei 7
it can be is HUF 23,862 (EUR 77). The family income limit is the sum of the consumption units of the household, multiplied by 92% of the statutory minimum pension. 5 The consumption units are calculated in the following way: the first adult family member is counted as 1.0 (or 1.2 in the case of single parents). (Marital) partners are counted as 0.9; the first and the second child are 0.8 per child; all other children are 0.7 per child. Children with disabilities are counted as 1.0. Thus, for a family of two adults and one child the calculation is: HUF 26,220 x 2.7 = HUF 70,794 (EUR 228); for a family of two adults and two children it is: HUF 26,220 x 3.5 = HUF 91,770 (EUR 296). In a family with one child, where the father does not have a job and the mother receives child care assistance the calculation would be: father (1.0) (no income), mother (0.9) (income of HUF 25,650 as child care assistance), one child (0.8), family allowance of HUF 12,200 (for one child); the total number of consumption units is 2.7; total family income is HUF 37,850 (25,650 + 12,200). The family income limit is HUF 26,220 x 2.7 = HUF 70,794. The amount of the support for the health impaired and for child supervision is therefore HUF 70,794 HUF 37,850 = HUF 32,944 (EUR 106). The actual level of MI benefits for different individuals and household types: divorced singles without children: HUF 22,800 (EUR 73.50) if capable of work, HUF 46,662 (EUR 150) if health impaired, two-adult households without children: at most HUF 22,800 + HUF 46,662 = HUF 67,462 (EUR 218) if one is capable of work and the other is health impaired; if both are capable of work, only HUF 22,800 (EUR 73.50), married couples with two children aged 7 and 14 years: at most HUF 22,800 + HUF 46,662 = HUF 67,462 (EUR 218) if one is capable of work and the other is health impaired, or if child care is not provided by the local government; if both are capable of work, only HUF 22,800 (EUR 73.50) (plus two amounts of family allowance 2 x HUF 13,300), and a divorced single parent with one child aged 2 years: HUF 28,500 (EUR 92) child care assistance (plus family allowance of HUF 13,700). 2.2 Eligibility conditions The minimum income scheme was significantly altered from 1 January 2009, following a parliamentary decision of 15 December 2008, modifying social and employment legislation (2008. CVII. Law) within the framework of the Pathway to Work programme. Its basic structure is described in the country report on minimum income schemes in 2009. 6 However, a number of changes and further restrictions have been made since then. Persons of active age on the labour market (between 18 years of age and retirement age) may obtain entitlement to benefit for persons of active age, instead of regular social allowance. Benefit for persons of active age can be provided to long-term residents and persons with the right of free movement (EEA nationals, family members of EEA nationals, family members of Hungarian nationals), who have been resident in for more than 3 months and who are entitled to it, provided they have sufficient income and do not impose a significant burden on the Hungarian social security system. There are two groups of persons entitled to benefit for persons of active age: 5 Until 28 February 2015 it was 90% of the statutory minimum pension. 6 http://ec.europa.eu/social/main.jsp?catid=1025&langid=en&newsid=1416&moredocuments=yes&tablena me=news 8
1. Persons capable of performing work, who can be involved in public works, or in case of lack of work, are entitled to a provision currently called employment replacement subsidy. Persons who belong within this scope are obliged to report to the public employment service (PES) for registration, should cooperate with the PES to enter into a job-seeking agreement, and should complete such an agreement, as well as take part in public works. 2. Since March 2015, persons incapable of performing work have received support for the health impaired and for child supervision (egészségkárosodotti és gyermekfelügyeleti támogatás). First the district government office (prior to March 2015 the local government) decides if someone is eligible for the benefit for people of active age, and then decides which of the two types of benefits is appropriate. Since 2010, only one person in a family has been entitled at any one time to the benefit for people of active age. The only exception is when one person in a family is eligible for the employment replacement subsidy and the other for the support for the health impaired and for child supervision. Those eligible for the benefit for people of active age are those: who have lost at least 67% of their work capacity, have a health impairment of at least 50%, or whose health status does not exceed 50%, based on a complex evaluation of the rehabilitation authorities, or who receive blind people s allowance or support for people with disabilities, or who are no longer eligible for the job-seeking allowance, or whose job-seeking allowance was terminated before its final time limit because they found a job but did not acquire entitlement to a new job-seeking allowance during this employment spell; who, during the previous two years before submitting their claim for the provision, have cooperated with the public employment service or the rehabilitation authority for at least a year; and who no longer receive nursing fee, child care support, child care assistance, regular social assistance, health impairment provision for miners, temporary support, rehabilitation support, disability pension, disability pension due to an accident, provision for people with modified work capacity, temporary widow s pension due to the coming of age of the child, and who cooperated with the public employment service or the rehabilitation authority for at least 3 months prior to submitting the claim. All of these are on condition that the claimant and the claimant s family members cannot sustain themselves in other ways, and do not pursue any gainful activity. With regard to the benefit for persons of active age, gainful activity excludes participation in public works, simplified employment or housework. Means testing means that the applicant is entitled to the benefit if the family has no possessions and the per-consumption-unit net family income does not exceed 90% of the statutory minimum pension (HUF 25,650/EUR 83). Income is all money defined as income by the law on personal income tax, including tax-free income and income on which simplified entrepreneurial tax or simplified public duty contribution (egyszerűsített vállalkozói adó, egyszerűsített köztehetrviselési hozzájárulás) must be paid. Family allowance, orphan s allowance and child maintenance must be taken into account as income of the person to whom it is paid. Expenses defined as such by the personal income tax law and child maintenance paid can be deducted. If someone gets income under the simplified entrepreneurial tax scheme or the simplified public duty contribution scheme, that income can be reduced on production of invoices showing legally defined deductible costs, or else using a 40% flat-rate deduction. The following types of incomes are exempt: funeral allowance (temetési segély), temporary allowance (átmeneti segély), irregular child protection support (rendkívüli gyermekvédelmi támogatás), the component of the regular child protection allowance provided in vouchers (rendszeres gyermekvédelmi kedvezmény), 9
settlement support (from March 2015), fees and allowances paid to foster parents (nevelési díj és külön ellátmány), maternity support (anyasági támogatás), jubilee grant (szépkorúak jubileumi juttatása), in-cash transportation allowances for the mobility impaired (a súlyos mozgáskorlátozott személyek pénzbeli közlekedési kedvezményei), personal annuity for the blind (vakok személyi járadéka), disability benefit for handicapped persons (fogyatékossági támogatás), allowance given to volunteers (az önkéntesnek biztosított juttatás), monthly income derived from occasional work, fees granted to a carer within the framework of domestic assistance (a házi segítségnyújtás keretében kapott tiszteletdíj) and public works income that is above the amount of the employment replacement subsidy.the family is defined, in a narrow sense, as a nuclear family or, more specifically, the head of the family, his/her spouse or cohabiting partner and children below the age of 20 years with no independent income (the age limit is 23 years for a child attending secondary school; 25 years for one in higher education; and there is no age limit for permanently sick, autistic or disabled children, provided their condition existed before they turned 25). Thus the eligibility of any person over 18 years of age and living in the same household as his/her parents is independent of the income of the parents. If an adult child still lives with his/her original family, the parents income should not be taken into account when assessing the child s entitlement. When assessing possessions, the claimant is not entitled if the property of his/her family exceeds the limit defined by law. The limit is set as follows: the value of one piece of property cannot exceed 30 times the minimum old-age pension (öregségi nyugdíj minimum) i.e. HUF 855,000/EUR 2,758; or the value of the whole property cannot exceed 80 times the minimum old-age pension i.e. HUF 2,280,000/EUR 7,355. Property includes usable real estate, the rights associated with that real estate and vehicles. However, it does not include the real estate where the claimant lives, the right connected to that real estate or the vehicle that is used to transport a mobility-impaired person. The benefit for persons of active age cannot be provided for someone: who is in pre-trial detention, sentenced to prison or serving a prison sentence, who has no residential rights or has stopped practising them, who receives child care support or child care assistance, who is entitled to child care support up to the end of the child s first year, who has sufficient employment history to gain entitlement to job-seeking allowance, who is in military service, who is in full-time public or higher education, who receives salary replacement provision (keresetpótló jutattás) as a training support, who receives provision for those with modified work ability, and who, based on the law on equal opportunities and treatment, receives a provision to enhance inclusion (felzárkóztatást elősegítő megélhetési támogatás). The provision of the benefit for persons of active age is terminated: if the entitlement ceases to exist for the above-mentioned reasons, if the recipient hinders supervision of the conditions of entitlement or the amount of the financial provision, from the ninety-first day of gainful activity, if illegal employment is detected for a second time during a two-year period while receiving the provision, or 10
in case of those whose entitlement to employment replacement subsidy or support for the health impaired and for child supervision has had to be terminated. The employment replacement subsidy is provided to those found eligible for benefit for persons of active age, provided they are not entitled to support for the health impaired and for child supervision. The support for the health impaired and for child supervision replaced the former regular social support on 1 March 2015. The entitlement of those receiving the former provision had to be verified by February 2015. Those eligible are people who: are qualified as health impaired, or have at least one child under the age of 14, provided other family members do not receive child care assistance or support and provided daytime provision for the child(ren) under the age of 14 cannot be supplied by the local government. However, this new support from March 2015 only includes two of the four previously included target groups. Those about to retire within 5 years (approx. 17,000 people) and those who, before March 2015, received this provision on the basis of local decrees (approx. 7,000 people) were informed that, if they were willing to cooperate, they would be entitled to the employment replacement subsidy and participation in the public works scheme. Thus, those groups may have remained without provision (Mózer et al. 2015, p.52). 2.3 Conditionality rules Those receiving the employment replacement subsidy must register as job-seekers with the PES and cooperate with it. The PES must be contacted within 15 days from notification of legal entitlement. Those receiving the employment replacement subsidy have to accept any employment opportunity offered. If they refuse, their entitlement to the provision must be terminated. A person s entitlement to employment replacement subsidy is also terminated if he or she: illegally terminates his/her public works employment or has the public works employment contract terminated by the employer with immediate effect, is removed from the list of registered unemployed by the PES for some reason attributable to the recipient, does not apply to register as unemployed within the given time-frame when granted benefit for persons of active age, cannot fulfil his/her duty of at least 30 days of employment at the yearly revision of the benefit. This may include participation in: o o o o public works, any gainful activity (including simplified employment or housework), a labour market programme, or at least 6 month-long training defined by the employment law. These above-mentioned activities can be combined. If this 30-day condition cannot be met this way, they can even include the duration of voluntary work in the public interest. If the above conditions still are not met, the provision must be terminated. As a general rule, the provision can resume within 36 months of termination without the need to meet the requirement of prior cooperation, if the other conditions are met. However the benefit cannot be provided again without meeting the cooperation requirement if it was terminated due to a sanction, such as obstructing supervision, 11
repeated illegal employment, lack of cooperation with the PES, refusing a job offer, violating an obligation while in public works 7 or not satisfying the minimum 30-day work requirement. Those receiving support for the health impaired and for child supervision have no obligation to cooperate any more. Up to March 2015, those who received regular social assistance had to cooperate with the authority that the local government nominated most often the family support services; but this commitment has been abolished. The benefit for people of active age is suspended for a month if the authorities identify illegal employment for the first time. If it happens again within 2 years, eligibility to the benefit is terminated. Any change of circumstances must be reported to the relevant authorities within 15 days. Previously, some benefits were cut because of conditionality introduced in 2012. Local authorities acquired the right to define eligibility conditions other than cooperation with agencies that help in providing access to jobs. These conditions intruded on people s privacy for instance with home visits to monitor the tidiness of the home or its surroundings. Since March 2015, there have been no such conditions regarding the benefit for people of active age, which is a positive step forward. However, the situation is the reverse of this regarding other linked provisions, primarily settlement support. 2.4 Duration Entitlement to MI benefits is not time limited: it is available so long as the eligibility conditions are met. At least once a year, the district office supervises entitlement in case of the employment replacement subsidy. If the eligibility conditions are met, the provision continues. Besides the recipient s financial circumstances, they consider whether, during the 12 months, the recipient has participated for at least 30 days in work activities (see Section 2.3 above). So as to become eligible again, 30 days of work must be certified, but the law does not specify that it must be a full-time activity. Eligibility to the support for the health impaired and for child supervision is checked every 2 years. 2.5 Transitions Formerly there were more regulations to enhance transition to employment, as described in the 2009 report on MIS (Albert 2009). At present, the employment replacement subsidy is suspended within the first 90 days of an earning activity. If employment continues, the provision is terminated and must be reapplied for. If the employment ceases to exist within the first 90 days, the employment replacement subsidy continues to be provided. It is also suspended during participation in public works or in training as part of which one receives the provision to enhance inclusion (felzárkóztatást elősegítő megélhetési támogatás). 3 Links with other social benefits and services 3.1 Components covered by minimum income schemes No other costs are covered by the scheme. However, certain types of universal family provisions should be mentioned here. Universally available support includes cash 7 Although a tidy living environment is not a condition for receiving employment replacement subsidy any more, such a condition exists for the public works scheme (among others). If one is excluded from the public works scheme, one is also excluded from the employment replacement subsidy. 12
benefits: the family allowance, childcare allowance (GYES), child raising support (GYET) and maternity support. Family benefits play a very significant role in alleviating the financial situation of the poorest families with children, since these benefits amount to an average of 18% of overall household income for families in the lowest income deciles (Szívós and Tóth 2013, p.41). The amount of family allowance is differentiated according to the number of children, and it also depends on whether the child (children) is (are) raised by a single parent, and whether or not the child is disabled. In order to ensure a child s regular school attendance, from 30 August 2010 family allowance has been paid as a schooling benefit to families whose children are of compulsory schooling age. In the event of a certain level of unjustified absence from school (50 lessons), the benefit is suspended. If the child begins attending school again, the equivalent amount of schooling benefit missed during suspension has to be paid to the family in kind. This measure affects socially excluded families to an increased extent, and sanctioning has further tightened. Truancy used to be sanctioned by suspension of the family allowance, which would then be paid after the truancy ended. But now the allowance is withdrawn entirely (Darvas and Farkas 2012, p.37). A person can also be excluded from public works if the authorities find him/her responsible for the truancy of his/her child. From September 2015, compulsory kindergarten attendance was introduced for children aged 3 years and older. If a child is unjustifiably absent from kindergarten for 20 days, the family allowance will also be withdrawn. To compensate for the financial burdens of having children, women who give birth to a child having participated in the pregnancy care programme at least four times are entitled to a lump-sum maternity grant, the amount of which is 225% of the minimum pension, or 300% in the case of twins. The child care allowance (GYES) is a flat benefit paid to parents who stay away from the labour market until their child is 3 years old (or 10 years old in the case of permanently ill or severely disabled children), or to grandparents who look after their grandchildren between the ages of 1 and 3 years in the parents household. In the case of twins, this support is paid until the children reach school age (usually 6 years). The amount of the allowance is the same as the minimum pension, or double that amount in the case of twins. Those parents who raise three or more children in their own homes (and with the youngest aged between 3 and 8 years) and who work a maximum of 4 hours a day are eligible for child-raising support (GYET). The monthly amount of this support is the same as the minimum pension, regardless of the number of children. 3.2 Other means-tested benefits The contribution-based unemployment benefit (now called job-seeking allowance or álláskeresési járadék) is available for a maximum of 90 days, the shortest duration of such provisions in the EU. Its amount is 60% of the labour market contribution base, but is capped at 100% of the effective minimum wage when the provision starts. Afterwards unemployed people may apply only for the benefit for people of active age, described above. Somewhat related to MIS is the nursing fee, which is provided for those taking care of their disabled or permanently ill relatives or children and who thus cannot pursue any gainful activity. It is differentiated depending on the level of the demand for care basic, increased and priority (introduced from 2014). The basic fee is HUF 29,500 (EUR 95) in 2015, the amount being determined in the annual budget. The increased fee is 150% and the priority fee is 180% of this basic sum. A nursing fee based on fairness cannot be provided after 1 March 2015. From March 2015, local governments have offered expense compensation provisions, which is now a single provision called settlement support (települési támogatás), instead of a number of previous, partly normative and partly discretionary provisions in a number of fields: the previous normative housing maintenance support, kindergarten support, debt management services, equity public health provision and 13
nursing fee were all terminated. 8 Local governments had to pass decrees by the end of February to set the criteria for this provision locally, which includes support to cover regular housing-related expenses, support for carers aged at least 18 years taking care of their permanently sick relatives, to cover the costs of medication, to support those in debt due to their inability to cover their housing costs, and to provide temporary emergency support for those in an extraordinary or life-endangering situation. The law only set an upper limit for such a provision the minimum pension (HUF 28,500/EUR 92 a month). Settlements with more significant income (with at least HUF 32,000/EUR 103) tax capacity per capita monthly) should create their own source for this support, and the room for manoeuvre for local governments to levy local taxes has been extended. Settlements unable to generate the necessary tax incomes can apply for funding to cover social expenditure. Free or discounted meals in crèches, kindergartens and primary schools have been provided to children from families with low levels of income or with three or more children. In addition, for years there have been programmes to support the nutrition of poor children during the school summer break. The child protection benefit is a passport-type benefit. When granted, it not only slightly increases the family income, but also establishes entitlement to free or lowcost preschool and school meals and free textbooks for some groups of recipients. However, the fact that neither the amount of the benefit nor the eligibility ceiling has changed in recent years effectively means a decline in the value and an everdecreasing circle that is entitled to provision. Furthermore, from October 2012 the benefit must be provided in kind, in the form of so-called Erzsébet vouchers. 3.3 Passport to other services and benefits Recipients of the benefit for people of active age are entitled to healthcare during the period of entitlement and for a further 45 days after its termination. 8 In Hungarian: lakásfenntartási, óvodáztatási támogatás, adósságkezelési szolgáltatás, méltányossági közgyógyellátás, méltányossági ápolási díj. 14
Part II Analysis of minimum income schemes 1 Assessment of adequacy, coverage, take-up and impact 1.1 Adequacy is moving away from a general minimum income scheme. The conditionality of provisions is increasing. Of the OECD countries, was the only one where cash income support (unemployment + social assistance) for those of active age decreased significantly between 2007/08 and 2012/13 (by 6% in real terms), and thus moved further and further away from the poverty threshold (OECD 2014). The government has decreased overall spending on social benefits paid (in 2010 it was 15.7% of GDP; after a steady decrease the figure was 14% in 2014). 9 The share of GDP taken up by government spending on unemployment benefits decreased from an already low 0.8% in 2008 to 0.4% in 2013. Regarding general minimum income schemes, the country lies at the bottom in terms of expenditure: the expenditure incurred, as a proportion of GDP, varies from 0.01% of GDP in to 1.25% in the Netherlands. The amounts per inhabitant show the greatest variation, ranging from EUR 0.5 per inhabitant in to EUR 369 in the Netherlands (Pena-Casas et al. 2013, p.49). The level of MI benefits was found to be inadequate even in 2009, and since then the situation has deteriorated even further, with a nominal decrease in certain provisions and the abolition of others. The country report on minimum income schemes stated even in 2009 that: By way of the criticism, the low eligibility ceiling and the low benefit amount can be mentioned The minimum pension, which is a basis of calculations for all social provisions, was below the Central Statistical Office relative minimum subsistence level indicator already when it was introduced, and it has been getting further away ever since. The real value of the minimum pension is only 65.8% of that in 1990. 10 There may be serious doubts about how much such a sum of the current minimum provision could guarantee to ensure basic needs at minimum standards of living (Albert 2009, p.20). Since then, the amounts of basic social provisions have not increased, or have even decreased. Thus, even without further restrictions, there has been an automatic loss of purchasing power due to inflation. The real value of the statutory minimum pension is estimated to have decreased by 20% between 2007 and 2013 (GYERE 2014, p.148). Recent changes to the law (2012 CXVIII.) stipulate that a proportion of social assistance formerly provided in cash can only be provided in vouchers to buy food products ready for consumption. As to the employment replacement subsidy, its amount already deemed inadequate in 2009 was further decreased in 2012 from 100% of the statutory minimum pension to 80% now HUF 22,800 (EUR 73.50) a month, just 33.6% of the at-risk-ofpoverty threshold for a one-person household, based on EUROSTAT 2014 data. The amount did not change in 2013 2015 and is due to remain the same in 2016. From 2010 on, only one person in a family could be eligible for this benefit. For the sake of comparison, in 2015 the new gross minimum wage increased to HUF 105,000 (EUR 339), and for skilled workers to HUF 122,000 (EUR 394). In 2014, the relative poverty threshold was HUF 67,746 (EUR 219)/month (60% of the median income) for a single person, and HUF 142,268 (EUR 459) for a family of two adults and two children. The minimum monthly subsistence level calculated by the Central Statistical 9 http://ec.europa.eu/eurostat/tgm/table.do?tab=table&init=1&language=en&pcode=tec00026&plugin=1 10 Nyugdíjasok, nyugdíjak [Pensioners, pensions] 2008. Available at: http://mek.oszk.hu/06200/06217/06217.pdf, p.23. 15
Office for 2014 was HUF 87,351 (EUR 282) for a single-adult household, and HUF 253,318 (EUR 817) for a family of two adults and two children. 11 Family allowance has remained unchanged since 2009; the normative home maintenance support was abolished in March 2015 and an often discretionary settlement support was introduced instead. Table 1: Income compensation benefits 2009 2013 12 Support 2009 2010 2011 2012 2013 Average monthly number of recipients regular social assistance employment replacement subsidy 71,816 35,894 50,647 38,031 36,824 167,287 174,539 209,918 236,609 211,760 nursing fee 55,200 56,853 57,970 57,973 58,179 Budget (in 1000 HUF) regular social assistance employment replacement subsidy 23,111,000 11,537,455 15,819,883 11,548,293 11,191,800 46,406,530 57,752,601 63,325,363 62,302,260 57,888,731 nursing fee 18,176,986 19,489,808 20,461,887 20,681,819 21,493,885 Monthly per capita amount (HUF) regular social assistance employment replacement subsidy 26,817 26,786 26,030 25,305 25,327 23,117 27,574 25,139 21,943 22,781 nursing fee 27,441 28,567 29,415 29,729 30,787 11 Létminimum [Minimum subsistence] 2014. Available at: http://www.ksh.hu/docs/hun/xftp/idoszaki/letmin/letmin14.pdf 12 https://www.ksh.hu/docs/hun/xstadat/xstadat_eves/i_fsp010b.html 16
Table 2: The net monthly HUF amount of provisions, including family allowance, and its ratio to the minimum subsistence level 13 and relative poverty threshold (60% of median income), 2015 divorced singles without children 2-adult households without children married couples with 2 children aged 7 and 14 divorced single parents with one child aged 2 years MSL Relative poverty threshol d % of MSL % of relative poverty threshold 87,351 67,746 ERS 22,800 26% 33.6% 152,864 101,619 1 ERS +1 SHI 253,318 155,816 1ERS +1SHI+ 2 FA 144,129 88,070 Child care assistance + FA SHI 46,662 53% 69% PW 51,847 59% 76% MW 68,775 78% 101.5% 22,800 + 23,862 = 46,662 30% 46% PW 51,847 34% 51% MW 68,775 45% 68% 22,800 + 23,862 + 26,600= 73,262 PW + 2 FA 71,847 + 26,600= 98,447 MW + 2 FA 88,775 + 26,600 = 115,375 28,500 + 13,700= 42,200 PW + FA 61,847 + 13,700 = 75,547 MW + FA 78,775 + 13,700 = 92,475 29% 47% 39% 63% 45% 74% 29% 48% 52% 86% 64% 105% Note: ERS = employment replacement subsidy; SHI = support for the health impaired and for child supervision; PW = public works; MW = minimum wage; FA = family allowance; MSL = minimum subsistence level. The former social assistance (terminated in March 2015) was first maximised at the level of the minimum wage, regardless of the household size; then in 2011 it was further reduced to the level of the significantly lower public work wage. The maximum of the monthly support was HUF 57,815 in 2009; HUF 60,236 in 2010; HUF 60,600 in 2011; HUF 42,326 in 2012; HUF 44,508 in 2013; HUF 45,568 in 2014; and HUF 46,662 in 2015. 13 This is calculated by the Central Statistical Office. It is a sum that assures satisfaction of the needs of households on a modest level that may be considered adequate for the given development of the country. This subsistence minimum is, however, not generally accepted as a good reference, since it is considered to be too high (above the 60% median AROP threshold, and approx. 40% of the population lives below this level), so it was announced that from next year on the Central Statistical Office will publish a different measure. 17
As Table 2 indicates, the employment replacement subsidy and the support for the health impaired and for child supervision is most often not enough to help families reach even 50% of the income poverty level (AROP). The wage for public workers offers a somewhat better income position, but it is still below the poverty line. The special public wage was introduced in 2012 at 77% of the minimum wage (or 85% if secondary education is a minimum requirement for doing some public work). In 2013, the wage of public workers was adjusted in line with inflation (was raised by 5.2%); in 2014 the wage for a public worker was again raised by the rate of inflation (2.4%). Those in public work receive the child tax reduction: the net public work salary is HUF 51,847 for those without children; HUF 61,847 for those with one child; and HUF 71,874 for those with two children. Albeit in return for a reduced salary, public works do provide an opportunity for those who are furthest from the labour market to achieve significantly higher income than the employment replacement subsidy, and also to maintain their eligibility for benefits; yet this income still seems inadequate to lift recipients out of poverty. Even regarding the minimum wage, it seems just enough to lift households above the AROP poverty line, but not the minimum subsistence level. Based on EUROSTAT, the AROP rate among unemployed persons increased from 44.9% in 2010 to 50.8% in 2013 and 52.7% in 2014. Meanwhile, a declining proportion of people from low-status, high poverty-risk groups live in unemployed households (with low work intensity): in particular the Roma have seen a very significant decrease of 20%. This is most probably a result of the wide-scale public works scheme. In, the level set for the minimum wage is relatively high, which acts as an incentive to find work; in addition the amount of provisions is very low. The fact that the AROP index of single-earner households has increased indicates that if someone in an unemployed household becomes employed in the public works scheme, work intensity improves, but that is insufficient to lift the household out of poverty (Gábos et al. 2014, p.45). Regarding expense compensation provisions, which from March 2015 is a single benefit called settlement support (települési támogatás), comprising among other things the formerly widely available and normatively based home maintenance support, we cannot even give an estimation. As indicated earlier in the report, this provision is now regulated by local governments. The law only set an upper limit on such a provision: the minimum pension (HUF 28,500/EUR 92 a month for the next year as well). This more significant role of local government clearly poses a risk of the spread of discriminatory practices (especially in smaller settlements that lack sufficient capacities) (EMIN 2014, p.6), but no comprehensive study on the subject is yet available. 14 There has only been one scientific study, analysing a small, but representative sample of 1% of the settlements (31 local decrees). Its focus was on support related to housing costs, and especially the former normative home maintenance support and debt management services. The study showed that provisions have become more limited, and their allocation more unfair. 15 Those households living on the smallest amounts receive less support, as do those with many children. Five of the 31 municipalities of the study provide no support, and only five provide debt management services; while in one municipality the provisions have remained unchanged. Often the mayor, the notary or the municipality officials decide on the amount a person can receive. The study emphasises the significance of the former, widely accessible, though quite low home maintenance support, indicating that for a 14 Some newspaper articles appeared presenting the wide variation in local measures, e.g. Eltérő segélyek Pesten és Budán. Nagy a szórás a bajban, HVG, 3 March 2015, available at: http://hvg.hu/itthon/20150303_eltero_segelyek_pesten_es_budan_nagy_a_sz or Szegény és pont itt lakik? Pech, Index, 9 February 2015, available at: http://index.hu/belfold/2015/02/09/szegenyseg_segely_segelyezes_onkormanyzat/ 15 Although the legislator provided a quite detailed and thorough outline for the local decree which local governments could easily have adopted, they seem not to have done so. 18
family living on public works wages, the former support was HUF 8,800 65% of their housing costs. The abolition of debt management services may also increase the risk of evictions in 2013, 8,166 people used these services and the linked debt reduction support (adósságcsökkentési támogatás) (Kováts 2015). It seems problematic that settlement support is based on discretionary criteria and that recipients are dependent on the goodwill of the local authorities. Normative home maintenance support could have been included among the income-compensation measures paid by central government. Also, the legislation could just as well have set a minimum limit for such a provision. 16 Agreeing with the experts from the Hungarian Minimum Income Network, there is a need for a legally defined minimum income level that is based on research and that takes into consideration the level of other related benefits. Based on this, the level of minimum income should be calculated as the difference between the available resources of the household and this level. The current level of minimum income should be significantly raised and also indexed annually (EMIN 2014). 1.2 Coverage Very briefly, it can be stated that at present eligibility conditions do not ensure that the MI scheme covers all the relevant population at risk. While trying to establish a workfare society (munkaalapú társadalom), using worktest to limit the circle of recipients of social provisions by analysing whether someone deserves to be helped, the system excludes those who prove to be undeserving. 17 The conditionality of the benefits and the sanctions attached to them are both increasing. For example, in 2012 a condition was introduced that only those people who had worked for at least 30 days in the previous year were eligible for the employment replacement subsidy. Some of the measures include discretionary elements. A number of people are excluded from the system due to sanctions. There is very limited data available, 18 but in 2014 approx. 3% of recipients of the employment replacement subsidy were excluded from the system for failing to meet the condition stipulating the need to have worked for 30 days in the previous year. As to public works, based on the available data, in 2014 only 0.16% of public workers were excluded from the system for failing to meet the conditions; in 2015 the figure is 0.64%. Others do not register, but one can only hazard a guess why: there have been no studies on the issue, despite the fact that we know that approximately half of all registered job-seekers do not receive any provisions. As the working poor are not included in the minimum income scheme at all, their involvement could also be considered. As for the restructuring of the system in March 2015, we received data from the Ministry of Human Capacities (see Table 3). It seems that the fears mentioned in Section 2.2 of Part I that those due to retire within 5 years and receiving social assistance based on local decrees may drop out of the system were largely unjustified: the number of recipients decreased by only 2,235, although formerly 21,272 people had been receiving benefits that were no longer available. It seems that the majority of these recipients most likely moved into the category of employment replacement subsidy recipients, receiving probably lower amounts and complying with stricter conditions (including willingness to cooperate with the PES and participate in the public works scheme). 16 A recent analysis of this restructuring, just published, mainly voices previous concerns about this change. See Mózer et al. (2015). 17 For a detailed analysis, see also Szikra (2014). 18 The data quoted was kindly provided by the Ministry of Human Resources and the Ministry of the Interior. 19