The impact of changes in competitiveness on labour market and human resource development, the case of Hungary

The concept of the competitiveness of a country’s economy is closely linked to the labour market. The most obvious and best known reason for this is that labour productivity is a key factor in shaping competitiveness. At the same time, changes in competitiveness (for example in branches) may induce considerable labour reallocation, job destruction and/or job creation, wage push or wage increase, productivity changes, etc. The history of the economic transformation in the Central and Eastern European (CEE) accession countries provides ample evidence of this. The changes are reflected in marked shifts not only in labour demand, but on the supply side. Shifts in the educational composition of the workforce indicate response by the population to changes in demand and in expectations of the future. The employment fall in Hungary (and most CEE countries) was accompanied by a major shift, mainly out of agriculture, but also from industry to services. The trend continued. Agriculture’s share of employment almost halved between 1992 and 2000 (from over 10 to 5–6 per cent). Industry’s share fell too, but much less (from almost 30 to 27 per cent) over the same period. The gain in employment was in the service sector, whose share of employment rose from 54 to 60 per cent. Growth of industrial production became significant as early as 1994, but employment was still declining in the sector, so that labour productivity increased to a marked extent.