Labour market developments in Hungary from a Central Bank perspective Stylised Facts

The purpose of this paper is to stimulate academic discussion on the Hungarian labour market in a policy-oriented framework by collecting some empirical stylised facts and their hypothetical explanations. These stylised facts cover both the area of labour supply and demand, including selected issues of unemployment, labour force participation, employment and wages. Stylised facts of labour supply are put in the context of micro-level conditions of economic growth and supply-side inflationary pressures. Apart from a discussion of developments in the 1990s, by using a long-term demographic projection a detailed analysis of expected labour market activity and employment tendencies is also carried out. I show that although demographic changes will increase the labour force participation rate it can only reach the European average if all demographic groups show a large increase in economic activity. I argue against counting on those out of the labour force or the discouraged workers as a potential labour reserve for future economic growth. In terms of the demand side, I show that besides a spectacular employment growth in manufacturing, public sector employment has also expanded. I also explain why it is misleading to analyse employment or wage developments in a blue-collar versus whitecollar setting. As far as empirical labour market implications of the real exchange literature is concerned, I demonstrate that while wage inflation in nontradables has not been higher than that in tradables, some service sectors in the former aggregate show diverging tendencies.