Chapter 1
The socio-economic environment of education

1.1. The international environment of public education

Until most recent times, the development of the Hungarian public education system was shaped by internal factors. Public education was initially exposed to international influences in the mid-nineties, on the occasion of joining the OECD. In the new millennium, the most important international influences are mainly related to the accession to the European Union. Hungary is becoming a member state in a period when the role of coordination of educational policies within the European Union is of an increasing importance. Participation in the ‘Lisbon process’ aimed at achieving the ‘future common objectives’ of educational systems will force Hungarian decision-makers and educational experts to re-consider the future of public education system in terms of quality and effectiveness, access to education and training, and equal opportunities.

International influences may affect Hungarian public education in a number of ways. The recession of the world economy and a slower economic growth in the EU are particularly unfavourable factors for employment, because more than two thirds of our export is sold on the markets of the EU. In the early 1990s, Hungary presented fairly attractive opportunities to foreign investments, due to cheap and well-qualified workforce. Following the sudden explosive increase in South East Asia’s appeal to foreign capital at the end of the 1990s, Hungary’s attractiveness should no longer lie in cheap, but rather in highly qualified and reliable workforce and developed infrastructure, and – last but not least – social stability.

1.2. The changing political and socio-economic factors affecting public education

In the spring of 2002, following the general elections, a coalition of socialist and liberal political parties (Hungarian Socialist Party and Alliance of Free Democrats, respectively) formed a new government, replacing the previous coalition of national conservatives. The position of the Minister of Education was taken by a representative of the Alliance of Free Democrats. Educational responsibilities were redistributed in the new government. The overall responsibility for human resource development was transferred from the Ministry of Education to the newly formed Ministry of Labour and Employment.

As far as the internal social and political environment of the system of public education is concerned, Hungary’s entry into the European Union is of great importance. The membership treaty was signed in Athens on 16 April 2003. Based on this document, Hungary will become a member of the political and economic community of the European states by the spring of 2004. This historic event may facilitate changes in the economic development by decreasing the risks accompanying globalisation, and providing an opportunity to diminish social and regional differences.

The European Union provides substantial support for less developed member states through the system of structural funds. Hungary may benefit from this support according to the priorities determined in the National Development Plan (NFT), elaborated by the government. The system of public education will benefit from the resources of the European Social Fund through the Human Resource Development Operational Programme (HEFOP), a constituent part of the NFT. It identifies several priorities that directly or indirectly – require the improvements of the system of public education. According to preliminary estimates, the total amount of structural funds support may reach HUF 150–210 billion per year, 20% of which (approx. HUF 35–40 billion) may be spent on the development of the education system, research and development sector.

Table 1.1.
Priorities and measures of the Human Resource Development Operative Programme of the National Development Plan

Priority	Measure
Supporting active labour market policies	Preventing and tackling unemployment
	Development of the Public Employment Service
	Promoting the participation of women in the labour market and reconciliation of work and family lives
Fighting social exclusion by promoting access to the labour market	Ensuring equal opportunities in education for disadvantaged students
	Promoting social inclusion through the training of professional working in the social field
	Improving the employability of disadvantaged people, including the Roma
Promoting education and training as part of lifelong learning policy	Development of the skills and competencies required for life-long learning
	Development of the content, methodology and structure of vocational training
	Development of the structure and content of higher education
Developing adaptability and entrepreneur skills	Training promoting job-creation and development of entrepreneurial skills
	Developing the system adult training
Developing the infrastructure of education, social services and health care	Developing the infrastructure of education and training
	Developing the infrastructure of services supporting social inclusion
	Development of health care infrastructure in regions lagging behind
	IT development in health care in regions lagging behind

Source: HEFOP, 2003

In the spring of 2003, the Ministry of Education (OM) allowed for the open debate on the initial draft of its mid-term strategy for developing the system of public education. This document identifies several priorities, which match the actual measures of the National Development Plan (NFT). The priorities highlight the corresponding elements in the objectives of the Hungarian educational policy and the goals of the educational policy of the European Union, providing opportunities to receive community support and using the resources of European Social Fund to achieve various domestic objectives.

One of the greatest challenges for the Hungarian public education system is the permanent and large-scale decrease in the number of children, which has been a noticeable factor since the late 1990s. This led to the deterioration of the optimal use of school buildings, causing problems of size efficiency and inevitably forcing school maintainers to introduce measures of rationalization. School maintainers are in fact forced to find a swift solution to all these problems, since the increase in the costs of education – due to pay rises, and the need to improve infrastructural conditions – leads to significant decrease in the cost-effectiveness of education.

It could seem to be a good solution for the utilization of idle capacities to keep the students in the educational system as long as possible and to broaden the duties and responsibilities of teachers. However, these opportunities are limited by the budget restraint and the continuous changes in the economy and the labour market. Due to the rapid changes in technology, the creation and termination of job opportunities and the importance of upgrading skills, adults are more and more interested in taking part in adult training on a continuous basis. Consequently, the society is compelled to spend a growing proportion of educational resources on adult training, restricting the opportunities of the system of public education and limiting its further expansion. At the same time, however, the involvement of schools in the implementation of lifelong learning provides new opportunities for public education.

1.3. Changes in regulations concerning public education

In the period under review there were considerable changes in the legal provisions of education. In 1999, 2002 and 2003 there were significant amendments to the Public Education Act of 1993. Furthermore, various newly established Acts had direct effects on the system of public education: regulations on the textbook market; on adult training; on the payment of compulsory vocational training contribution and on the development of the training system. Additionally, there was an amendment to the Public Employee Act, regulating the employment of teachers. Furthermore, many additional acts regulating the socio-economic conditions of Hungary also had an effect on the system of public education. The most important of these was the annual budget, which corrected various financial provisions of the Public Education Act on several occasions.

Various governmental and ministerial decrees were issued in this period, concerning the introduction of frame curricula, the school-leaving exam concluding secondary education and the quality assurance and quality improvement system of public education. The Ministerial Decree concerning the operation of educational institutions was amended and the regulatory function of the annual ministerial decrees gained greater importance. Many of the newly introduced provisions may have a significant effect on the future of organization of school-level education, therefore in the course of the legislative process, the regulations attracted great professional and public attention.

1.4. Demographic trends

1.4.1. The population of Hungary

In recent years, there was a continuation of the former unfavourable demographic trends. A low – and decreasing – birth rate was characteristic for the 1990s. According to long-term forecasts, the number of students in public education will drop by one sixth between 2001 and 2015. It urges policymakers to cope with this situation, otherwise the effectiveness of the educational system will become even worse.

The demographic trends of Hungary are similar to those of other countries. However, whilst the decreasing fertility rates are a common feature in the member states of the European Union as well as in acceding countries the mortality rates are far better in these countries than in Hungary.

1.4.2. Educational attainment of the population

The average level of educational attainment of the population continues to improve, yet there is still a significant group, which finishes studies after completing the 8th grade of the general school education. The proportion of the population over 18 years of age that had completed the 12th grade considerably increased compared to the previous decade: this ratio was below 30% in 1990, and was approximately 39.5% in 2001.

Figure 1.1.
Estimated school-age population between 2002 and 2010 (thousand learners)

Source: Sugár, 2003

Figure 1.2. Educational attainment of the population, 1960, 1970, 1980, 1990 and 2001(%)

Source: Population Census of 2001, KSH, 2002

It is noticeable that even by international comparison, in every decade the proportion of young people enrolled into higher education continues to increase, and simultaneously, the proportion of those leaving the system of education having completed secondary school studies is increasing. It is also noteworthy that in practically all age groups, the proportion of those without upper secondary qualifications (ISCED 3) is below the EU-average.

Figure 1.3. Percentage of people who do not have an upper secondary qualification, by age group, 2000

Source: Key data..., 2002

1.5. The economy and the labour market

1.5.1. Changes in economy between 1998 and 2002

Between 1997 and 2002, the Hungarian economy grew more dynamically than the economies of developed countries. In the five-year period between 1997 and 2001, the annual growth of GDP was on average 4.5%. This favourable trend slowed down to some extent in 2002, but according to the preliminary findings for 2002, the 3.3% growth rate of the GDP is still three and a half times the amount of the 0.9% EU average. At the same time, the annual growth rate of the economy in 2001-2002 places Hungary in the lower third in comparison with other Central-Eastern European countries, even though Hungary had the most dynamically growing economy in the region in 1998.

The per capita GDP (adjusted for purchase power parity) in Hungary was 52.8% of the EU average in 2002. Budapest, the most highly developed central region of Hungary achieved 83.5% of the EU average, while the most underdeveloped Northern Hungarian region achieved a mere 34.6%.

The rate of inflation dropped from 10% in 1999 to 5.3% in 2002. However, analysts warn that the resources for further growth will shortly be exhausted and the economy is facing problems (high deficit in the balance of payments and in the budget).

The budget deficit in percentage of the GDP¹ dropped from 8% in 1998 to 3% in 2000, but later began to increase. In 2001 it reached 4.1% of the GDP and in 2002 the official budget deficit was around 10% of the GDP, which is unusually high even in international comparison. This was partly due to provisions resulting in the large-scale outflow of revenues following 1998, such as the rise in the minimum wage or the pay rise of public employees and civil servants.

1.5.2. Labour market trends

Changes in the structure of employment

In the changing economy, the structure of employment regarding regional and sectoral characteristics underwent significant changes. The proportion of workforce among the major sectors of the economy has changed in harmony with international trends. Employment in agriculture sector decreased significantly while the number of those employed in the services sector increased. In 2001, 6.2% of the workforce was employed in agriculture, 34.2% in industry and trade and 59.6% in services (EU: 4.4%, 26.9% and 68.8%, respectively). The structure of employment was considerably affected by the severe downsizing of companies, which was brought about by the economic crisis following the transition. By 1999, private and micro businesses accounted for over one million jobs, including self-employment.

The rate of economic activity

In highly developed countries one of the key political and socio-economic objectives is to involve as much of the potential labour force as possible. Full employment has been a key objective in EU employment policy since the Lisbon summit. In 2001, the activity rate of the 15–74-year-old population was 53.3% in Hungary, and 64.4% of the employment-age population. Active measures (retraining) proved less effective then passive measures (early retirement or disability pensions) in dealing with unemployment. The latter, however, increases the proportion of the inactive working age population to such an extent that it may lead to a split in Hungarian society. Due to stagnating employment levels and the large size of the inactive working age population not actively seeking employment, Hungary has the smallest working population in the 15 member states and 10 acceding countries of the European Union.

Table 1.2.
Economic activity of the 15–74-year old population, 2001 (in thousands)

Age	Employed	Unemployed	Economically active population	Economically inactive population	Of which passive unemployed	Activity rate (%)	Rate of unemployment (%)
15–19	46,6	12,5	59,1	549,7	8,8	9.7	21.2
20–24	413,5	43,2	456,7	354,7	13,8	56.3	9.5
25–29	567,7	42,5	610,2	196,0	13,7	75.7	7.0
30–39	974,6	55,3	1029,9	255,1	25.6	80.1	5.4
40–54	1570,9	71,0	1641,9	525,0	38,1	75.8	4.3
55–59	224,3	7,1	231,4	386,1	5,7	37.5	3.1
60–74	61,9	1,3	63,2	1317,7	2,3	4.6	2.1
Total	3859,5	232,9	4092,4	3584,3	108,0	53.3	5.7

Source: Statistical Yearbook of Hungary 2001, KSH, 2002 Notes: Activity rate: the total sum of the employed and unemployed in percentage of the population. Rate of unemployment: the number of the unemployed in percentage of the economically active population.

There are significant regional differences in terms of unemployment, and these differences seem to settle and not diminish. In Northern Hungary and in the Northern Great Plain the rate is high (15.8%; 13.7%), in Western Transdanubia and in the central regions of Hungary the rate is low (4.9%; 2.6%).

Educational attainment, income and returns of education

In the 1990s, the value of educational attainment continuously increased. The effect of educational attainment may be observed in the levels of income and unemployment rates. The advantage of being highly qualififed is demonstrated by the fact that the proportion of those with upper secondary and tertiary level qualifications within the active population is higher than in the entire population. In 2000, more than 42% of men and almost 60% of women of the employed population had at least upper secondary level qualification. In the recent years, the composition of the unemployed by the level of educational attainments showed little change. The proportion of those with not more than lower secondary level qualification has slightly decreased. Those with tertiary educational qualifications are the least affected by unemployment. The composition of the employed and unemployed population by the level of education attained shows that employers generally employ those with high-level qualifications.

Figure 1.4. Percentage of the employed and unemployed population by educational attainment, 2001

Source: Statistical Yearbook of Hungary 2001, KSH, 2002

The number of unemployed youth decreased in the period between 1998–2001. There was a significant decrease in the 15–19-year-old population. Of the entire group of 15-19 year-olds (approximately 600 thousand individuals) 550 thousand (90%) were inactive in 2001, mainly because they were students. 8% of the remaining 10% were employed, and 2% – approximately 12.5 thousand people – were actively seeking employment. The unemployed youth finds it more difficult to get a job than the average jobseeker. The main reason for this is that they generally have low attainment and half of them live in rural areas with few job opportunities.

Table 1.3.
Youth unemployment, 1998–2001

Year	Aged 15–19		Aged 20–24		Aged 15–24
	in thousands	Unemployment rate %	in thousands	Unemployment rate %	in thousands	Unemployment rate %
1998	28,3	24.8	59,3	11.1	87,6	12.6
1999	21,3	23.4	57,3	10.6	78,6	12.4
2000	17,6	23.7	53,2	10.4	70,8	12.1
2001	12,5	21.2	43,2	9.5	55,7	10.8

Source: Labour force survey 1992–2001, KSH

1.6. The educational challenges of a knowledge-based economy

According to foreign companies settled in Hungary, the lack of well-trained personnel is an increasing problem and many may consider Hungary to become less attractive for investments due to high level of production costs. After fifteen years, the lack of skilled workers has yet again become a permanent problem in regions where the economy is growing. Following the collapse of the communist era, the apprenticeship training of skilled workers lost its prestige in the ensuing economic transformation. Many of those entering the labour market as skilled workers find no job and have worse chances to participate in retraining programmes or starting a new career than those possessing a secondary school-leaving certificate. Vocational training schools are unable to cope with the demand for training, in terms of quantity or quality. With the decreasing number of students enrolled in vocational training schools, the number of unmotivated, low-achieving youth with a lack of perspectives has risen in such institutions. The apprenticeship exam did not fully assure good quality of training, therefore skilled worker qualifications were not attractive to employers, and this situtation has worsened.

According to a 2001 survey, employers were not dissatisfied with the behavioural conduct of young people, yet their lack of practical knowledge was criticized. Respondents identified the lack of foreign language skills as one of the greatest problems.

Figure 1.5. Satisfaction of companies with first-job holder skilled workers with our without a secondary school-leaving certificate, respectively, in 2001 (average marks on a scale of 5)

Source: Palócz, 2001

The discrepancy between companies and schools was displayed in the course of several monitor surveys. Only a small portion of enterprises had contacts with an educational institution, yet the majority of these had no clear understanding of this relationship or even their own opportunities in this regard. At the same time, enterprises consider the standard of the Hungarian workforce to be unsatisfactory.

1.7. Social indicators and trends

In the development of human and social capital, aside from schools, the workplace environment, local communities and families all play an important role. The quality of human relations greatly influences the state of social cohesion. The more cohesive societies are better in achieving common goals and preventing vulnerable social groups from drifting to the periphery of society. Splitting up of families and the increase in the inequality of income diminish social cohesion, yet the broadening of social relations or even the use of the Internet may strengthen such cohesion.

Following the collapse of the communist regime the appearance of huge and increasing inequalities of income was striking. The current extent of such inequalities corresponds to the European average. The inequalities of income seem to have stabilized in recent years, and – in the case of middle-class families – there are promising signs of economic growth. There are three general factors which determine the income level of families: (1) educational attainment of family members, (2) the earning members of a family and (3) the number of dependent children. The risk of poverty is great in the case of those with a low level of educational attainment, those living in villages, and in the case of families with children, or individuals belonging to the Roma ethnic minority group. The risk of poverty of the latter doubled in the span of a decade.

1.7.1. Factors influencing the quality of life for children and young people

The changing structure of families

Since 1990, every year there have been fewer marriages and a greater number of divorces in Hungary. There were 375 divorces per a thousand marriages in 1990, while in 2000, this figure was 499. The lower number of marriages is partly due to a higher rate of unmarried partners. Simultaneously, there is an increasing rate of births out of wedlock, which constituted approximately one thirds of the births in 2001. The decline in the number of marriages and the increase in the number of divorces also affect the composition of households. The proportion of couples living in households has dropped and the proportion of single parents with children or singular households has risen.

Table 1.4.
Number and composition of families, on 1st January in 1970, 1980, 1990 and 2001 (%)

	1970	1980	1990	2001*
Couples without children	33.7	35.2	34.3	33.9
Couples with children	56.1	53.5	50.2	49.7
of which couples unmarried	N/A	N/A	4.3	9.5
Single father with children	1.3	1.9	3.1	2.0
Single mother with children	8.9	9.4	12.5	14.4
Total	100.0	100.0	100.0	100.0
N	2,890,912	3,027,668	2,896,203	2,868,694

Source: Statistical Yearbook of Hungary 2001, KSH, 2002 ^* February

The income of families with children

There are significant differences between the income of families with and without children. While in 2000, the real income of individuals with children was at the 1994-1995 level, the income of childless individuals approximated the – higher – 1993 level. In 2000, households with children had a below average per capita income. The financial situation of families with children somewhat improved when the family tax benefit was introduced and later increased, and when the childcare leave and allowance² was reintroduced – still, they are in a worse financial state than childless families. Their consumption – especially the consumption of inactive people with children and active families with 3 or more children – is more restricted; their home is less equipped and furnished than the households of active individuals without children. The households of inactive families with children are in the most disadvantaged status: their income is on a minimum level, and since they have a lack of taxable salaries, they do not make advantage of the family tax benefit or maternity allowances. While households with children spend more than half of their income on foodstuffs, their per capita spending on such goods is actually less than the spending levels of childless families. The disadvantage of active households with many children and inactive households with children is clearly reflected in the smaller quantities they consume of each food category. This is particularly conspicuous in the case of milk, dairy products and fruit, which are nutrients essential to healthy development of children.

Deviancies among young people

The characteristics of the youth subculture changed in the course of the 1990s. The different generations became more heterogeneous, and the difficulties in starting a career brought about new types of subcultural groups. The various social changes also produced winners and losers among young people. As young people were exposed to greater media and peer group influence, their schools and families became increasingly distanced from the subculture of young people. Some of the young people facing failures in the course of socialization, school activities and family troubles tried to get away from these problems through the use of alcohol or drugs. There is an obvious over-representation of young people in criminal and drug statistics, yet the same is not true for the consumption of alcohol. Hungarian educational policy made great efforts to cope with the mental hygiene issues of young people. A wide range of projects was launched including surveys on drug use, various tenders for solving such problems, as well as the establishment of drug prevention and mental hygiene programmes.

Alcohol consumption among young people

In international comparison, based on the HBSC and ESPAD surveys – and in contrast to the indicators of adult alcohol consumption levels – Hungarian students are not frequent alcohol users. In the course of the surveys, the various countries were placed into five categories according to the alcohol consumption of students. The Hungarian students were classified in the lowest or second lowest category.

Trends in drug use

In the late 1990s, try-out figures showed a sudden and dramatic increase, and remained on the same level in 1999 and 2000. The fact that the number of intensive drug users increased the most between 2000 and 2002 is an ominous sign. In comparison of the findings on Hungarian drug use with other countries, Hungary may be regarded to be among the countries with low levels of contamination. The proportion of illegal drug users places Hungary in the lower third on a list of 30 countries, in the group of countries such as Portugal, Norway, Bulgaria, Lithuania, Iceland, Estonia, Croatia and Poland.

1.7.2. Favourable factors of social cohesion

In recent years, the importance of social capital and the intensity and quality of human relations have become more appreciated as factors influencing the cohesion crucial in the state of social well-being. Digital literacy is gaining importance, allowing for the expansion of the field of interpersonal communication and the flow of information.

Digital literacy

In Hungary, there is a clear gap between various social groups concerning access to computers and the Internet. The elderly, those with low levels of educational attainment and residents of smaller villages are lagging far behind in this respect. We have even experienced harsh negative opinions on the use of ICT devices from these groups. In 2001, 22% of all households were equipped with a computer, while 6% of these households had access to the Internet. Adults generally have access to the Internet at work or at school. As far as the use of the Internet is concerned, Hungary is positioned more at the end of the list of acceding countries of the EU: only in Bulgaria and Romania do people use the Internet less than in Hungary, while 40% of the population are willing and capable to use the Internet in Slovenia and more than 30% of the population has access to the Internet in the Czech Republic. In Hungary, 70% of general schools and 90% of secondary schools are fully connected to the Internet. The majority of students use computers on a regular basis at school, and there are no significant social differences in the background of students using schools computers.

1.8. Education in the media and in public opinion

Public education is not a particularly highlighted topic of the press in Hungary, and no change has taken place in this respect in the new millennium. Of the various fields of public education, this is particularly true for vocational education, which was strongly neglected by the press. In 2002, however, following the chamber reports warning on the lack of skilled workers, a series of articles were published on vocational training. In 2000 and 2001 the highlighted topics of the media concerned school curricula, school programmes and student welfare issues such as grants, student loans. The issues concerning the salaries of teachers are a favoured topic of the media, yet the presentation of the work of teachers is not. Unfortunately, the media does not deal much with the role of parents in education, neither with the issue of equal opportunities and disadvantaged social groups. The findings of the PISA survey inspired an interesting and important debate in the media on the quality and effectiveness of public education. The nationwide consultation of the 2003 Amendment to the Public Education Act brought attention to issues such as the new rule prohibiting grade repeating, the general role of teachers and the workload of students. As a result of the pay rise of public employees at the end of 2002, many articles concerning cost-effectiveness problems appeared repeatedly in the media in the form of concerns over the closure of schools.

The fact that people are generally more satisfied with education than with other public services has been a recurring tendency since the 1990s. Public satisfaction, however, is not the same on all levels of education. Those questioned were generally the most satisfied with pre-primary education, with higher education coming next in the list, then secondary and finally general school education. Those questioned would place education high on the list of public expenditure items, only to be preceded by health services in the level of local government spending.

Figure 1.6.
Satisfaction rate of the Hungarian adult population with certain public services between 1990 and 2002 (on a scale of 100)

Source: Educational Opinion Polls 1990-2002. OKI KK – Marketing Centrum – Szonda Ipsos. Question asked: “I am going to list a few things. Please tell me how satisfied you are with them at present in Hungary.”