Nov 3, 2015

Investors feel the impact of Hungary's brain drain

Companies resorting to poaching workers from rivals
By Gergely Szakacs

BUDAPEST (Reuters) - German technical services provider TUV Rheinland left no stone unturned in its search for an engineer to fill a specialized auditing position in Hungary. It took two and a half years to find the right person.

A growing number of employers are facing such travails since about half a million of Hungary's 10 million people left for better paid jobs in western Europe, with ramifications for economic growth, competitiveness and investor appeal.

Engineers are in particularly short supply. Companies resort to poaching workers from rivals, at greater cost, or invest time and money to bring their own workers up to speed.

For Timea Kalina, Human Resources Manager at TUV Rheinland's Hungarian unit, losing experienced colleagues is a big problem.

"If we want to recruit a replacement who can fill the role flawlessly from day one, that is difficult right now," she said. "I would say the chances of finding someone like that are zero."

On average, it takes TUV Rheinland two or three months to recruit an engineer, longer for more specialised positions or if management skills are also required.

Engineering is just the start of the problem.

A recent survey of 750 employers by staffing company Manpower Group found that nearly one in two have trouble finding enough skilled workers to fill vacancies from blue-collar jobs to drivers, IT experts and accountants.

Doctors, who have created the most visible gap due to abundant media coverage in Hungary, rank seventh on the list.

Vodafone and International Business Machines Corp are among a string of global companies to have chosen Hungary in centralising services for employees and customers. Some of those companies are now finding it hard to recruit.

"In local shared service centres there is a shortage of several thousand workers," said Laszlo Dalanyi, Country Manager for Hungary and Slovenia at Manpower Group. "In the information technology sector there are 20,000 empty jobs and the gap in the car sector has also reached tens of thousands by now."

He said Hungary, which has walled itself off from the hundreds of thousands of migrants pouring into Europe from the Middle East and Asia, has yet to find a way to hold onto its top talent or keep new graduates from leaving in droves.

Structural problems 

Hungary's jobless rate has fallen substantially in recent years, sinking to 6.4 percent by September from double-digit figures when Prime Minister Viktor Orban took power in 2010 with a sweeping mandate for reform after eight years of Socialist rule that saw the country pulled back from the brink with an international bailout.

But the unemployment figure has been partly pushed down by 226,600 mostly unskilled people employed in public works programmes, a fraction of whom find employment in the private sector, as well as 114,200 people registered as working abroad.

Analyst Mariann Trippon at CIB Bank, the Hungarian unit of Intesa SanPaolo, said most of the improvement in jobless figures came from these two factors and the unemployment rate adjusted for the impact of public works programmes remained above 11 percent.

"A shortage of workers can have serious consequences in the long run," she said. "One of the key challenges of Hungarian economic policy is to boost potential growth and that would also require tackling the structural problems of the labour market."

The problems include a sizeable grey economy, a lack of appropriate skills and low internal mobility.

For the first time in a decade, Deloitte Consulting has launched a billboard campaign aimed at university students and career starters in Budapest. Jobs advertised on its local website include IT engineers, accountants and finance experts.

Lajos Antal, head of Cyber Risk Services in Hungary and Central Europe, said only a major overhaul of the education system from primary school to master's degree would solve the problems long term.

"We need to devote significantly more resources into finding the right people, casting a wider net, look around across the border and even hire from abroad," he said.

Skills gap

One of the most frequent complaints is a lack of hands-on training at universities, but a 2012 skills survey by the Organisation for Economic Co-operation and Development (OECD) showed Hungarian school children losing ground to their peers in mathematics and science, despite some improvement in reading.

In all three categories, however, Hungarian pupils scored below the OECD average.

German premium car maker Audi, one of Hungary's top revenue-earners and exporters, sponsors an entire department at a university in Gyor, where it is based, to train engineers. Earlier this year, road haulers entered a deal with Orban's government to train 6,000 drivers in Hungary.

"Our surveys indicate that there are at least 20,000 to 22,000 drivers missing in Hungary," said Peter Erdei, a director at the Hungarian Road Hauliers' Association.

"In our profession, this has become an impediment to growth," he said. "Trucks stand idle and further investments to buy additional trucks are not made because companies cannot ensure the required staff to drive these trucks."

The proximity of richer euro zone neighbour Austria creates an extra problem in the western regions of Hungary. Erste Bank said in some cases it took them six months or even a year to find a suitable candidate for a sales position.

Earlier this year, Orban's government launched a 100 million forint ($459,000 CAD) programme to get 50 young people to return from London, sometimes referred to as the second-largest Hungarian town for the number of migrants working there.

The website of the programme, which was launched in April, lists four people in its "Success Stories" section.

"I think it is not primarily about education," Manpower's Dalanyi said. "It is a lot more about whether Hungary can become attractive enough for these people to return."

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