GKI: Large investments supported by the government are destroying the local labor market

By: Trademagazin Date: 2025. 01. 21. 11:06

The Hungarian government has announced several large investments in recent years as part of the country’s reindustrialization. These include CATL and BMW in Debrecen, BYD in Szeged, and the battery factories in Ács, Nyíregyháza, Ivancsa, or Göd. On the one hand, these investments do not help the country’s long-term catch-up: for low wages, often foreign guest workers perform low-value-added work in these factories, while receiving significant state subsidies (which are paid for by domestic SMEs). Battery production is also a particularly water- and energy-intensive sector, of which our country does not have a predictable supply of the necessary resources, and environmental pollution from the factories leads to additional problems.

Although these reindustrialization plans do not seem to be profitable from an environmental and economic perspective, their impact on employment may still be positive. Since low-skilled workers can also fill these positions, it is advisable to locate these factories in regions with high unemployment, where the necessary workforce for operation is provided locally. To determine whether this is the case, we examined the unemployment rate at the settlement level based on the December 2024 data of the National Employment Service (NFSZ). The rate reported by the NFSZ as a relative indicator shows the number of registered job seekers in relation to the population aged 15-64. The national average was 3.5%.

The settlements with a minimum (0-2 percent) unemployment rate (542 settlements) are shown in white on the map, of which 36 settlements have no unemployed people. In addition, the settlements with a yellow color (1243 settlements) have low unemployment (2-5 percent). 56% of the settlements fall into the first two categories. In the areas marked in green (5-10 percent) (923 settlements), there is already significant unemployment, while the settlements marked in blue (rate between 10-15%) and red (rate higher than 15%) are clear crisis zones (308 and 161 settlements, respectively). The most severe unemployment is found in South Somogy, South Baranya, the northern part of Nógrád and Borsod-Abaúj-Zemplén counties, and along the Romanian border. The lower unemployment rate of large settlements drives the rate down, while the higher unemployment rate of small settlements drives it up.

It would be advisable to focus investments on areas with high unemployment, and not on the northwestern part of the country, the Budapest agglomeration, or Szeged, which are already struggling with a labor shortage. This results, on the one hand, in the employment of guest workers, the longer-term commuting of domestic workers from the previously mentioned high-unemployment regions, or the luring of workers from the local labor market. As for GDP production: large employers located in regions characterized by low unemployment will primarily draw the necessary labor force from neighboring plants, which results in a decrease in production at these plants, which reduces the generated added value.