By Julius Jönson
Would you have four kids if it meant never paying taxes again? If you live in Hungary, this is not a thought experiment, but a real option for women. Prime Minister Victor Orbán’s government – which has ruled Hungary since 2010 – has put the country on the map for its efforts to reverse the country’s population decline. Demography is a stated priority for the government and Hungarian spending on family benefits is now among the highest in the OECD. As Hungary is far from alone in grappling with issues of an aging population, other governments are likely studying the Hungarian example in search of possible solutions. Is it possible to reverse demographic decline using enough resources and the right policy? Spoiler alert, the answer is no.
The problem
Hungary’s population has been shrinking since the early 1980s. The shrinking was modest initially but has gained momentum as fertility rates have consistently stayed below the replacement rate of 2,1 children per woman. The population has now shrunk back to the level it was in the 1950s. This has resulted in Hungary now having a shrinking workforce and a growing retired population, creating pressure on the pension system while the demand for health care soars. More than half the world’s countries now have fertility rates below the replacement level of 2,1 and the rest of the world is fast heading in the same direction. If it was not for Africa, the world as a whole would have a declining population by 2050. Around the world, governments are scratching their heads trying to come up with a solution to reverse the decline – so far without any meaningful success. Some countries pursue automation to replace manual labor, while others increasingly rely on migrant workers. The most common solution however is to try to increase birth rates. Many countries have a goal of increasing births, but few governments commit serious resources to pro-natalist programs. In cases like Turkey or Russia, natalist policies don’t stretch much further than the president simply saying that he thinks women should have more children . . . .
What makes Hungary interesting is that the Orbán government not only has employed a pro-natalist rhetoric but has also shown that it is prepared to pay to make it happen.
Boosting birth rates instead of relying on migration
During the migrant crisis of 2015, Hungary, alongside other Eastern European states, made it clear that it was not interested in migration as a possible solution to its demographic issues. Instead, the country intensified its campaign to boost birth rates at home. New mothers are exempt from taxes from the birth of their first child until their 30th birthday, and mothers of four children or more gain a lifelong tax exemption. Families are also offered housing support, childcare allowance, and discounts for all kinds of products a family might need. The government’s goal is to increase the fertility rate to the replacement level of 2,1 children per woman in 2030 – higher than the rate in any European country as of 2024. So, to the big question: is it working?
To answer the question let’s look at two metrics: the fertility rate and the number of births per year. The fertility rate measures the number of births per woman in childbearing age, typically 15-44 years old. The number of births on the other hand simply measures how many children were born in a particular year. In the first ten years of Fidesz’s rule (2010-2020), the fertility rate in Hungary increased from 1,25 to 1,56 per woman. The number has since fallen again, reaching 1,39 in 2024. In the early 2020s, Hungary saw its highest fertility rate since the mid-1990s, indicating that government policies might have pushed the number of births upwards. However, this is only half the story – the number of births in Hungary has flatlined at between 85,000 and 90,000 per year, reaching a new record low of 78,000 in 2024.
In the graph below, the blue line indicates the number of children per woman, while the red line indicates the number of births per year. The shaded blue area indicates the period in which the Orbán government was in power. Notice that the number of births followed the fertility rate until the 2010s.
Why is the number of births not increasing along with the fertility rate? Because Hungary’s fertile female population is also shrinking! Herein lies the biggest problem for Orbán’s government. Even if the fertility rate was pushed up to 2,1 children per woman in 2030 (which is extremely unlikely), the number of women having these children is also shrinking – because they were born at a time when fertility rates were low. The age structure itself makes government efforts to increase births an uphill battle, making it extremely difficult to half or reverse a decline that has already begun.
To sum up, Orbán’s government successfully boosted fertility rates in Hungary from ultra-low levels to just regular low levels. Hungary’s population will still decline, but at a slightly slower pace than other eastern European countries. Still, the campaign has not been nearly enough to ease the pressure on the workforce caused by its aging population. Between 2024 and 2050, not only will the Hungarian workforce shrink by 18%, but the number of retirees will grow by the same amount. Despite devoting more resources than perhaps any other country, Budapest has found itself in the exact same position as many other aging countries – it would have to increase migration to fill gaps in the domestic labor force.
Relying on migration despite boosting birth rates
If giving tax breaks to large families is the famous side of the Hungarian fight against its aging population, the steady increase in labor migration has not received as much attention. The reason is simple, it does not fit well with the image of Hungary as an anti-migrant nation. During the 2015 refugee crisis, Orbán proclaimed that: “Hungary does not need a single migrant for the economy to work, or the population to sustain itself, or for the country to have a future”. Ten years on, it appears that Hungary does need an increasing number of immigrants because of labor shortages caused by the aging of the country. In the last ten years, the Hungarian economy has grown at more than twice the EU average. If labor shortages are not addressed, the Hungarian economy could stall.
The graph below shows the number of migrants arriving in Hungary every year. The blue-shaded area indicates the time Fidesz has been in government.
While having an anti-migrant rhetoric, the Orbán government has overseen a dramatic increase in the number of migrants entering Hungary.
To understand this seemingly paradoxical trend one must consider that the absolute majority of the migrants arriving in Hungary are workers. To be fair to the Orbán-government, they only ever declared to be anti-refugee migration, not necessarily against labor migration. While refugees and labor migrants are often lumped together into the same “migrant” category, the groups are very different. The most important difference is that the very reason a labor migrant is entering a country is for a job position that needs to be filled, while refugees are primarily fleeing from something. In the eyes of many Eastern European countries, labor migration is therefore not that controversial, and several countries in the region, such as Poland, Slovenia, and Romania, are now taking steps to recruit more migrant labor. These governments would of course want the domestic labor force to be sufficient for the fast-growing economies of the region, but this is simply not the reality.
The Hungarian example shows that even countries that go beyond rhetoric and try hard to boost birth rates struggle to reverse population aging when the process has begun. It is simply too much of an uphill battle. Around the world, more and more countries will have to shift from fighting the trend to learning how to live with it. Regardless of the attitude towards migration more generally, more and more governments find themselves forced to accept migrant labor. It is not something a government would typically want to emphasize, but it is one of the most important policy shifts of the 2020s.
Photo: Konrad Koller via Unsplash
