Pécs, Hungary

Pécs is located in South-Western Hungary close to the Serbian border, approximately 200 kilometres from Budapest.

The urban area of Pécs consists of the core city and 33 settlements that are mostly small villages and some small towns, many of which are considered remote.

The social and economic difference is much bigger between the city (Pécs) and its rural environment than between Pécs and other larger Hungarian cities, with poverty and social inequalities deeply entrenched in Hungarian rural areas.

The lack of large and economically stronger companies and the lower wage level compared to other big cities of Hungary means Pécs has experienced continuous outmigration from the city in recent years: the city lost approximately 14,000 residents in the last 12 years, and the population of the wider urban area is also declining, even though the settlement belt closest to Pécs is stable. Young people between age 15 and 29 are overrepresented within the demographically declining age cohorts.

The share of Roma population in Baranya county – which includes Pécs – is above the national average: 4.6% according to self-reported data in the 2011 Census, although in reality it may be much higher.

In 2010, the Hungarian education system was substantially restructured following the election of a new government. First, the previously municipally owned and maintained primary education system was centralised, effective 1st of January 2013, with the aim of reducing differences between schools. After 2017, the education system was completely centralised, including the maintenance of schools. Only kindergartens reamined in the control of local municipalities.

The centralisation process has turned into a deconcentrating tendency from 2016: the schools as organisations are governed by school districts, which are tied to the “járás”). However, these processes did not go hand in hand with the expansion of financial resources and the share of GDP spent on public education (primary and secondary) has been around 2% for more than a decade ^[ 1 ] .

The vocational training system was also significantly restructured: from 2015, schools that provide vocational education became independent from the public education system and were integrated into 'vocational centres', supervised by the Ministry of Innovation and Technology. Today there are 44 Vocational Centres in the country, managing 381 schools, and providing courses in 238 professions. These centres are intended to help provide a smooth transition from education to employment, providing generic education and basic professional courses at the educational institutions, while having specific, market-oriented training sessions at the premises of the employees.

There are many criticisms aimed at schooling in Hungary as a result of its overall general performance. The rate of early leavers in Hungary is increasing, in contrast to most European countries which are seeing this rate go down. Alongside this, the PISA results of 15 year old students have been getting worse since 2009 ^[ 2 ] .

Alongside this, Hungary's education system reproduces social inequalities. Educational gaps present early in students from different social backgrounds, surfacing in primary school and continuing, and widening, in secondary schools. An example of this is Roma students, whose attainment is below the national average ^[ 3 ] .

A further issue with the educational system in Hungary is the segrating nature of it. This is mostly due to the following reasons: free choice of schools which makes middle-class families move to schools that perform better; segregated primary schools are mostly located in segregated neighbourhoods; there are 4, and 8 year secondary grammar schools, which means the highest performing children leave school earlier, ahead of those with lower grades; and finally, the choice between grammar schools and vocational schools, as the students with lower grades tend to enter vocational programmes.

Segregation in education is also present in the shift regarding the administrator of educational institutions. For example, when it comes to primary schools, there has been a steady growth over recent years in the number of students attending church-maintained schools ^[ 4 ] . Students from more priveleged backgrounds attend these schools, leaving those students who are from underpriveleged backgrounds in public schools, creating further social segregation.

The ability of the education system to compensate for social inequalities among young people was further reduced by decreasing the age limit of compulsory education from age 18 to 16 in 2012, which resulted in a decrease in number of students in the age cohort of 15-19, and increased the number of young workers.

Pécs itself is a university town with approximately 20,000 students in tertiary education, of which 4000 are international students. There are 14 secondary schools and 10 vocational schools located in Pécs. However, many students are unable to travel into Pécs due to poor public transportation. This means many students attend lower quality schools outside of the city, although there is an option to access dormitory accomodation.

Educational segregation in Pécs is closely linked to spatial segregation and the high percentage of Roma pupils for example in the northeastern part of Pécs. Due to an industrial past, the vocational training system is strong in Pécs, attracting hundreds of students to the city. However, the schools are selective: most marginalised students attend the same 3-4 schools, where the dropout rate is highest. Vocational schools have more freedom than other educational institutions and have better opportunities to attract trainers, provide courses and involve private companies into their cirriculum. However, there are limited opportunities for providing practical education at industrial and service companies, as the economy of Pécs is relatively weak and lacks medium and large enterprises, which are the typical places of practical learning in dual education. Therefore, the schools themselves provide most practical classes, which weakens students’ market orientation and sensitivity to market needs.

To tackle the phenomena of early school leaving, EU2020 directives encouraged countries to introduce new programmes. There are complex pedagogical programme packages, financed and administered by the central government (and later on built into EU financed operational programmes) that aim to support students for reaching a decent educational level: 1) ‘Public educational ‘HÍD’ (bridging) programmes’ (‘Köznevelési hídprogram’); 2) ‘Springboard’ (’Dobbantó’) programme; and 3) Orientation year programme, which offers information and experience to vocational school students.

Only one programme enjoyed broad political support through different administrations: the János Arany Talent Support Programme. It was first launched in 2000 for students in disadvantaged social positions to support their education, providing them with the possibility to study in the best secondary schools in Hungary, and to get into tertiary education.

The government is also strengthening vocational training with substantial scholarship programmes put in place to attract more students. At the same time, adult education is a currently expanding form of education. The main goals of adult education is to finish primary school, gain a vocational certificate and pass the high school finishing exam. It also allows for young people who dropped out of school early to reintegrate into education.

Since COVID-19, and the shift to digital teaching, there has been an increase in teachers' digital skills. However, 7-12% of students may not have access to digital tools, with an additional 6-7% having limited access. Also, moving education online required parents to have active involvement. These issues pose the risk of increasing the differences between schools and students ^[5] .

An innovative way to improve educational attainment of Roma was the establishment of a Roma national secondary grammar school in Pécs in 1994. Since 2002, this school has provided adult education and was also among the first institutes to incorporate the János Arany Talent Support Program. 197 full-time students and 113 correspondence course students were expected to enroll in the academic year of 2020/21.

Economic activity in Hungary has seen in a period of continuous growth: In 2010, when the financial crisis still had a significant effect, the activity rate was 61.9%; it grew to 72.6% by 2019. The employment rate has also been continuously increasing, from 57% in 2010 to 72.2% in 2019. The unemployment rate also declined to 3.42% in 2019, putting Hungary among the best performing countries in Europe ^[ 6 ] .

The pattern was similar in Pécs and its surrounding region: rising unemployment and lowering activity levels after 2008 but by the end of the 2010s, the economic indicators were more favourable than before the crisis. For example the unemployment rate in Baranya county was 8% before the crisis and 6% in 2019.

However, the employment rate of 15-29 year-olds significantly declined as a result of the financial crisis in 2008. Despite recovering by 2016, the younger generation have the most precarious situation in the labour market compared to other age groups: while the unemployment rate of 15-25 year-olds dropped from 27% in 2010 to 9% in 2018, this compared to 10% and 3% respectively for older age groups. The rate of NEET youth also decreased rapidly, from 18% in 2012 to 13% in 2018, although the rate of female NEET is still high (18.6%). Alongside all of this, fixed term contracts are much more prevelant among young workers than in the whole working age population, 17% compared to 6.5% ^[ 7 ] .

The overall favourable employment trends are mostly the result of the most prosperous decade for the Hungarian economy between 2010-2020, characterised by a general economic boom all over Europe and an influx of EU funds. The Covid pandemic caused a temporary impact on the job market - about 800,000 people lost their job - but overall, employment levels returned to their 2019 levels by mid-2021 ^[ 8 ] . However, the Covid pandemic had a more serious effect on youth, as the youth unemployment rate remained at 14-15% by July 2021 ^[ 9 ] .

Despite overall low unemployment rates, there are many structural problems within the labour market. Firstly, there are differences between the regions of Hungary, and between rural and urban areas. Secondly, there are big diferences between the employment of the majority of society and marginalised groups, such as the Roma population. According to the Central Statistical Office, 55% of men and 36% of women in the Roma population was employed in the 15-64 age group in 2017, while this rate was 76% and 62% respectively in the non-Roma population ^[10] .

Thirdly, certain forms of employment increase vulnerability, such as fixed term contracts, contracts for definite periods, and hired staff that are in a contract with a labour force agency. These roles often offer weaker legal protection, and have lss favourable working conditions ^[ 11 ] . Finally, it is common to have a reported workload and salary which is lower than the real one for tax evasion purposes. The difference is often paid in cash, which does not contribute towards the employees pension ^[ 12 ] .

While the main employment indicators of Pécs are comparable to other major Hungarian cities, there is a key difference. Half of the employment positions are in education and public services, and the share of market based companies is low, leading to lower average wages and a higher share of low paid employees compared to other major cities.

There are active job market programmes in place to help alleviate the mismatch between supply and demand by providing support for individuals to improve their marketable skills. Among these programmes, the public work programme has been the most significant employment programme of the last decade ^[ 13 ] . Public work programs originally aimed to support the transition to the job market by providing mainly low qualified, easy to fulfil, protected roles in the public sector.

From 2012 to 2016, the number of young people aged 16-17 who joined public work increased from 600 to nearly 6000. Many of these young people quit school early to earn more money, a result of lowering the age limit of compulsory education to 16. In 2017, a significant amendment made it so that the minimum age for those working in public work was 25 ^[14] .

Public work is most intensively used in rural areas; in some remote settlements public work is the most prevalent form of employment. The net wage in public work is far below the minimum wage, but two-three times higher than the basic social benefit. Public work is less common in Pécs than in other areas. The rate of public workers, compared to registered jobseekers, was 18.41% in 2019. These people are mostly employed by the municipal company (‘Elszámoló Ház’), and the company that processes recycled waste (Biokom Kft.).

The Youth Guarantee Programme (YGP) was established by the European Unionin response to concerns regarding long-term unemployment and the lasting effect this has on future employment possibilities. Countries are responsible for creating job offers for under 25s who have just finished their education. A new element is that NEET youth are guaranteed to get much earlier and substantial support from the authorities. From 2015 to 201, approximately 54,000 young adults got subsidy for their wages; 28,000 received training; and about 17,000 got both ^[15] . However, local experts report that YGP hardly affected rates of NEET and undereducated young people.

Locally it is reported that while currently there are enough job opportunities in the city and its surroundings in terms of quantity - practically everyone who wants to can find a job - a major concern for young people is the lack of jobs which provide decent pay and proper working conditions. Labour market fluctuation is high due to low wages and poor working conditions on the employees’ side; and due to the low skill and competency level of workers on the employers’ side.

The Baryna County Government Office (Baranya Megyei Kormányhivatal) implements central programmes that provide training and gives subsidies for employers hiring the registered unemployed. These programmes are financed from European Union funds.

Another mechanism has been the creation of a local pact, which dates back to the 2010s, to support the most disadvantaged in the labour market:

• undereducated young people under age 30
• people over 50
• people (especially women) returning to the labour market from maternity leave
• social allowance recipients
• the disabled
• workers in public work and economically inactive people

Currently, there is a Pécs Pact which has a budget of EUR 6 million for the period 2016-2021. The project reached about 1,500 people, about 5-6% of which were at the same employer 6 months after the compulsory employment period.

The innovation of this Pact lays in its collaborative approach involving the Municipality, the County Government Office, an NGO (MALTA) and the Pécs Urban Development Company. MALTA is a charity organisation who sought out vulnerable inhabitants of Pécs who were not registered unemployed, bringing them into different programmes. This type of work is what is missing from the public employment service system. The current government system concentrates of spending the funds without trying to create connections to the most excluded, and to find more tailor made solutions.

The housing finance system in the post-socialist countries collapsed following the political-economic transition of 1989-90, resulting in distorted housing regimes ^[16] . Between this time and the financial crisis, there were three main stages of housing policy in Hungary: The first (1990-1994) aimed to eliminate 'socialist' housing system through privatising the state owned stock; in the second stage (1995-2000), the new system's main institutions and tools were set up especially in the financial sector and housing market; the third stage, before the financial crisis, saw the re-emergence of active housing policy making. During this third stage, a new housing policy was declared which focused on supporting the construction of new municipal rental stock, and introducing a new housing mortgage system to improve credit access of lower income households ^[ 17 ] . The increase of the municipal stock did not achieve a breakthrough, as it only resulted in the construction of 712 additional flats between 2000-2005.

The housing stock in Pécs is quite large, with 72,037 dwellings in the city, with only 64,795 occupied (2011 census data). 87% of the dwellings were owner occupied in 2011, while the rest were rented out. The municipality of Pécs owns 3926 dwellings, which is a high number compared to other cities but is only 5.5% of the housing stock. 41 of the houses are vacant, of which only 19 are actually habitable.

After 2000, mortgage lending increased significantly, further boosted by the replacement of subsidized Hungarian Forint based mortgages with foreign currency backed loans. This led to a drastic increase of instalment amounts due to the Financial Crisis in 2008 ^{[ 18 ][ 19 ]} . Measures were introduced to alleviate the mortgage burden, in many cases preventing the loss of housing: an early FX loan repayment scheme; a rent-to-own scheme, which took over foreclosed homes at a regulated price, and turned them into social rentals (by 2021, the majority of these were resold to original owners at a preferential price); and an FX loan exchange rate cap scheme (2012-2017).

Despite the state measures, the financial crisis and subsequent recovery period had a large impact on the housing market. First, the recovery period saw a steep increase in housing costs, without a similar increase in incomes, significantly affecting the lowest income groups and lowermiddle class households. Secondly, housing related debts have been accumulating across the population ^[20] . The effects of the financial crisis are still visible on the housing market: in 2005, 50% of 18-34 year-olds lived with their parents, while this rate rose to 62% in 2019.

Pécs is the only city where the house price to income ratio did not decrease in 2020 ^[ 21 ] . University cities have higher average rent levels compared to the region in which they are located. University students have a strong impact, as their number in high compared to the number of residents. Consequently the affordability problem affects not only the most marginalised, but also the middle class.

There are eleven neighbourhoods in Pécs which are already segregated or are at risk of segregation, eight of which are located in the north-eastern part of the city, where the former coal miners’ estates are located ^[ 22 ] . These areas are characterised by low quality housing, many of which are owned by the municipality of Pécs. This massive segregated area accommodates 1,500-2,000 people, but some of the surrounding neighbourhoods also have low status.

In 2011, municipalities gained more freedom to determine the eligibility criteria for housing benefit, originally introduced in 1993. In 2015, the central funding of the allowance was abolished, and the responsibility to operate this was placed on local municipalities. Analysis by Habitat for Humanity Hungary in 2015 showed that of 31 municipalities', only one maintained the original amount, with the remaining 30 reducing the subsidy amount and becoming less targeted to the most vulnerable households ^[ 23 ] .

The state also introduced a notworthy regulation in 2013: the freezing of utility prices for all inhabitants. This resulted in stable and relatively low utility prices, which became independent from the market prices. This indirect subsidy is provided for everyone who uses utilities, regardless of income level. However, it did not provide for solid fuels, which are primarily used by marginalised rural households.

Between 1994-2009, a grant for construction and purchase of new housing was provided by the state for families with children, and couples planning to start a family. This ended at the time of the financial crisis, but was then reintroduced in different forms; its current form was introduced in 2015. This version was called the Family Home Allowance (FHA) scheme, aiming to help families buy newly built houses with the intention to boost the housing market as well as the birth rate ^{[ 24 ][ 25 ]} . The grant is available to families with stable employment and income, and enough savings for a down-payment, as long as at least one of the couple is under 40.

The Rural Family Housing Allowance programmes was introduced in 2019 as part of the Hungarian Village Program. The grant is accessible for buying a home in small settlements with a population below 5,000 and which have been shrinking over the previous decade. This is set to last until June 2022. This is the most relevant programme in the functional urban area of Pécs, as there are many settlements that fulfil the criteria, and the support level for the families is a substantial help. On the other hand, these settlements have poor public transportation, thus moving to these areas may result in segregation from mainstream educational, cultural and working opportunities.

Local social housing policy has been inconsistent for decades. On the one hand, the social housing stock generates massive losses every year, as a result of many factors such as non-payment, which is often the result of poverty. Legal consequences are unpredictable due to the inefficient rental housing operation and debt management of the municipality.

The latest Local Housing Policy was published in 2008, when the local government announced the opening of a wide discourse and organised roundtables around a new housing policy, although this seemingly hit a dead-end in 2020. A new housing plan has been under preparation, focusing on establishing the financial sustainability for the management of public housing.

There are two programmes that were mostly financed by the state originally, but as of 2015 were completely delegated to local governments: 1) housing allowance; and 2) debt management programmes. The number of households receiving housing allowance in Pécs has dramatically decreased from about 10,000 in 2013 to 2,200 in 2017 (Local Equal Opportunity Plan 2018-2023). From 2015, the debt management programme practically disappeared. Only a few dozen households recieved this assistance after 2015.

Between 2005 and 2010, a pilot programme was implemented as an addition to the debt management programme. It assisted families who had housing debt above HUF 300,000 for a maximum of 3 years. According to both the utility companies and the municipality, the programme worked well and was then reintroduced by MALTA Charity Service, and was built into their social rehabilitation programme.

Segregation is an important issue in the urban and housing domain. Complex rehabilitation programmes were started in the city focusing on the segregated areas in 2007. In 2012, this was accelerated with the involvement of EU cohesion policy funds; the city was given funding of about EUR 8 million for rehabilitation programmes. This mostly focused on the eastern part of the city. The interventions included demolition of 38 social dwellings, purchasing 34 dwellings, and renovating 139 municipal flats. It also included the relocation of some families into less segregated, but still stigmatized areas of Pécs ^[ 26 ] .

The main outcome of these programmes was to finance NGOs that became involved in the everyday life of local citizens, to some extent replacing social services which struggled with a shortage of capacity. The interventions also improved the job opportunties of the targeted groups and somewhat the overall situtation, but the segregation process was still prevelant.

Before 2011, social security was defined as a basic right to be provided by the state. However, the Consititution, amended in 2011, changed this previously accepted approach so that the state aims, but is not obliged, to provide security. So, since 2011, the government has been delegating more responsibility to citizens and their families.

In regard to social allowances, up until the 2010s, two types of support existed: normative (stipulated by law) and fairness based (allocated by individual assessment). The latter was controlled by local municipalities, which meant better off municipalities could provide more whilst the lower income could provide less. This was recognised and resulted in some fairness based benefits getting phased out.

In 2015, the system was restructured again. These new allowances became independent from local municipal policy, and other benefits previously financed by the state were delegated to local municipalities without providing financial resources, meaning the better off locations are able to offer better support.

Despite indicators related to poverty and deprivation improving or stagnating in the last decade, this was not the case during the financial crisis. Between 2007 and 2018 the at-risk-of-poverty rate remained below the EU average, and the rate of severe material deprivation decreased, although still worse than the EU average. These results were the result of the overall economic recovery of the country, the large scale public work programme, tax deductions for families with children, and the overall cap on utlity costs.

As in other policy areas, the allocation of social services resources has been centralised. In addition, resources are allocated by organisation and not tasks, so the real cost of services cannot be assessed. Experts find it challenging to tell whether the budget covers the goals sufficiently or if services are overbudgeted ^{[ 27 ][ 28 ]} . In 2020 approximately 0.7% of GDP was allocated to the social service system.

The social system is targeted towards: the registered unemployed; people with disabilities; people caring for chronically ill family members; pensioners with long-term health conditions; families of vulnerable children; and the foster care system. Young adults are not a target of the social services, unless they have children of their own, are in foster care, or are disabled.

Centralisation has taken place in the social sector, leaving limited functions for local municipalities. These local functions are implemented by the Cultural and Social Department of Pécs Municipality through the supervision of various entities: territorial social centres, responsible for the distritbution of local social allowances; Lajos Esztergár Family Care and Child Protection Services, with seven branches; temporary shelter for families; daily centres of pensioners, home care services and 2 pensioners' homes; Kindergartens; and Nurseries. The responsibility of the institutions providing social services covers not only the city but its neighbouring villages as well (42 settlements outside Pécs).

The three territorial centres, which cover different territories of the city, distribute the social allowances which remained in place after 2015. They have to follow local regulations and are bound by the annual budget of the municipality. Despite each centre having different clients, one phenomenon is common: social problems appear to be inherited from generation to generation. The main issue with regard to social allowances is their limited amount and low maximum eligbility periods, as they do not provide substanital help.

There is a contradiction present in the allowance system: the allowance is low and does not help much, but if it was raised then you would lose eligibility, resulting in poverty. This problem is most crucial to pensioners, as they cannot be expected to return to work to boost their income. As a consequence, the number of recipients decreases as income and pensions grow, while the eligibility thresholds do not go up with inflation, making more fall out of the system.

Pécs muncipality has the ability to define the amount of local allowances. However, these are kept low, much lower than other Hungarian cities, due to constraints on the budget. Clients of the system are mostly pensioners, and inactive working age people.

In regard to the Lajos Esztergár Family Care and Child Protection Service, they functioned independetly from each other until January 2016, when they had to be integrated. The role of the services is to provide direct help to families in need, providing them information, directing them towards allowances, service providers and NGOs, and finally also providing temporary shelter for children. After the integration in 2016, clients tended to be families with children, thus individuals without children were often left out.

The centre is mostly turned to for help with housing, either in a direct (finding affordable housing) or indirect sense (to manage the psychological conseuences of an overcrowded home). However, the direct services provided by the centre are decreasing, and they are now mostly an intermediary between different authorities and professionals working for municipal institutions. One of the biggest problems these services have is that they are widely considered to be part of the administrative system rather than social support providers, meaning their clients are somewhat distrustful towards them. The real social work is currently carried out by NGOs, whose financial status is very insecure and depends highly on EU financed social programmes.

Finally, in cities with over 30,000 inhabitants, it is mandatory to have temporary shelters for families. In Pécs, the temporary shelter can accomodate 40 people, and has external placements for 77 people. There are legal obligations to follow, however there is room to manoeuvre, mainly the rules around co-habitation and the way of assisting vulnerable families in everyday life. Most clients in the shelter are coming from foster care, and so often need strong social assistance as they begin their own families. Consequently, the majority of clients are below 29, and mostly undereducated. The main problems of the shelter is the limited capacity, the fact that the complex problems of families cannot be solved in a year and a half, and the lack of social rental homes or supported private rental housing.