Tackling Labour Mismatches and Promoting Mobility in Hungary

Significant labour market mismatches and insufficient mobility penalise employment and productivity.Mismatches have above all a skills dimension, with an excess of low-skilled workers and a possible lack ofskilled workers in certain domains. Reducing the high tax wedge on low salaries and avoiding excessiveminimum wage increases would support demand for low-skilled labour. In the longer term, upgrading thelabour supply requires improving educational outcomes, especially of disadvantaged students, and makingthe school-to-work transition less abrupt. To facilitate good matching and enhance sectoral mobility, asomewhat longer duration of unemployment benefits and an upscaled Public Employment Service would beof value, as well as greater focus on reintegration in the public works programme and more efficient anddeveloped lifelong learning. Besides skills mismatches, important geographic mismatches are illustrated byhigh and persistent regional disparities in the unemployment rate. Mobility is hampered by theunderdevelopment of the rental housing market, while there is room to enhance the efficiency of publictransport to further support commuting.