In this paper we  try to fit the figures of the first Hungarian
social security arrangements into the Western-European trends. We  concentrate on the date of introduction of such schemes
and the coverage of
industrial and factory workers. The  major finding is that the beginnings of
the Hungarian compulsory
social security legislation were not belated compared to Western countries. At
the same time we  see differences which  the paper  attempts  to explain

Szikra, Dorottya

English

Periodica Polytechnica (Budapest University of Technology and Economics)

PERIODICA POLYTECHNICA SER. SOC. MAN. SCI. VOL. 10, NO. 1, PP. 143–149(2002)THE ORIGINS OF THE HUNGARIAN WELFARE STATE IN ACOMPARATIVE PERSPECTIVE1Dorottya SZIKRADepartment of Social PolicyELTE University, Budapest1117 Pázmány Péter sétány 1/a.e-mail: szikra.toth@mail.datanet.huReceived: April 23, 2000AbstractIn this paper we try to fit the figures of the first Hungarian social security arrangements into theWestern-European trends. We concentrate on the date of introduction of such schemes and thecoverage of industrial and factory workers. The major finding is that the beginnings of the Hungariancompulsory social security legislation were not belated compared to Western countries. At the sametime we see differences which the paper attempts to explain.Keywords: social security, insurance, industrial workers, factory workers, comparative.1. IntroductionMy research deals with the beginnings of the Hungarian state-run welfare system.Here I concentrate on the introduction of the compulsory social security schemesas this is the first legal step of the state intervening with the social circumstances ofmasses of people (and especially industrial workers). This time we try to fit figuresinto the comparative analysis of the first social security laws done by Peter FLORAand Jens ALBER. Their work is chosen because we found it the most detailedand the widest ranging one. It compares 12 Western-European countries (Aus-tria, Belgium, Denmark, Finland, France, Germany, Italy, Netherlands, Norway,Sweden, Switzerland, and United Kingdom) in respect of their first social securityarrangements and tries to answer the question why some countries introduced thesearrangements earlier than others.I thought it might be useful to see how Hungary, as an East-Central-Europeancountry fits into the western trends. What are the similarities and the differencesand how we can explain them? In this essay I only deal with the very beginningof the history of social security (between the late 1880s and 1910) because that iswhere I started my own research.1This paper has been written with the support of the Research Support Scheme of the Open SocietyInstitute (640/1999). I also owe a debt of gratitude to the assistants of the Library of the HungarianCentral Statistical Office.144 D. SZIKRAFinding the relevant data on Hungary turned out to be much more difficultthan I thought. While the Hungarian Statistical Office (and leading Hungarianstatisticians) of the time was widely acknowledged professionally, social realitywas hard to map. Categories were missing or fluid; institutions were so ‘pluralistic’and so rapidly changing that overall figures cover different realities in successiveperiods; the country being part of the Austro-Hungarian Monarchy consisting itselfof different units, the geographic area covered may also vary. Finding such simpledata as for example the number of industrial workers comparable from one decadeto the next took me several months (and I am still not sure about their reliability).This is why I can only give an overview of my first findings – not the whole picture,only some bits of the beginnings of Hungarian state-run social security schemes.I first present the data, and then attempt to explain them.2. Facts2.1. First LawsFirst of all it is important to see when the first laws establishing compulsory systemsin the main four social security schemes appeared in the countries researched andin Hungary.Table 1 presents the average date of introduction of the basic compul-sory schemes in the 12 above-mentioned countries and the year of introduction inHungary.Table 1. Year of introduction of social security lawsFirst law Average date HungaryAccident 1884 1914 1907Sickness 1883 1923 1891Old-age 1889 1922 1928Unemployment 1911 1930 –As it can be seen Hungary is amongst the leading countries in sickness insur-ance, preceding the average of the Western-European countries in accident insur-ance but being a little late in old age (and connected) schemes and not introducingcompulsory schemes for the unemployed (until 1989).What might be interesting is that in Hungary compulsory sickness insuranceof workers was introduced much earlier than the insurance for accident. Those whoworked in dangerous working places could voluntarily be insured against accidentbut it was not very popular until accidents became very frequent and the workersstarted to bring their cases to trial. The judicial decisions were many times infavour of the workers, which led to the bankruptcy of several small and middle-sized factories. Then the factory owners together with workers’ societies proposedTHE HUNGARIAN WELFARE STATE 145the introduction of accident insurance to the government.2.2. Core LawsFLORA and ALBERselected from all major social insurance laws those that appearedto establish the institutional core of the four insurance systems. They call them ‘corelaws’ and they define them as follows: ‘A core law is defined as the introduction ofa compulsory system covering a majority of industrial workers.’I thought it would be an easy first step to find these ‘core laws’ for Hungary.It turned out to be a rather complicated task. Why?The first problem is that we do not know whether ‘coverage’ in the abovesense means the actual coverage (the number of insured persons) or the coveragein principle (the number of those who should be covered by the word of the law).In Hungary this is a very central question because there seems to be a significantnumber of people who should have been insured according to the law but somehowhas fallen out of the insurance. I am going to present my findings concerning thenumber of persons covered by the law and actually insured.The second problem came when I tried to find out the number of industrialworkers in Hungary in the period of the first social security laws. It turned out tobe the beginning of a big adventure in the labyrinth of early Hungarian statisticalscience.2.3. Coverage of Industrial WorkersWe have reliable data from 1869 but the problem is that the definition of industrialworkers may have varied from one census to the other. Still the following datamight be relevant:Table 2. Number of industrial workers1869 647.0001880 800.0001890 900.0001900 1.000.0001910 1.400.000This meant about 4% of the active population in 1869, 5% ten years later andaround 14% at the beginning of the century.The next question is when the majority of the industrial workers becameinsured through the different social security schemes (core laws).146 D. SZIKRAData are sadly missing on this point. (The remedy may be to start archiveresearch of the several dozens of insurance companies, but even then data willremain incomplete.) The only available information is the total number of insuredpersons from 1891.Table 3. The number of insured persons in sickness insurance companies1891 446.0001895 523.0001900 600.0001905 685.0001910 1.018.000As we cannot put the two data together (because not only the industrial workerswere insured) we can only make guesses about the percentage of the industrialworkers being insured. We know for instance that around the turn of the centuryabout 80% of the total number of the employed persons worked in the agriculture,14% in the industry and 6% elsewhere (‘services’). The agricultural population wasnot insured at all thus out of the total number of insured persons about one quartermight have been employed in other sectors than the industry. Thus we can guessthat in 1900 out of the 600.000 about 450.000 might have been insured personsworking in the industry. This might mean that out of the 1 million people workingin the industry 45% was insured.If we take another way in the labyrinth and turn to the statistics on employmentat the time (which has completely different categories than those we have beenworking with until now...) and try to see how many people were not insured, weget a different ratio: It turns out (let me not reconstruct the calculation) that only30% of the industrial workers were insured at the turn of the century.I also found a third data in a third source, which says without explanation that40% of the industrial workers has been insured by 1889.So when we get out to the sunshine after having spent some hard months inthe labyrinth of the library of the Hungarian Central Statistical Office the only thingwe know is that around the turn of the century the ratio of insured persons amongstindustrial workers might have been between 30–45%. Not a good basis for testinga central hypothesis. . .2.4. Coverage of Factory WorkersThanks to the bright statisticians of the time (and the factory laws which go backto the mid 1880s in Hungary) we are in a much better situation when trying to findout the number of insured persons in the factories. (The factory means more than10 employees and/or machines according to the law.)THE HUNGARIAN WELFARE STATE 147Table 4. Number of factory workersFactory workers Insured %1889 100.000 73.000 731900 260.000 220.000 851910 434.000 366.000 84As we can see already at the end of 1880s the majority of industrial workershave been insured by the voluntary sickness insurance schemes. The compulsoryscheme was enacted in 1891. It further improved the tendency without arriving atfull coverage even after 10 years. (Full coverage at this time was almost impossibleto achieve anywhere.) It has to be emphasised that the factory workers constitutedonly about 20% of the industrial workers at the turn of the century, and just about3% of the active population.All in all we can say that compulsory sickness insurance in Hungary camereally early (1891), soon after the German and Austrian laws. It intended to coverthe totality of industrial employees (except for seasonal workers). It did almostsucceed in this amongst the factory workers but it failed if we take all the industrialworkers as it could cover less than half of them. The Law for insurance againstaccidents came in 1907, and intended to cover the same population as the sicknesslaw.At that time the insurance system became centralised which helped it to bemore effective. Following the law in 1907 we can say that the majority of theindustrial workers was covered.At the same time neither of these laws intended to cover the agriculturalworkers who constituted the vast majority of Hungarian employees at that time.There have been attempts in 1900, 1912, 1925 etc. to make arrangements to coverthe agricultural workers with some forms of insurance but these attempts all failed.The law said that the employer of the agricultural worker should pay the costs ofthe healing of the sick employee. It seems that a very low percentage of farmers didpay for their workers these fees and later the contribution. Sadly the situation ofagricultural workers remained more or less the same up until the late 1930s and thenimproved only slightly. Even after World War II and the advent of ‘state socialism’the insurance of agricultural workers remained long unsolved.3. Attempts for ExplanationAs I said before I believe that the beginnings of the Hungarian compulsory socialsecurity legislation were not belated compared to Western countries. At the sametime I see some differences which make the picture more opaque. These cursoryattempts at explanation will be probed much further at a later stage. They have to148 D. SZIKRAbe seen as hypotheses rather than answers.1. Regional gaps (in organised labour, information, etc.). Not only the timing ofthese laws but also their content was very progressive for the period. Yet theycould hardly reach their intentions. Their implementation went very slowly.This was probably due to the fact that the laws were not very well preparedon the local level. Where workers were concentrated (mainly in Budapestand other big cities, esp. in factories) the administration of the schemes wasnot as problematic as in the countryside. They could hardly make employersand workers of small distilleries pay their contributions, particularly whenthe workers concerned might not have known anything about the advantagesof compulsory schemes.2. The special case of the agricultural workers. The non-insurance of agricul-tural workers for such a long time in such an agricultural country is striking.Some possible explanations follow, but all of them have to be substantiatedlater.a./ The circumstances in the countryside were so bad that several social policymakers of the time (even in the late 1920s) argued thati would not be sensibleto insure agricultural workers because there are no doctors to see them. Bythat time one third of the doctors lived in Budapest and it was not rare thatthe nearest doctor from the village was 50 km away. How can they evencall the doctor? Also, the majority of the agricultural workers lived in suchcircumstances that first had they to learn how to wash hands or live in a houserather than being conscious about their possible rights to see a doctor. Thusthe health care of the countryside remained for long time in the hands ofcharitable societies (who actually did a fantastic job).b./ Also it would have been very hard to check whether an agricultural workeris really ill in the winter or there is simply no work. The capacity of theinsurance companies and the state were too small even to try to check themisuse of the system in the countryside. This was another reason to opposesuch a scheme.c./ The third reason at least as important as the previous ones is that Hungarianlandlords strongly opposed the introduction of any kind of social insurancefor the agricultural workers. As they had big influence in the parliament theycould veto any kind of proposition of this kind for a long time. They livedin a very patriarchal and feudalistic relationship with the lower agriculturalclasses which meant that there should be no right of any kind given to thesepeople because they might misuse them.3. The dual society. The famous Hungarian historian Ferenc ERDEI describedthe Hungarian society of the time with this term. He meant that there is a verysmall but growing part of the society which takes on ‘bourgeois mentality’,rising into the middle class, whereas the majority of the society remains in theold feudalistic structures being not even touched by the ‘other’, modernising‘world’.This seems to apply for the development of the Hungarian social arrangementstoo. On one side there is a progressive, modern way of thinking, creating actsTHE HUNGARIAN WELFARE STATE 149that we can still be proud of, and on the other side there is dense ignoranceand poverty. Civilisation could hardly break through the wall between thetwo societies of Hungary.4. The paradox of social science. To understand why we had such arrangementslike the compulsory sickness insurance as early as 1891 we have to know thatthe Hungarian social scientists were amongst the best social scientists oftheir time. The fact when and how those in power gave them money andspace to work strongly influenced the outcome (legislation or statistics). Theproblems of Hungarian statistics I mentioned above did not come from thefact that we did not have enough great statisticians. It came from the fact – asthey described it several times – that one year they got money and entitlementfor their work and then for several years they did not. There was no continuityof their work.Whether the voice of such great economists as e.g. Farkas HELLER waslistened to in the mid 1920s is a big question. (This is a point I have to pursuefurther. HELLER was an economist, but about one third of his ‘Treatise on AppliedEconomics’ is an exploration in social policy, complete with the description offacts and their analysis.) His words sound more than up-to-date today: ‘The taskof social policy is to intervene in economic life to bring the human aspect into it,and to help to develop the economy into a morally acceptable community. . .. Thisis why social policy is the crowning of all economic politics.’ ([5], p. 237.)To sum up, alongside timely attempts to modernisation there were many‘developmental deficits’ ranging from the feudal structures to the lack of sociallystrong organisations or of politically effective discussions. I still have to show allthe contradictory or paradoxical elements stemming from these conditions.References[1] ERDEI, F., Hungarian Society between the Two World Wars. In Kover (ed.): The Social Historyof Hungary, Bp., 1995.[2] FLORA, P. – ALBER, J., Modernization, Democratization and the Development of Welfare Statesin Western Europe. In Flora-Heidenheimer: The Development of Welfare States in Europe andAmerica. Transaction Publishers, 1982.[3] Fifty Years of Hungarian Social Security. 1892-1942. OTI, Budapest, 1942.[4] Hungarian Statistical Yearbooks, 1874, 1894, 1899, 1901, 1909, 1910.[5] HELLER, F., Economics. II. Book, fourth edition. Budapest, 1947.[6] The Manufacturing Industry of the States of the Hungarian Crown. (Contemporary Statisticsfrom 1890, 1898, 1900, 1906, 1910.)

THE ORIGINS OF THE HUNGARIAN WELFARE STATE IN A COMPARATIVE PERSPECTIVE

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THE ORIGINS OF THE HUNGARIAN WELFARE STATE IN A COMPARATIVE PERSPECTIVE

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