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European Monetary Union - Why Central Europe is bad news - Part 1

THE IMPACT OF IRRESPONSIBLE HUMAN RESOURCES PLANNING ON THE ECONOMIES OF CENTRAL EUROPE

Sources: see footnote

ECRE-European Committee on Romani Emancipation estimated the orders of magnitude of the loss in Gross National Product in Central Europe caused by the educational deficit enforced upon the Roma. This was based upon estimates of the proportion of the Roma population who have been systematically de-capacitized in terms of professional abilities as a direct result of having been subjected to Special school treatment in the Czech republic, Hungary and the Slovak republic.

The Special schools have negative impacts on several important economic factors including:
  • confidence to take initiative
  • broad educational capacity
  • professional capacity
These personal motivational and capability issues are further impacted in a negative fashion by:
  • a general lack of encouragement by others
  • a difficulty in purchasing land and buildings
  • a prohibitive bank loan conditions, including excessive and usually unrealistic collateral requirements, for new initiatives
  • a frequent failure of local authority personnel to provide adequate orientation
These circumstances combine to create a situation where, in general, Roma, and especially those who have been subjected to Special schools, are unlikely to achieve average level of economic productivity and therefore income levels. This will have a serious impact on the economies of Central Europe. We set out the reasoning and logic behind this statement in the following paragraphs.

National populations

The current population projections for the Czech republic, Hungary and the Slovak republic are presented in the table below. All countries have a negative population growth and as a result the total populations in all countries will fall.

Central Europe 2000-2050
Population projections in millions

2000 2010 2020 2030 2040 2050
Czech republic 10.3 10.2 9.9 9.4 8.7 8.0
Hungary 10.1 9.8 9.5 9.0 8.5 7.8
Slovak republic 5.4 5.5 5.5 5.3 5.1 4.8


The expected declines in the total population figures for these countries are set out in the following table.

Central Europe 2000-2020 & 2000-2050
Loss in population

2000-2020 2000-2050
Czech republic 836,000 2,257,000
Hungary 308,000 2,302,000
Slovak republic (increase 67,053) 643,000


In summary, Hungary's population will decline by some 300,000, or 6%, by 2020 and the population will decline by 2.3 million, that is 22%, by 2050. The Czech Republic will face a decline in population of some 3.7% by 2020 and 22% by 2050. These figures are based upon natural population growth figures.

In practical terms, when these countries join the European Union there will be a significant brain drain made up of professional individuals who will be able to earn up to five times more than they can earn in their countries by working for European private enterprises. This will have an impact on the performance and productivity of these economies.

The Roma living in these countries are nationals and citizens of these countries. In planning for economic development Central European countries have tended to concentrate on initiatives which favour the mainstream portion of the population which is declining in numbers. It is this segment amongst which there will be the most significant loss as a result of the brain drain to the European Union.

Mainstream and Roma population numbers

Over the time frames considered, the proportion of the population in these countries who are members of the Roma community will increase significantly. Projections of the Roma population in these countries over the same period are provided below.

Central Europe 2000-2050
Population projections for whole countries and Roma
Highest Likelihood Estimate based upon an upper limit of Roma natural growth rate of 2% pa  (Source: GeoHive & SEEL)

2000 2010 2020 2030 2040 2050
Czech republic 10.3 10.2 9.9 9.4 8.7 8.0
Roma pop 0.36 0.41 0.50 0.61 0.74 0.90
% Roma 3.5% 4.0% 5.0% 6.5% 8.5% 11.3%
Hungary 10.1 9.8 9.5 9.0 8.5 7.8
Roma pop 0.61 0.74 0.91 1.10 1.35 1.64
% Roma 6.0% 7.6% 9.6% 12.2% 15.9% 20.9%
Slovakia 5.4 5.5 5.5 5.3 5.1 4.8
Roma pop 0.61 0.74 0.89 1.10 1.34 1.63
% Roma 11.2% 13.5% 16.4% 20.5% 26.2% 34.2%

2000 baseline established on basis of natural growth estimates from 1994 figures.


The table above was generated on the basis of an upper limit to expected natural growrh rates for Roma of 2% p.a. The result is an increase in the percentage of Roma in the Czech republic of from 3.5% in 2000 to some 6.5% in 2030 and 11.3% by 2050. In the case of Hungary these percentages rise from 6% in 2000 to 12.2% in 2030 and 20.9% by 2050. In the Slovak republic these percentages rise from 11% in 2000, to 20.5% in 2030 and 34.2% in 2050.

Between 2000 and 2030 the total Roma population is likely to rise from some 1.67 million to 2,85 million and to around 4.2 million by 2050, a 250% increase in numbers.

Roma population within the school age segment and the Special schools

In reviewing the Roma school age populations during the last 40 years by backward projection it is possible to estimate the percentage of Roma children which have ended up in Special schools. Backward projection of population numbers at the rate of 2.25% pa generates total population estimates for Hungary as shown in the table below.

Hungary 1989-2003
Represemtations of Roma children
within the 7 - 16 years age group in Special schools


Hungary Roma population 7-16 age group Special school (SS) population % Roma in SS Number of Roma in SS % of all Roma age group in SS
1989 478,000 119,000 15,000 0.12 1,800 1.5%
1990 488,000 122,000 15,000 0.12 1,800 1.5%
1991 499,000 124,000 20,000 0.20 4,000 3.2%
1992 510,000 127,000 25,000 0.25 6,250 4.9%
1993 522,000 130,000 25,000 0.30 7,500 5.8%
1994 534,000 134,000 30,000 0.35 10,500 7.8%
1995 546,000 137,000 30,000 0.40 12,000 8.8%
1996 558,000 140,000 30,000 0.45 113,500 9.6%
1997 571,000 143,000 30,000 0.50 15,000 10.5%
1998 584,000 146,000 35,000 0.60 21,000 14.3%
1999 597,000 149,000 42,500 0.75 31,875 21.4%
2000 610,000 152,000 52,500 0.90 47,2550 31.1%
2001 624,000 156,000 60,000 0.95 57,000 36.5%
2002 638,000 160,000 70,000 0.98 68,600 42.9%
2003 652,000 163,000 70,000 0.98 68,600 42.0%


Labour productivity segments & economic impacts

The above figures for Hungary serve to show that an increasing number and proportion of Roma children are receiving a defective education which robs them of future prospects because of a lack of professional training. With the Roma making up an increasing proportion of the Hungarian new workforce, this "policy" is high disruptive of the future economic prospects of the country. It has already inflicted a serious level of underperformance upon the country during the last half century.

In order to provide some guidance to the economic losses to the Hungarian economy which result from the lack of education and training of the Roma population, it is necessary to separate the economic contribution of the mainstream from the economic contribution of the Roma. In broad terms, on a per capita basis, the Roma earn approximately 16.6% of the per capita income of the mainstream. In the case of Hungary this works out at a per capita contribution of Euro 12,000 for the mainstream and Euro 2,000 for Roma.

Opportunity cost

169. In 2000, with a GNP of Euro 115 billion the Hungarian mainstream segment contributed Euro 114 billion and the Roma component some Euro 1.2 billion. If economic and human resources planning strategies had enabled the Roma to have an earning capacity equivalent to the mainstream, then the Hungarian GNP would have been some Euro 7.3 billion higher. This loss of Euro 7.3 billion to the Hungarian economy is the result of a failure to introduce effective educational and training programmes to address the needs of the Roma. This loss, resulting from policy inaction, is known as the opportunity cost. As the mainstream population numbers decline and the Roma population increases, the opportunity costs of inaction will increase dramatically. The opportunity costs for such inaction have been calculated for the years 2010, 2020, 2030, 2040 and 2050. These figures show that the opportunity cost will increase from Euro 7.3 billion in 2000 to some Euro 16.5 billion by 2050. In real terms if future Hungarian economic activity is projected up until 2050 with no change in the relativities of non-Roma and Roma income levels the Hungarian GNP will decline by some 37% to roughly 63% of its current real value.
Hungary 2000-2050
The opportunity cost in Euro billion of non-development
of Roma segment to the Hungarian economy. Current real growth
pattern with no proactive development of Roma population component.

2000 2010 2020 2030 2040 2050
Non-Roma pop 9.53 9.05 8.48 7.75 6.82 5.74
Roma pop 0.61 0.74 0.91 1.10 1.35 1.64
CURRENT            
Mainstream/capita 12,000 12,000 12,000 12,000 12,000 12,000
Roma/capita 2,000 2,000 2,000 2,000 2,000 2,000
Mainstream GNP Component 114B 108B 102B 93B 82B 69B
Roma GNP Component 1.22B 1.49B 1.81B 2.21B 2.69B 3.28B
Projected GNP 116B 110B 104B 95B 85B 72B
Opportunity Cost 6.10B 7.44B 9.06B 11.05B 13.47B 16.42B


Erosion in Hungary's competitive status

Naturally, this decline will not be this dramatic because of innovation and improvements in technology and technique will result in higher overall performance. But the figures in paragraph 172 represent a strain on the economy created by an imbalance in basic capabilities which relate to school and professional education. In the terms of accession to the European Union this imbalance will crate a significant strain on Hungary's ability to compete and thereby improve the overall welfare of the population. Unless the basic professional capability of the Roma population is radically improved, the so-called transfer costs from the central budget to support social welfare, family benefits and the unemployed, for the whole population, and not just the Roma segment, are likely to become increasingly unsustainable by 2030.

Hungary's one option choice

Hungary has a choice. This is to recognize that the Hungarian citizens, who are also Roma, are a vital human resource upon which the future prosperity of Hungary depends. The physical realities of the population dynamics of the mainstream or non-Roma population make this an undisputed fact and there is nothing which can change this underlying trend. During the last decade, Hungary has lost something of the order of Euro 50 billion as a result of the lack of training and professional capacity of its increasing Roma population. During the last decade, Roma children, to an increasing degree, have been placed in Special schools. Now more than 40% of the relevant age group is in a Special school. Current Hungarian policy is proactively laying the foundation of a serious future deficit in the performance of the economy.

The children entering Special schools now (including the new contingents entering so-called "Special kindergartens") will enter the Hungarian labour market in 2013-2015 when already Hungary will be losing some Euro 8 billion each year as a result of under-trained Roma.

Central European losses

Currently, in global terms Central Europe has an annual performance deficit estimated at around Euro 15 billion as a direct result of this policy motivated by financial corruption and racial prejudice. The European Union has provided some Euro 66 million to assist Roma and some Euro 10 billion for other programmes, during the last decade. Central European governments have been remiss in not actively promoting training and have knowingly maintained the Special school system, indeed have intensified its use, which has and will contribute to a significantly reduced earning capacity of the Roma. The result of this poor planning and policy decision making has depressed gross national products by at least Euro 150 billion over the same period.

Continue on to the next part, Part 2 ?


Document: ECRE(2003) 002; Updated 18th March 2003  A Report on an Investigation by EUROPEAN COMMITTEE ON ROMANI EMANCIPATION ECRE, European Economic Interest Grouping, THE IMPACT OF SPECIAL SCHOOLS ON THE ROMA IN CENTRAL EUROPE,  A case of wilful criminal neglect & professional incompetence, Brussels, 26 February 2003