Even back in 2014, the concentration of wealth amongst the top 10% richest Hungarians was unprecedented. Based on the latest estimates as reported by hvg.hu, this group controls 56% of the Hungarian population’s assets. The poorer half of the country’s population only accounts for 8.9% of the total wealth.
According to the latest figures, Lőrinc Mészáros’s Opus group generated a profit of €168 million in addition to the taxed €77 million. 56.4% of the population’s total net wealth was in the hands of the richest 1/10 households. The richest 1% owned a quarter of total assets while the poorer half of the country’s population only had 8.9% of the wealth.
A sizeable wealth inequality
This data is surprising as it has always been the belief that Hungary has a relatively small wealth disparity when compared to the rest of the world. According to the study conducted by MNB (Hungarian National Bank), the top 1/10 ‘only’ owned 48% of total assets in 2014. While this 48% does represent wealth disparity, the recent figure of 56.4% obtained by KSH makes Hungary one of the least equal countries in the EU.
Even the 2014 figure was underestimated; a re-evaluation of the data led to the adjustment of the value from 48% to 53%. KSH (Hungarian Central Statistical Office) conducted the survey by asking participants in person. However, targeted households were unwilling to open up about their income and often understated the value of their assets. The data was therefore corrected by central bank officials using macroeconomic data from bank accounts based in the country.
The poorest half’s share of wealth increased slightly from 8.7% in 2014 to 8.9% in 2017. However, even though the richer half’s share of wealth decreased, within that group the richest 10% and 1% increased their asset values by 3.4% and 1% respectively.
Income-based inequality did not increase
Even though some people may be rich due to their assets – for example due to inheritance and valuable property -, they may still have a low income. This may be because they have low wages or a large family, the latter reducing the average wealth of each individual in the household.
Nonetheless, the data states that households with more wealth tend to have a higher income, while asset-poor households usually have lower wages – it is easier to increase wealth from the availability of assets. Based on this, MNB found in 2018 that 97% of government household securities and 98% of shares and equities were in the hands of the population’s richest 20%. In contrast, 31% of outstanding loans belonged to the poorest 20%.
However, despite the growth in wealth disparity, income-based inequality did not grow between 2014 and 2017; the richest 10% reaped in 24% of earnings in both years.
In fact, income-based inequality has slightly decreased. In 2014 the richest households earned 8.3 times more than the poorest. This figure dropped to 8.2 in 2017.
The above statistic means that the richest and poorest households’ income is growing at the same rate. However, when looking at the raw numbers, the wealth disparity between the two groups is still increasing. Indeed, for the richest households the growth in income in the space of 3 years was greater than the actual income of the poorest.
Continued rise in wealth disparity.
The increase in revenue for the richest is from businesses. 52% of earnings from enterprises went to the top 1/10 in 2017. This was only at 33% in 2010.
Even though they may have higher earnings, it does not mean that the richest will have much higher expenditures than people in poorer brackets. Since they spend a smaller proportion of their wealth than people with a lower income, they have higher rates of wealth accumulation as well, thus reinforcing wealth inequalities. The poorest households had a net-negative income due to their amassing of debt.
With the government’s focus on policies that encourage investment and growth, it is not surprising that wealth disparity is growing in Hungary. Placing enterprises at the forefront of economic policy will no doubt continue this trend.
Despite this, at the end of last year we reported that the government announced that income inequality has declined since 2010. In February Mészáros invested in a wheat starch plant in Northeast Hungary.
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Source: hvg.hu, mnb.hu, ksh.hu