Long abstract

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The Hungarian government is conducting a series of reforms to tackle the low employment rate through tax and welfare reform. This Chapter first looks at measures taken recently to lower the tax wedge on labour through reductions in employers’ non-wage labour costs and reductions in personal income tax. In welfare reform, ongoing efforts to reduce the very large numbers of people on disability benefit are examined and the policy options for further reform in sickness pay and early retirement schemes are considered. The Chapter also considers whether reforms that cut generosity and restrict eligibility should be balanced by increased generosity in unemployment benefit to encourage more of the non-employed to engage in job-search activities. A final section of the Chapter looks at whether additional policy actions can be taken to improve transport networks for commuters and increase the level of labour mobility between regions.