There is a consensus among politicians worldwide of the need to create jobs. The only question open to debate is exactly how to create them.

In the EU, job creation policies rarely make it into the headlines. There are twice as many people without work in the EU than in the US – 25m, a joblessness rate of 10.4 per cent, reaching almost 25 per cent in Spain. Yet politicians struggle when it comes to talking about jobs.

In Brussels discussions over the past six months have been dominated by abstract and fruitless debates between “austerity” and “growth” – totally distracting from the harder and more practical task of job creation, and forgetting the simple economic wisdom that fiscal stability is an indispensable prerequisite for healthy growth.

As more and more European countries face economic slowdown and rising unemployment, it becomes clear that there is an urgent need to act now.

Hungary offers a recent example of such action – where the government has introduced its Job Protection Plan to the new session of Parliament.

This programme has two pillars: the first comprises a reduction of employer social security contributions for people who are the most vulnerable to the scourge of unemployment, young people between 18 and 25; those above 55; people with minimal or no qualifications or skills; the long-term unemployed; and mothers wanting to re-enter the job market.

For these groups contributions will be at least halved, and in some cases cut completely depending on exact circumstances, up to a gross wage of Ft100,000 (€350) per month.

The second pillar will reduce the administrative and tax burden for the self-employed and for small businesses. Micro-companies with an annual turnover of less than Ft6m (€21,000) will be able to make monthly lump-sum tax payments of Ft50,000 (€175).

Meanwhile, for small companies (fewer than 25 employees) a new small enterprise tax will replace five existing taxes.

Taken together these measures will dramatically cut paperwork, improve cash-flow, vastly simplify financial planning, and, most importantly, will save businesses a total of Ft300bn (€1bn) annually.

Interestingly, in a political landscape which has been highly polarised over the past few years, this programme has attracted some cross-party support. And while the government estimates that a minimum of 1m people will benefit, a recent report by the independent economic research institute, GKI, anticipates that approximately 1.2m employees – roughly one in three in Hungary – will be better off as a direct result of these measures.

In fact, unemployment in Hungary is very near the EU average, at 10.8 per cent. On the other hand, levels of employment in Hungary are low compared to other European countries, at only 57.2 per cent of the working-age population, though there have been slow improvements to this recently.

Since the centre-right government of prime minister Viktor Orbán came to office in the middle of 2010, there has been a comprehensive package of very conventional supply-side reforms, including laws to introduce a more flexible labour market, support the highly acclaimed German “dual model” apprenticeship system, and provide greater incentives for people to work with the introduction of a low, flat rate of personal income tax of 16 per cent.

The Job Protection Plan is adding a demand-side element, and contributes to a balanced and comprehensive strategy.

Of course, time will tell how these policies take effect and what their impact will be on employment and jobs in Hungary. And in the coming months, it will also be critical to European economies that a consensus emerges in Europe: that politicians start to talk more seriously about – and start to take action on – jobs for people.

(Financial Times)