It is hard to leave this post without response. Both because I am Hungarian, and also because I happen to be an entrepreneur. The only reason I think this post deserves a response is because it seems you haven't started your business yet.

So here is my advice: don't do it. Just don't.

Not because of the taxes, but because of your utter lack of respect towards your future employees. If what's really holding you back is that you couldn't deliberately fire them, I see no reason why you would even want to hire them in the first place. I think what you don't realize is that you as an employer would become responsible for your people. They would depend on you and their monthly salary, and I think if you see your employees as some company assets you can just get rid of as soon as things get tough, you really shouldn't hire anyone to begin with.

I would like to believe you are slightly distorting reality to shake things up. But if you are actually serious about founding a business, I would suggest you do not hire your 12 males in their twenties right in the beginning, instead, you hire a few people you actually _want_ to work with, and pay them a decent salary. And pay the taxes, as high as they are. Just because _you_ would be happier with lower taxes, does not mean that it would help the country's economy. Maybe try innovating and charging more instead of low-balling.

I am well aware of this type of criticsm, because I've already got it with the original, Hungarian post. I could have rephrased it to avoid some of the misunderstanding. But I didn't change a word, only translated to English what has already provoked a lot of thought.

In fact during my long life as an entrepreneur I employed more people than most of my harshest critics. Most of my employees were actually women. I treated them with great respect and I'd like to believe they're thinking about me as a good boss.

In fact, this post isn't really about me. It's about something much bigger than me. I know it's provocative, over simplifies many things, even populist if you will. It's not an academic lecture. It's how many smallbusiness owners feel about an environment that is leathaly poisoned by corruption. In which being honest makes you very uncompetitive.

I get a lot of advice about how to survive under these circumstances, how to trick the system, how to avoid employees stealing my (intellectual) property, how to do business. In fact, that wasn't my point. I know all that. I'm fine, in fact I'm one of the last persons who will not be fine in Hungary.

In fact I don't mind high taxes and strong social security. What I'm worried about is that it's ok for others not paying these duties, and they make honest smallbusinesses uncompetitive. Among many other things that make this society really, badly, deeply screwed up.

So badly, that Hungary is now marching towards national socialism. Something, that every intellectual should fight tough against. And that's what I'll try to do with my blog.

My point was only that the system is not _that_ bad that you wouldn't have a choice. Of course, that choice is yours to make.

But for society as a whole, these things are good. Long maternity (and paternity!) leave is good for the children that will one day grow up and become productive members of society. Having laws around parental leave preventing discrimination means that society doesn't have to deal with paying unemployment welfare for women around 30, and having a hard time re-integrating them into the workforce at 40. Instead this cost is spread out among all the companies in the form of employment laws.

I understand that all businesses wish to have a workforce consisting only of young well-educated males that are never sick, never take vacations and work lots of overtime, but there's a cost to getting that, and almost all businesses forget, or refuse to understand the value society provides to them. You want a workforce? Sure, it's gonna cost you, both in corporate taxes, and in social responsibility by employing less desireable individuals. Tough shit, pay up.

But I'd point out that, if one makes social responsibility particularly onerous on individual businesses, "You want a workforce? ... pay up" may reach equilibrium not by people paying up but by fewer and fewer wanting a workforce. Then everyone is poorer.

At the end of the day, businesses are started and run by people. Pro-little-guy positions like "tough shit, pay up" are aggressive stances not just against abstract legal entities but also against often-well-meaning individuals who aspire to offer products and services. Even people strongly aligned with European social democratic values agree that the government can't do everything, so if you want locally produced products and services you have to ensure that the conditions are suitable for people to do that.

Yet, somehow I don't think we'd feel the same sort of emotional satisfaction from "You want jobs? Tough shit, stop voting for policies that make it hard to offer them."

Corporations don't receive limited liability. The owners of a corporation have limited liability.

Also, it's not just the owners; employees acting as agents are typically protected by the corporate veil, so it's not just a fat-cat capitalist protection. This is important for, say, employees managing hazardous waste that may be spilled (through employee negligence) into public land. Or imagine who would be willing to be employed as an aircraft designer if their individual errors could lead to personal legal liability for crashes.

That's not true at all. The corporate veil exists solely to protect investors' investment in a corporate entity. It does not extend to any other persons. Employees can and have been held civilly and criminally liable for their negligence.

My understanding of vicarious liability (http://en.wikipedia.org/wiki/Vicarious_liability) is that the corporation is liable for actions of the employee in the course of duties (as an "agent"). I thought that the individual was liable only in the case of negligence outside the scope of employee duties (so if you're a garbage truck driver and also happen to be a burglar, you are personally liable for on-the-side burglaries during your rounds but not necessarily for accidentally crashing into someone's car).

However, I am not an expert and would appreciate clarification.

Edit: I did a bit more research and it turns out I misused the term "corporate veil" which appears to be a term of art (http://en.wikipedia.org/wiki/Piercing_the_corporate_veil) specifically pertaining to shareholder liability and which does not pertain to vicarious employee liability.

Thanks rprasad for pointing out the error. Terminology aside, is the rest of my commentary on vicarious liability accurate?

No, it's spread out among all the companies that are willing to hire women. The companies that discriminate against women have a competitive advantage over those that don't.

(Note that under normal circumstances, discrimination is a competitive disadvantage. If I hated Indians, for example, I'd never have found my current team.)

1) You overstate the likelihood of the market driving out discrimination. Racist and sexist discrimination has existed for centuries without the market ever reaching the equilibrium state of no discrimination that would result if people were rational market participants (1).

2) Inevitably people bring up Scandinavia in these discussions, and for good reason. Scandinavian countries have both very generous family benefits (including paternal leave!) and high representation of women throughout the workforce. This isn't dispositive, but it does suggest the situation is much more complicated than the original post would suggest.

All in all, I prefer to live in a world where everyone pays their fair share instead of trying to eke out a couple extra cents of profit by not providing parental benefits to mothers and families.

(1)This is actually an even subtler issue, because it's possible for markets to exist where racism and sexism offer a competitive advantage, due to consumer preferences.

I would imagine that those who don't discriminate would continue to not discriminate while those who do discriminate would continue to do so. Removing the law doesn't make women less likely to get pregnant. I am not sure your concept that we should remove the laws so that everyone can discriminate against women equally is really advantageous or very upstanding. Nor do I think the idea that people are going to discriminate despite the laws & it's too hard to prove that they're discriminating is a valid reason to remove the laws either.

True, but we are not postulating an employer who's customers prefer not to be served by a pregnant woman. We are merely postulating an employer who wants his employees to show up for work.

I would imagine that those who don't discriminate would continue to not discriminate while those who do discriminate would continue to do so.

In that case, why bother with any laws on the topic at all? After all, those who do discriminate would continue to do so.

Removing the law doesn't make women less likely to get pregnant.

No, but it does mitigate the harm that her pregnancy causes for her employer. If she chooses to vanish from the workforce as a result of becoming pregnant, her employer can permanently replace her and is not obligated to take her back 3 years later after her skills have stagnated.

This in turn gives the employer a greater incentive to hire her, since she poses less of a risk to the business.

I believe you stated under "normal circumstances" discrimination is disadvantageous. I am not sure exactly what you would consider "normal circumstances", but I was merely giving an example where discrimination would be an advantage.

We are merely postulating an employer who wants his employees to show up for work.

Which can lead to discrimination because a woman may be turned down for a job because of something she has no control over, her ability to become pregnant, regardless of if she actually has plans to become pregnant or not, or is even fertile.

In that case, why bother with any laws on the topic at all? After all, those who do discriminate would continue to do so.

People still murder others even though it's illegal. Why have laws against murder? They obviously don't work.

No, but it does mitigate the harm that her pregnancy causes for her employer.

Isn't the biggest harm losing an employee & having to hire someone new? That happens regardless of leave laws. True it might be less hassle now that they can fire a now expectant mother, but they probably would save themselves even that hassle by not hiring a woman in the first place.

Do you actually believe this claim?

"I would imagine that those who don't murder would continue to not murder while those who do murder would continue to do so. Removing the law doesn't make murderers any less likel to kill."

If not, your analogy is faulty.

Isn't the biggest harm losing an employee & having to hire someone new?

Did you even read the article? ...not only I couldn't fire her while she's away, I couldn't fire her when she comes back either. So I would have to fire the one who's been working instead of her for the whole time. When a woman would come back from the maternity leave I would be legally forced to increase her salary to the present level in her position, and also, give out her normal vacation days...

I would imagine that murderers would still murder & those who don't like to murder wouldn't murder. Laws don't enforce themselves, people still break them & sometimes get away with it. That is no reason to repeal them.

I couldn't fire her when she comes back either...

What would be the point of saving her job for her if you're allowed to fire her immediately upon her return?

So I would have to fire the one who's been working instead of her for the whole time.

So long as it's clear that the job was a temporary fill-in position, I don't see a problem with this.

When a woman would come back from the maternity leave I would be legally forced to increase her salary to the present level in her position...

Like you would have to offer any other employee at that position.

I don't think it's a black-and-white issue of giving or not giving a job. These types of government restrictions cause a change in the supply and demand for the protected individuals. This results in a change in their average salaries (i.e. more restrictions reduce salaries). Women are still worth hiring, just at a lower salary, to account for the added risk.

So in the end, the cost ends up being fronted by the women anyway.

Where I live, there's plenty of laws that stop companies from discriminating against women, thereby removing the competitive advantage, which in turn forces the companies to do the right thing.

Yes, there's a cost to these laws and these processes, but I think (and the politicians of my country obviously agrees) that it's cheaper and easier to do it this way, than to add a corporate tax and redistribute that money to groups that suffer from workplace discrimination.

It seems to work here, but that doesn't mean it would work as well elsewhere. There are so many factors that make up a society.

But in this case, the discrimination is rational. Due to maternity leave, a woman of equal skill creates significant cash flow risks - if she takes leave, you either go for 3 years with her job not getting done, or else you hire a replacement and risk being stuck with unnecessary employees in 3 years.

That is not how it works in Sweden (nor anywhere else that I know of). The replacement is hired as a temporary position until the original employee returns.

Such laws make an employer indifferent between a man of quality Q and a woman of quality Q + P(taking leave) x (cost of leave). Whether or not hyper-productivity is required depends strongly on P(taking leave) and the cost of leave.

To the partnership answer, a lot of people don't want to take risks in general. This is true even in the US where people are way more entrepreneurial than other countries.

Then why not triple the existing benefits? Why not multiply them by 10 even? If it's an unalloyed good, then why are we being so stingy with the good stuff?

If you account for only one side of the ledger, you can make anything look good. (Or bad.) Unfortunately, reality checks both sides. Wrapping it in a social justice narrative may make it easier to obscure the ledger to other humans but it doesn't fool reality for one Plank instant.

What an absurd, and incredibly disingenuous thing to say. Water's good for you - in fact if you don't have it you die. So let's throw you in a huge pool and see how you like it!

Stop putting words in OP's mouth, and argue against his argument instead of twisting it into an easy straw man.

It might be the case that the balance in Hungary is off as the author of the article claims, but that claim was buried in a one-sided rant against the cost of accessing the labour pool.

The point of my post was to even the scales, to remind everyone that it costs a lot of money to employ people, because creating employable people costs a lot of money. The CS college graduates we want to interview as potential employees of our dot-com startups don't materialize out of thin air. As cheesy as it sounds, previous generations invested in their future; we have to do the same.

A business simply can not hire when the cost of an employee exceeds the benefits, and if it can't make do without employees, it will simply go out of business. It doesn't matter at that point how much it cost to "create employable people" (itself a terribly loaded formulation, but moving on), because society has priced itself right out of the market, apparently.

Something a lot of people seem to forget is that if you want to use businesses as a piggy bank to fund social ambitions, you have to let some money actually flow into the piggy bank. It is not simply a given that money will be there.

The cost is not spread around much at all. The entire burden is on women who are discriminated against because they cost more to employ and on small businesses that cannot shift jobs around as easily as big corporations can.

My preferred solution would be to exempt small business (those with less than 20 employees) and don't grant any parental leave or benefits unless both parents take equal leave (Obviously single parents have to be exempt).

Here in Sweden, employing people can be a crippling move for small businesses.

Politics. Most people don't see or hear about payroll taxes, but they would notice if you added 5% to their income taxes.

Plus, in a lot of cases it's administratively easier to say "the funding for this social program comes directly from this source of taxation".

You're right that taxes should be designed better; in a lot of cases they provide disincentives for a lot of beneficial behaviour. Taxes are just really hard to design correctly. It's a huge problem no one has control over.

My hacker's mind sees society the same way it sees ie software layers, kernels, APIs, libraries, etc. And from that POV, current society practices seem very inefficient and disorganized, and could be improved readily with a dollop of hacker values (eg lazy but smart) and cold hard logic.

One example: I am becoming more and more in favor of a minimum guaranteed income provided by society. Here are some good arguments in favor of that: http://www.xamuel.com/ten-reasons-for-guaranteed-minimum-inc...

Of course a MGI is heresy in today's society because we are still in a mindset where it's crucial that everyone pull their own weight lest other people suffer - a lingering meme from the days when 90% of the population was occupied with food production.

This of course ignores the notions that 1) society is insanely productive thanks to automation and it requires very little labor to pay for the true necessities of life (see for instance http://www.earlyretirementextreme.com - he lives on $7k a year) 2) many jobs today are marginally useful at best - think paper-shuffling mid-management 3) most of our income goes toward consumerist escapism which fails at making us truly fulfilled 4) much of the economy just exists to satisfy society's need for a status stratification mechanism (eg one is considered middle-class because one has such-and-such job title and education - if this classification went away then there would be general status confusion).

Then again, trying to fix society the same way one re-factors code may be hubris on my part...

Personally I've long been inclined to the view that we should replace our existing welfare, unemployment, and Social Security systems with the NIT. Although SS has been sold as a retirement savings system, it is really a transfer payment system, a reality that is starting to become inescapable. It's just not right, I believe, for a transfer payment system not to involve means-testing -- there's no way to justify taking money from young middle-class workers, many with families, to support retirees who are well off anyway.

For some very interesting arguments against the NIT, backed by some experimental data, see: http://www.econlib.org/library/Enc1/NegativeIncomeTax.html

I actually think the problems could probably be solved, but I have to grant that they are nontrivial.

It's all a matter of perspective IMHO.

Of course, I'm generally leary of "solutions" that come out of the gov't but that's another story...

I've certainly read statements by Friedman supporting basic income/negative income tax as a more efficient alternative to the existing welfare state. But do you have a citation for Friedman/Hayek supporting it in general?

If you've ever been an employer you would be able to relate, grow up.

Otherwise you are free to hire consultants and pay a premium to the agency and (hopefully) the consultant, but don't be surprised when they leave you in six months for something better (paid).

Also fresh graduates or self educated people are loyal and relatively cheap (especially in Sweden). But then you would of course have to invest in them.

You say it's a scam, but if so, who manufactured the scam? Are you telling me that those in power got together and decided to build a system which punishes the hardworking and rewards the lazy? Since when do people join a conspiracy to help others and hurt themselves?

You also make gross generalizations in describing the people that benefit from social programs. It's repulsive.

As for who manufactured the scam, you hit the nail on the head. There are those who are in power and wish to remain so, and the best way to do it is through bribery by theft, aka welfare/"social responsibility". It's not a conspiracy to hurt themselves (laws are for others, not them), but to gain control over others. It's just like giving wild animals food; soon they lose the desire and incentive to hunt/forage for themselves, and you've gained control over them.

Before you accuse me of "gross generalizations", you should know I was born into a dirt poor family. But we had pride, morals and a strong work ethic, and my parents were proud to have never taken welfare. We knew the welfare people and wanted nothing to do with them. Many had kids just so they could collect more welfare per child and proceeded to spend it on alcohol, cigarettes, gambling. Essentially whatever the parent(s) wanted, the kids be damned with most of them turning out bad--prison, murdered, or a second generation on welfare. The theme has continued throughout my adult life, only it's now extending into the middle class as well.

Finally, if you think my "gross generalizations" from personal experience and observations are repulsive, I know people who have a much harder stance on this topic than I do. They're a friend of mine and her colleagues--who are social workers in a major US city. She (and perhaps the others) got into the field to help others get back on their feet--only to find not apathy but hostility towards any attempt to get them off "social responsibility" programs, sometimes to the point where she's felt her life in danger.

A better overall society indeed.

Assuming that your "social responsibility" taxes are only intended for poor unwed mothers is a gross generalization regardless of your personal background.

What if the woman was not poor or not unwed at the time of conception? What if her husband lost his job? Do you think having children should be a privilege limited only to married couples with at least a quarter million dollars in savings? And if so, do you at least support the state giving out free contraceptives to the "leeches" who aren't in such a financial position?

If a person can't afford their child, what do you recommend? Leave the kid near the dumpster to fend for him/herself? That'll teach a strong work ethic, right? Because we all know maternity leave is just a euphemism for vacation.

A sampling from one paper:

>We find considerable associations between early returns to work and many of the outcome measures [regular medical checkups and breastfeeding in the first year of life, the receipt of all DPT (diptheria, pertussis, and tetanus)/Oral Polio immunisations (in approximately the first 18 months of life) and cognitive and behavioural assessment scores at age 3 or 4]

http://onlinelibrary.wiley.com/doi/10.1111/j.0013-0133.2005....

@brown9-2 In theory it does, but if businesses don't hire said unwed mothers because government policies make it too expensive, it doesn't benefit anyone.

Edit: To be clear, I agree that you shouldn't have a child you can't afford, but mistakes happen, situations change, etc. It's a lot more complicated than the commonly portrayed notion of welfare mothers defrauding the government.

And it's wrong(1).

When you spend 3000 Euros to hire someone who nets 1500 Euros, the difference is not "stolen" by the government, it's what you pay to have access to a pool of highly educated potential employees who get free(ish) health care, childcare, pensions that you as an employer don't have to worry about.

There are of course places where such taxes are not levvied, but it's a mistake to assume an employer can simply pocket the 1500 Euros difference as employees will demand higher salaries so they can save up for their own medical care, child care and pensions.

(1) Except the bit about maternity leave: it may not be three years (!) all over Europe but even if it's a mere six months it's enough to cause small businesses to be very reluctant to hire women in the child bearing age.

The government takes away your "right" to find your own balance between opportunity and security. The government takes away your choice and your power as a consumer to discriminate between different suppliers, which causes those suppliers to be worse than they might otherwise be. For some things, like health care, the assumption is broadly correct, if the quality controls work (that's a big if). For most other things it is not correct at all.

Not everybody wants to retire at the same age or at all. Not everybody wants to secure the same pension or start saving for it at the exact same time of their life. Not everybody wants to go to university. Not everybody wants to have children or send them to the exact same (mostly broken) type of school.

Not everybody wants to buy expensive protection against being fired or getting sick for a week. Not everybody wants to support the local opera house, museums, the government's very own TV network or that network's very own classical orchestra. Not everybody wants to subsidise railway lines to remote parts of the country or the post office there.

And then there's the problem that some groups of people that are close to the government or belong to well unionised traditional industries are getting a lot more out of it than everybody else. The system isn't driven by need, it's driven by affiliation. Affiliations are a complex web and hence entitlements are organised in an extremely complex and ineffecient way that makes people want to stay put once they have a achieved a certain entitlement status.

At the end of the day, we're paying 50% into government coffers and yet we have widespread poverty in many European countries because the poor are a minority without much of a say in anything.

I'm not arguing for letting people go hungry, untreated and homeless when they cannot help themselves. I'm arguing for redistributing money instead of forcing canned buying decisions on everybody. I'm convinced that catching those who fall does not take 50% of all monies earned.

Not really. It's a matter of risk pooling and public good. In health insurance, for example, it's understandable for a healthy person to pay a premium higher than the value of the services he actually receives. In exchange, if he suddenly gets in a car accident, an expensive procedure may be affordable. Additionally, his disabled neighbor may be able to afford his otherwise extremely expensive care. This sort of scheme only works effectively when everyone participates, especially the healthy, low-cost folks, who bring down the cost for everyone else.

The same or similar concepts apply in unemployment insurance. Someone with a stable job may not feel he needs unemployment insurance, but paying into the system makes the system possible. If only the unemployed and underemployed paid for unemployment insurance, we wouldn't have such a thing.

With education, things are a little different. There are some people who will never have children to benefit from paying for public education, but these people indirectly benefit from living in an educated society. I don't have children, but I'm more than happy to contribute to public education, since I value literacy not only in myself but in others.

Arts (e.g., your TV, symphony, and museum examples) are basically an extension of education, though I suspect some people would probably argue against me there.

Infrastructure in rural areas is expensive, but in my experience, at least, those rural areas are often poorer than the more urban areas. Your options seem to be (a) cut those people off from society, (b) subsidize their infrastructure, or (c) pay them to move elsewhere. I think (b) is the most reasonable option.

In the end, the people in the most need generally have the least to offer, so the people with the most to offer either have to subsidize, or the least have to go starving. Universal, progressive taxation seems like a very reasonable way to accomplish the goals of a civilized society.

Now I'm assuming you're strictly talking about health insurance (though the same concept applies to homeowner's insurance, etc.), but isn't subsidizing high-risk/high-cost subscribers inherent in some forms of insurance? Take a pension, for example. Some people will live much longer than expected; some will die a year after they retire. The only way to account for this, other than periodically adjusting each retiree's income based on how unhealthy they are, is to pay for the pension of one ancient retiree with the funds from one who died young.

This causes problems, to be sure, in that it disincentivises some, but not all wellfare recipients from trying to escape their poverty, but it prevents people from dying of hunger in the streets, which is, imho, a good thing.

According to the chart, Hungary takes 50% more than the Netherlands. Are there any objective metrics at all that suggests that Hungarians are 50% better educated, have 50% better health and child care or 50% better pensions?

Stealing might be an inflammatory word, but what's going on in Hungary (and, indeed, many other European countries) certainly isn't a mutually beneficial transaction.

The problem here is that Hungary's cash salaries are much cheaper than average, whereas Hungary's non-financial compensations are merely quite cheaper than average.

The only systemic problem described in the article is that private bosses have to shoulder the burden of helping mothers and older workers. Helping them is a societal decision, it ought to be supported by society: if you want to help pregnant women, let bosses fire them, then have the government compensate them with tax money coming from all companies, not only from those which hire child-bearing-age women.

Simply have the state pay their wages while on maternity leave (and the father's on paternity leave). That's how it works in Canada. Works well.

How does Canada handle those parts?

So like most things, "it's complicated". This article oversimplifies to the point of it being flat out wrong.

And not only that, it's completely unoriginal, being an exact transcript of what every shopkeeper in Europe will tell you after you've bought him a few drinks.

I don't understand Fidesz - or their motivations. I don't have the context (I'm rather new to living in Hungary) but it looks to me like they think they can tax their way out of the hole the socialists left behind. The fact that we have the highest VAT in Europe now seems to corroborate with this view.

The problem is - it doesn't work. People just find ways around the taxes. They have to do so. People need to eat and live and if they do everything above board they will not make it.

So as I read your post - I was bemused, trying to picture this Hungarian who pays all his taxes.

As for paying the taxes? Some people do have to. You may go to jail if you're in the way of people who have good political connections.

Fine, I can see that. But your post barely says anything about this problem, focusing instead on how much it is you would have to pay.

Which is exactly what every shopkeeper does after you buy him some drinks. Hence the confusion :-)

And yes, also, that when you get sick of it all, and go the hospital that is financed with your tax money, not those, who do not pay the taxes, you are literally scared of the conditions. You are walking on tiptoes in piss.

This is basically what I can whine about when you have paid me a drink.

This is not true, the maternity is paid by the state. He mentions the high taxes as another problem, but in fact that's why they are that high, it's the same problem looked from the other side.

Also, there is a lot of productivity lost during the transitions.

It's common here, that women on maternity take a correspondence course or learn languages, etc. Often they are more skilled at the time of their return.

The law is like that because companies are much more powerful than the individuals. They have to take you back, that's fine, but still they can (and often do) offer you a position 300 km from your home, or exclusively in night shifts, effectively force you to quit.

As for point two, just because she's more skilled doesn't mean there isn't a productivity loss. It takes a little while to get settled (back) into a job. If the employee on maternity leave has been taking correspondence courses, good for her, but her replacement has spent that time working at the actual job. If the replacement has been doing good work, I would rather keep him/her rather than hire back the original worker, who might be "out of the groove" after a long maternity leave.

If they can learn a language or take courses, why can't they come back to work?

Three-years maternity leave? That's unheard of in western Europe, most countries allow for less than a year (my wife got 6 months in the UK); men only recently started to enjoy some rights in that sense (in the UK it's two weeks).

He talks about a post-50 "protected age" where you can't fire people. That doesn't exist in the UK, where we have the opposite problem (firms firing people near pension age, and then hiring youngsters at 1/3rd of salary). I know in other countries laws are tighter (in Italy it's fairly hard to fire people, for example), but as people say over there, "Facta lex inventa fraus" (as soon as a law is written, a way around it will be found"): in countries with rigid laws, firms now hire almost exclusively on a temporary basis, i.e. they hire people as contractors for years or even decades, abusing the relationship.

The high taxes and pension contributions are also a factor in Italy and in France, but not elsewhere.

What this post is representative of, is the general douchebaggery of European "entrepreneurs"; they usually come from "old money" (banks are very conservative with their lending, favouring entrenched players) and bring a terrible mindset to the workplace, i.e. "screw the employees, they're just idiots anyway". This obviously doesn't motivate workers, keeping productivity low.

Some startups from Hungary with funding:

  - LogMeIn: remote-login-as-a-service, had Nasdaq IPO
  - Ustream: live streaming, raised $100M
  - Prezi: nifty presentations, raised $10M
  - Indextools: webmaster tools, acquired by Yahoo
  - Pocketguide: nifty iPhone tourist guides, raised couple $Ms
  - Gravity: recommendation engine, raised couple $Ms

I remember those guys!

    Hungary is a backwater, and absolutely NOT representative of the EU, probably not even of the old eastern bloc.

I also cheer for the lofty let's-share-the-social-burden ideals that people present in this thread. But I fear these folks are just blissfully oblivious of how their money is redistributed and where it really ends.

9 months is the "baseline" maternity leave in Finland. My sister had a baby and ended up being away from work for almost two years. She just started working again this week, and the same company was legally obligated to take her back.

One of the favorite words around here is "pivot" and ponder how a company can pivot successfully with some of these considerations. Sometimes a pivot will completely change a product, business model, industry, etc and the company has to hire or layoff people accordingly.

It sucks by all measures (I've been on the wrong end of that), but ponder how much more difficult that gets when some of your staff is untouchable.

Even if it's not a problem, it changes your mindset and gives you yet another thing to worry about.

Actually its not, employers always have the whip hand - what they are complaining abotu is that its harder to act in grossly bad ways in the UK.

As for maternity leave, the same issue exists in the USA, to the extent that any firing of an employee has to be non-discriminatory. As for health-care : That's a very expensive nightmare in the USA, and it would be far more efficient IMHO for it to be wrapped into a % tax levy, rather than flat monthly rates (but that's a rather political statement in the US).

Reproducing Silicon Valley is another story. Arguably it's very hard to do even in NY or other parts of US that are more or less similar to California. After all, labour law is just one of many factors. For instance, even with all that overhead, I bet it's still much cheaper to hire a bunch of top-notch, English-speaking programmers in Hungary than in California.

Actually, towards the end of the post he delineates the real tragedy: nobody starts a legal small consulting business in Hungary, for all the reasons he states. It's cheap to hire hi-tech labor in Hungary as long as you just send checks to individuals and leave the government out of it as much as possible.

So the situation is that the gov't, through heavy-handed social legislation, makes it basically impossible to start a small business legally. Big business I suspect has ways and means of gaming the system and making a profit regardless. Bad for Hungary.

And not everyone has emigrated to California, some have but US emigration is just too rigid. Many of us would want to move to SV, but unless we want to endure H1B slavery status our doors are pretty much closed.

However if anyone out there wants to take a shot at hiring some of us as contract workers, contact me.

I am from a milieu with excellent Engineering talent and could easily build a 5-10 man team of excellent engineers at roughly 60.000$ annual price point.

However I am getting massive down votes here, for something that is neither rude, neither false, neither off topic.

I find this kind of attitude (not even bothering to teach me a lesson if I erred) very rude.

...Oh and they cost roughly 70% less

E.g. I had a chat with a VP of a chech-US startup and they were inquiring about the possibility of expanding in Hungary, because they satured their chech sources, but SV is too expensive / also saturated.

Also, companies like Morgan Stanley, SAP or Microsoft are not starting new offices or expanding in SV, but they are over here.

So, talent is available. In fact, this is so obvious that companies like Morgan Stanley et.al. showed up here, giving good salaries, making my job as a startup guy trying to hire much more difficult.

To be fair though, specific talent like "has worked with Hadoop for a year" or "has worked at Google on the core search engine" is not present here. Also, people are much more likely to prefer to work at a BigCo than in a small startup, compared to SV.

I understand what you're saying, and it's true, in fact I've worked at small companies and been subject to it.

My post was specifically meant to refute the parent's point that:

"I would expect there to be very few engineers in Hungary that match that [top-notch] description".

According to the dictionary: outstanding, notable, superior. Seriously, though, take any reasonable definition. If you asked me a number I'd say 1% but yeah, you could say top 0.1%. I can't see how that gives any more precise information though, given that we don't have a practical, objective way of measuring programming skills.

> Because under my definition of the term, I would expect there to be very few engineers in Hungary that match that description.

Why? I'd expect any country with >10 million people, very high level of literacy, a couple of good universities and internet connectivity to be home to a good number of top-notch programmers. I can't see how that's particularly controversial.

In any case I'm not sure why you're taking issue with this. I never said that Hungary has proportionally as many top-notch programmers as in Silicon Valley. My point is simply: hiring people in Hungary is no more expensive than in California in terms of U$; if you have a company with 20 programmers in SF you could sure find 20 replacements in Hungary and save on payroll.

- has experience working in the early stages of a venture-backed startup

- went to one of the top schools in the world, such as Stanford, MIT, Harvard, etc

- has an extensive personal portfolio of software projects on which they contributed

My point is that Silicon Valley "works" because it has lots of people that meet 2 or 3 of these bullet points. There is no place in the world that really comes close.

Nobody is objecting that you can surely hire people cheaper in other countries, but for small companies the cheapest labor source is almost never the winner. It's far more important to have the very best engineers.

This has no effect on someone's ability.

- went to one of the top schools in the world, such as Stanford, MIT, Harvard, etc

Those are not "top schools in the world". The only advantage they provide are great contacts and opportunities thans to those contacts. In terms of knowledge, many schools around the world (including many in the former Eastern bloc) provide excellent education.

> - has an extensive personal portfolio of software projects on which they contributed

Again, this has nothing to do with being in SV. Many bast-known open-source projects were started outside US (I'll leave it to someone else to list them, but I'm sure you can think of a few off the top of your head).

ADDENDUM - An example of your bullet points working just as badly more recently than 30 years ago:

Cevat Yerli when he started Crytek

And you would be so incredibly wrong. Hungarians are smart. Smart like Americans used to be, back in the 19th century when an American who did his work out in the barn could revolutionize entire industries for breakfast.

And why would you expect Hungary to have very few top-notch engineers?

I am also tried about the "stealing your money argument". In the US, the salary you get after taxes still needs to be used to pay health insurance and retirement. In continental Europe, that's part of the 'stolen' money. You can argue whether it is a good system or not, but an honest comparion is to e.g. remove the social contributions for health (around 6-7 % for a beginner engineer with a good degree), and pension (around 10-12 % IIRC). When comparing e.g. the US vs European country, this has to be taken into account (the graph in the OP is pure non-sense in that regard for the OP argument).

As far as Silicon Valley goes: from all countries I have been working in, Japan has by far the lower income taxation. Yet, it does not especially thrive in a silicon valley manner (I also believe California is far from being the state with the lower income tax in the US ?).

Then you'd have to remove our 7.65% for Social Security and Medicare (employers pay another 7.65% on employees behalf).

If we're going to build tech clusters, let's do it on our terms.

Every time a country takes on more debt, it means it's failed to live within its means. Very few countries have managed without taking on more and more thin-air money year after year.

Western economies are just a huge intertwined clusterfuck. Don't think you're safe.

No, the Asia that has recently engaged in less gambling at the casino of the "financial services industry" than the West.

Generations of poverty? Well, that can be explained by human nature. Various "Elites" oppressing/abusing/killing people, and confiscating the wealth created by them. Our problem as a species is that the West consists of the same homo sapiens as all the Asian countries you have a problem with. In other words, our collective problem is that we're all human beings.

The PIIGS countries have recently adopted "austerity measures", but for example here in Finland, our taxes and price-levels are so ridiculously high it's like we're in some kind of permanent austerity mode.

Our VAT was recently raised 1 percent, to 23%. It would be quite an accomplishment in the field of pissing away taxpayer money if Finland was broke. Oh wait.. even Finland can't get by without more debt practically every year. Go figure.

As for the overall shape various countries are in, at least Germany, The Netherlands and Denmark seem to be doing alright.

In Asia, I bet at least Singapore, Hong Kong, and probably South-Korea are in decent/good shape. Australia has a nasty property bubble going on, probably about to deflate. Same thing in China, but they've gone completely overboard what with all those ghost cities etc.

(Also, there's much less corruption in the US, which is probably the key difference.)

Anything that increases the base costs of starting a business, such as these, will reduce entrepreneurship.

He might be a HR manager in a larger company with good resources, happily hiring all kinds of people for all we know.

If you force companies to pay for women being pregnant and raising children, companies hurt. If you force companies not to pay, women hurt because pregnancy means instant unemployment and loss of income. If government pays, everyone pays in taxes even startups and people with no children (but at least the cost is spread widely). If nobody pays and it's left to charity, women and children live in poverty and suffer from that.

In individual cases, a couple can choose when to have children such that they can win no matter the situation, by deciding to save, or arrange to live on one income, etc. But I don't see any win-win scenarios that can be enforced from outside by legislation. Can you?

For example, goverments should REDUCE the cost of hiring the handicapped instead of forcing companies to hire them.

How could they do that (without charging you taxes to pay for it)?

Easy.

Let's say, in my country €760 NET is a very good salary. If I advertise the job, I get thousands of people to choose from. Some of them will be handicapped. Let's say there is a goverment regulations, that employing the handicapped is duty-free, like cigarettes at the airports. Now I have two options. I either choose somebody who isn't duty-free, and pay €1572 (the empoyee still gets only €760), or, if I'm LUCKY, I will find a somebody suitable for the job among the handicapped persons, and I can choose him or her for the job. That way I've cut my employment costs two half, without paying ANY taxes. It's a nobrainer, even if I have to make some changes in my office to accomodate it for the duty-free person. Because I can slash my employment costs into half on the long run, without paying 1 cent less Salary than to everybody else. And the state? It's a win-win-win. Now they have a lot less people to worry about.

I took it as an example of why he won't hire anyone and why he won't even sell his apartment and start a venture. As such he would have no company to represent in saying those things. Further if you never hired anyone, I am pretty sure you could state your reasons in America and not run afoul of legislation. Now if you openly stated such and then hired only 25-50 yr old males, sure you are asking for it and are going to get it.

Facts aside, I don't approve the author making such a big thing of it though it sometimes may be an issue (if you're hiring for a long project where replacing people is REALLY expensive).

I know of at least one employer who privately boasts that when he needs to hire a woman, he will only hire a lesbian, to avoid this issue altogether.

What a moron. Lesbians have children too. From my own anecdotal information on this, about in the same proportion as heterosexual women.

He is certainly incorrect, but a moron? No, he needs correcting, not insulting.

Some one I know moved to the states (from the UK) working for citibank and was paying much more just for his health cover than he would for all the UK benefits.

It's not the best, but you won't go broke if you have any sort of health emergency.

In Romania it's about the same: the taxation for an employees is high and so is social security (pregnancy leave, difficulty firing, etc). But people don't complain as much because tax evasion is really high.

Of course, this is really annoying for me because if your customer is in the US they will not pay you behind the counter, they will do a wire payment or such, which goes straight into accounting and is taxed.

In this regard, tax evasion becomes unfair competition.

Some companies are preferring contractual work and abusing it, by putting clauses in the contract that employees cannot quit for the next 5 years. This works in the cases were employees need to travel a lot (for example) and in the contract it is stipulated that if you quit, you have to pay the costs of accommodations, food and "training" provided during the contract, which is not feasible for most people.

This IMHO, is equivalent to modern slavery. If you're not able to quit, you cannot complain, you cannot negotiate a higher salary and you are at your employer's mercy.

(For the record I am for at-will quitting and firing)

But, as an employer, I feel I am clearly at a disadvantage.

It's easy to put clauses in a contract, but it doesn't actually mean they could be enforced in a court of law, even in one as bad as Romania's.

Having seen the restrictions the local Labour Department (ITM) puts in place, including the kind of stuff you may add to a contract makes me doubt what you say is more than a scam. I have never seen such a contract nor do I know somebody in IT working under such conditions.

Even a non-compete clause is something that I cannot add to a contract because it's super-expensive. According to the law if I want a non-compete on an employee, I have to pay him at least 50% of his salary for the duration of the non-compete.

Also, I know of at least one instance in which the owner of a company asked his employees to sign their resignations, without a date added. He can fire anyone when he feels like it.

     I have never seen such a contract nor do I know 
     somebody in IT working under such conditions ...

Also, asking for a return of "subsidies" is completely legal.

     Even a non-compete clause is something that I cannot 
     add to a contract because it's super-expensive.

About firing, it does seems fair to me: an employee can just quit at any time with no reason so a company should also be able to fire at any time.

They way I see it, asking for a return of "subsidies" should be regulated some more. But not outright banned since I can clearly see some situations where it would make sense.

I am able to add non-compete to a contract, it's just not worth it because the ex-employee will still be getting at least half a salary each month. I don't see why they should be banned.

In California non-competes are not valid, except for equity stakeholders. Silicon Valley is in California and clearly the lack of this privilege hasn't done much harm to businesses - quite the contrary, if the correlation with their success in the software industry says anything about it (the same argument could be made pro software patents, however software patents have only began to be seriously accepted / enforced recently - and I feel like Silicon Valley will see a decline because of it).

As a boss, you have more influence over your employees' daily experience than possibly anything else in their life. The reverse just isn't true.

So, I don't see how much my position as an employer impacts my employee's daily experience. They are free to do what they please, they just have to perform some work on a laptop for 8 hours a day.

The disadvantages are many for a company, starting with the fact that you have to play by the rules that are enforced by various entities that usually can't wait to fine you.

Firing an employee is rather complicated [1] and you are not allowed to do time-limited contracts much. So, once you hire somebody you do it "for life".

In a small company I would say any employee influences about as much my life as I influence theirs. I had a guy quit on me out of the blue this year (got another offer) and it was a bit of a shock for my business -- I'm not certain there is anything I could do that would impact an employee that much except suddenly firing him, which is restricted as I've just said.

1. Actually they changed the law recently, it might have become less complicated, not sure...

1. I can fire you, if I want to.

California has at-will employment, but you sure can't fire someone based on gender or age anywhere in the United States—and he opens with his desire to do just that.

2. If VAT goes down to at least 20%, better yet 15%.

Sales tax alone is not 20%+$.01 anywhere in the Bay Area, but there are a surprising number of added taxes here and there—Healthy San Francisco, for example, or the California state gasoline taxes—that can make the surcharges on consumer goods add up to that level.

3. If the state takes away "only" 30% of your money.

Federal income tax + California state income tax + FICA significantly exceeds that for most people in the technology industry in Silicon Valley.

4. If higher income is not exponentially punished.

The US certainly does have a progressive income tax scheme.

5. If the states punishes corruption instead of decent companies.

No-bid contracts, anyone? The US is hardly free of corruption.

He's asking for a place that doesn't exist. Moreover, it's a place I wouldn't want to live in; I don't want to live in a place where it's legal to discriminate against minorities, in particular.

I don't think you understand his position at all. Trying to fire someone in Europe is often compared to adopting a child, lawyers will take cases against former employers on commission because the probability of winning the case is extremely high. There is no comparison when it comes to US at-will employment, for eg. you have to be able to prove that the employee you fired for coming drunk to work was really drunk, that you gave him written warnings, flowed the formal procedure etc. To be fair tough, employers often use employment agencies that exploit loopholes but it only serves to increase the cost of labor. The only ones benefiting from these laws are the public sector and government owned company employees (ironically even government owned companies resort to exploiting loopholes because even they can't operate under the regulation). And these are probably much higher percentage of workforce than in the US.

And the corruption he is talking about is tax evasion and gray market, that's a huge part of the economy in these countries.

Also, I'm thinking the "progressive tax" in the US kicks in at a much higher nominal amount then Hungary, and that it's disproportionate to the cost of living difference.

In much of the world people will complain to a government department if they are discriminated against, and expect the department to investigate impartially.

It is typically only in high-value cases (ie, C-level executives, sexual harassment cases where high levels of damages are expected etc) where people usually seek private representation.

(I'm from Australia, and this is the case here. In my state I'd use this procedure: http://www.eoc.sa.gov.au/eo-you/making-complaint)

P.S. 3 years maternity leave in Hungary looks really bad IMHO.

On the other hand, it looks really good for the children. This is worth paying for.

5 months don't look as too much to me; this notwithstanding many businesses only hire young women if they sign a blank resignation letter (which of course is illegal too, but very difficult to prove). I agree it's a very complicated matter.

The best solution imho would be to have more state-subsidized childcare solutions (we have some, but much less than needed), which would make young mothers more productive for employers, but I understand that most free-market advocates wouldn't agree :)

PS Yes I expect to win the case, because my wife's former employer so patently broke the rules. But here in Italy justice is so slow (next month there will be the first hearing, 8 months after we sued) and compensations so little that very often employers get away with it. I decided to go to court more to defend a principle than for an economic reason.

With generous (eg like in France) benefits per child, or generous unemployment benefits for young mothers, I could agree with more flexibility. The problem is, benefits cost immediate money from the State while putting the burden on families and businesses only costs in the long run. Given our current debt, the choice is very limited...

I think the best thing countries in Europe could do is implement something like a negative income tax and kill all that regulation and special programs/taxes/bureaucracy but I haven't even heard anyone in Europe propose such a move.

I don't think that deregulation is always right, but it is when you have too much - and we do have too much regulation, too much discretionarily applied.

Eliminate paper currency and only have digital transactions, force the banks to disclose accounts and transaction information to remove gray economy and use NIT scheme instead of all the special programs. That way everyone get's the same safety net when they are unemployed or poorly paid and you can have unregulated at-will employment because employees aren't forced to negotiate for bare minimum.

i think his desire was to be able to fire people who don't do their job or dont do it well

It is a very grey area. Too much government regulation and how the hell can it be profitable to hire someone. Too little and individuals get borked if they get pregnant/sick/etc.

Personally I would sacrifice less pseudo stability for less regulation. I believe many problems start off with good intentions, especially when it comes to more regulation.

Possibly a necessary means to end (if you believe in this kind of logic) but hopefully not an end in and of itself.

(Already got enough minus points for pointing out gender issues and advocating free education so may as well dig myself even deeper :) )

Car insurance isn't compulsory in all states (assuming you are from the US, but most require it). In NH you simple have to prove the ability to provide personal responsibility. If the roads were private, then it should be up to the owner of the road whether or not insurance is required.

Federal income tax + California state income tax + FICA significantly exceeds that for most people in the technology industry in Silicon Valley.

Does it add up to anywhere near the ~52% his graph says it is in Hungary? Or are we talking around 35% or so?

You and your employer come to an ex ante mutually beneficial agreement. A secure and effective government will enforce such a contract, unless it represents an egregious abuse by one of the parties. A responsible government will formulate a wise definition of egregious abuse.

Once you start to enumerate all unenforceable contracts, you will come to understand how far we are from this situation. And when you look at how insecure, ineffective, and irresponsible governments are, you'll see why we may never get there.

Startup hires tend to be somewhat self-selecting, as the jobs tend to draw young males without families. The risk of the job makes it more appealing to those types, but the field is generally overrun by men, which is a topic that seems to come up every few months as well.

What that means is that the eco-system is better for lean startups. You don't have to have the 'buffer' budget over actual costs that corporations do. Large companies typically offer paid vacation, matching 401k, disability leave, maternity leave and all that jazz.

If you're working on a lean startup right now, ask yourself what would happen if your lead developer disappeared for three months.

This is one of the real disadvantages we face as a nation because, in large part, the people we outsource labor to don't have these protections.

I was comparing the average lean startup to the average large corporation. Neither made-up example was his company.

The point of the article is that employees are expensive. Certain types of employees are potentially more expensive than others. He wants to avoid hiring the low-risk people, but isn't allowed to. The self-selection of startups is... y'know what? I'm just repeating what I said originally.

The hardships encountered in Hungary are the same sorts of hardships that large companies have to put up with, to varying degree. That was the basis for my comparison.

If you don't get it, sorry. I honestly don't know how you read the article and read my post and don't know how they relate.

That blogpost made me kind of like a celeb, a bloghero or something. Fact is, that single blogpost generated half a million pageviews, 91141 Facebook likes in a matter of days. It was covered on national television, I was "the blogger of the week" at the biggest local blog provider (blog.hu), a whole bunch of responses were written by big names in the trade.

Newmedia analysts were trying to figure out what made it such a big meme, out of the blue, from totally nothing, without any mainstream media promotion. People shared it like hell, on Facebook. Likes were rising by hunderds, by the second. Like this: 30145, F5, 30359 ...

Edit: The EU is considering if measures should be taken; I hope they will, and fast.

P.S. I'm from Eastern European country and I see some similarities with Hungary.

Politics has more than one dimension, and we're not even sure which dimension is described by this left-right dychotomy.

Interesting to hear how things are in other parts of the world, though.

EDIT: If you're downvoting, by the way, please leave a comment about why. I don't really care too much about the karma, but I'd love to hear why people disagree (and for the record, this comment is at -1 at the time I edit).

Here's the problem. Bad employees tend not to leave of their own free will, in my experience the worse they are the more this is true. However, really good employees tend to move on every few years as they grow into new opportunities. What this means is that every time you replace a good employee you roll the dice that you'll get a bad one. There is now one position that is likely locked in place with bad employee. Over time this leads to a lot of bad employees, which in turn lowers your retention rate of good employees.

Now there is a standard tactic to fight this (and this same tactic would work in your senario as well). Make the bad employee extremely uncomfortable. Within the rules of the system do everything you can to make work suck. This does work reasonably well. The problem? Terrible employees are immune to this. So if this tactic is abused you end up with only terrible employees.

So in short, without the ability to fire people easily you tend to go on a downward spiral of increasingly bad-mediocre employees.

http://en.wikipedia.org/wiki/Constructive_dismissal

The overall problem is that in the end it becomes a game between bad employees and the management see how can play the rules against the other the best, which is a phenomenal waste of time and energy.

In the UK it can be up to 11months and 3 weeks before the main employment laws kick in.

To be honest I find the idea of paternalist employers rather revolting.

In my mind, it's a matter of inertia - if "protected" is default, then if an employer wishes to have the ability to fire anyone at will, they need to offer concessions - whether it be a higher salary, or the ability to quit at will, or whatever.

However, if "not protected" is the default case, then it becomes far more difficult for an employee to obtain such protection, as it's not beneficial to the employer. And as such, barring anyone who can negotiate their own contract (the minority, generally), most people will remain unprotected. And I believe that to be a problem, for reasons I mentioned elsewhere in this comment thread.