The Turkish Labor Market:
A Few Facts and Figures
Prakash Loungani
Advisor, Research Department, IMF
April 22, 2013
I thank Ezgi Ozturk for excellent research assistance.
The views expressed in this presentation are those of the author and should not be attributed to the IMF.
Outline of talk
 Turkish labor market performance during the global financial
crisis
 A broader look
 Beveridge Curve
 Okun’s Law
 Medium-term: challenges and opportunities
Recovery from the crisis
Output and unemployment
during the crisis
Source: Hakan Ercan (2012)
Unemployment by duration
Share of long-term unemployment
Unemployment by gender
A broader look:
unemployment and vacancies
Beveridge Curve for Turkey
Okun’s Law in Turkey
1989-2012
5
y = -0.1118x + 0.4622
R² = 0.0949
Change in Unemployment Rate
2009
4
3
1993
2001
2
2002
2004
2007
1
1999
0
1991
1989
1998
2003
1995
1997
2005
2012
-1
2000
1996
2006
1992
2008
-2
1994
1990
2011
2010
-3
-8
-6
-4
-2
0
2
Output Growth
4
6
8
10
Okun’s Law in Turkey: Age Group of 35-44
1989-2012
3
2009
Change in Unemployment Rate
35-44
2
2002
2001
1
1994
1999
1989
2008
1991
0
-1
-2
1998
1992
2006 2005
2007
2004
1996
1997
20001993
2012
2003
1990
1995
2010
2011
y = -0.1549x + 0.7413
R² = 0.4874
-3
-8
-6
-4
-2
0
2
Output Growth
4
6
8
10
Okun’s Law in Turkey: Age Group of 45-54
1989-2012
Change in Unemployment Rate
2
1.5
45-54 20012009
2002
1994
1
2008
0.5
1999
0
1998
2005
2004
1997
1993
1996
2006
1990
2000
2010
1992
2007
2003
1991
1989
2012
-0.5
-1
1995
-1.5
y = -0.1169x + 0.5485
R² = 0.4778
2011
-2
-8
-6
-4
-2
0
2
Output Growth
4
6
8
10
-1
Spain
Australia
Slovak Republic
United States
Finland
Chile
Poland
Netherlands
Ireland
Sweden
Belgium
Greece
Canada
Denmark
New Zealand
Estonia
France
Germany
United Kingdom
Hungary
Portugal
Israel
Switzerland
Iceland
Czech Republic
Norway
Korea
Slovenia
Italy
Mexico
Japan
Austria
Turkey
Luxembourg
Okun’s Law Coefficients: OECD Countries
1978-2011
0
-0.2
-0.4
-0.6
-0.8
Okun’s Law during the Crisis
Medium-term:
IMF advice on avoiding boom-bust cycles
 Due to its low savings, Turkey remains prone to boom-bust
cycles driven by capital flows.
 Fiscal policy has a role to play in raising national savings and
mitigating the economy’s excessive cyclical swings.
 Contain real primary spending growth below the potential growth rate of 4 percent in
the next three years and change the public pension system; in particular, by increasing
contribution rates without raising benefits
 public spending on health programs, which has grown significantly in recent years,
could be reexamined;
 tax base should be broadened by eliminating tax exemptions and improving tax
administration.
 Recent reforms to boost private savings
Savings Rate in Turkey
IMF advice on supporting
domestic saving
 Boosting competitiveness more broadly would support domestic
saving.
 The recently introduced Commercial Code helps improve corporate governance
and encourages FDI.
 The recent package of investment incentives could, if properly administered,
help stimulate investment in advanced technology sectors and lower the import
content of production.
 But past experience with similar schemes, depending on tax
exemptions, showed mixed results. Thus, expectations should be
modest and higher priority should be given to maintaining broad VAT
and income tax bases.
IMF advice on labor market reforms
 Efforts to address the large informal sector, which have had some
success in recent years, need to be sustained.
 Evidence suggests firms in informal sector more liquidity constrained, invest less, are
less profitable, and grow more slowly than in formal sector.
 Informal workers save less than their counterparts in the formal sector.
 The labor market needs to become more competitive
 greater use of part-time and temporary labor
 reform of the severance pay system, and slowing the growth of the high minimum
wage, while ensuring an adequate safety net.
 Continue improving the quality of its workforce by bolstering the education system and
training programs.
 Measures to boost the female participation rate, which at about 30 percent remains well
below that of most middle-income countries.
OECD advice
Thank you
Additional slides on Okun’s Law
Okun’s Law in Turkey: Age Group of 15-24
1989-2012
8
y = -0.2016x + 0.7946
R² = 0.219
Change in Unemployment Rate
15-24
6
2009
4
2001
2002 1993
2
2003
2007
1999
0
2008
1991
1989
1994
2004
1997
1990
1992
2005
1996
2006
1995
2000
1998
2012
-2
2011
2010
-4
-8
-6
-4
-2
0
2
Output Growth
4
6
8
10
Okun’s Law in Turkey: Age Group of 25-34
1989-2012
4
Change in Unemployment Rate
25-34
y = -0.1429x + 0.7218
R² = 0.1659
2009
3
2008
2002
2001
2
1998
1999
1
1989
2003
1993
2005
1995 2004
1991
0
1990
2012
19921996
-1
2007
1994
-2
1997
2000
2006 2011
2010
-3
-8
-6
-4
-2
0
2
Output Growth
4
6
8
10
Okun’s Law in Turkey: Age Group of 55-64
1989-2012
1.5
Change in Unemployment Rate
55-64
2009
2002
1
2008
0.5
1989
2001
1999
0
1991
1994
-0.5
1998
2006 2005
2003
1992
2000
19952011
1993
2007
1997 2004
2012
1996
-1
-1.5
1990
2010
y = -0.0447x + 0.2044
R² = 0.1035
-2
-8
-6
-4
-2
0
2
Output Growth
4
6
8
10
-0.8
Singapore
Indonesia
China
Malaysia
Turkey
Argentina
Thailand
Peru
Russia
Philippines
Mexico
Hong Kong SAR
Brazil
Taiwan Province of China
Costa Rica
Ecuador
Venezuela
Korea
Iran
Israel
South Africa
Chile
Colombia
Okun’s Law Coefficients:
Emerging Market Countries 1978-2011
0
-0.2
-0.4
-0.6
-0.6
Ukraine
Romania
Belarus
Turkey
Malta
Russia
Slovenia
Bulgaria
Czech Republic
Cyprus
Croatia
Hungary
Latvia
Estonia
Poland
Lithuania
Slovak Republic
Okun’s Law Coefficients:
Emerging European Countries 1978-2011
0
-0.2
-0.4
-0.6
Saudi Arabia
Kuwait
Sudan
Morocco
Azerbaijan
Armenia
Georgia
Algeria
Turkey
Malta
Jordan
Iran
Israel
Egypt
Tunisia
Okun’s Law Coefficients:
MENA Countries 1978-2011
0.2
0
-0.2
-0.4
Okun’s Law: Countries with
Comparable Data Quality
Okun’s Law: Countries with
Comparable Data Quality
Okun’s Law: Countries with
Comparable Data Quality
OECD on Turkish labor market
More on OECD advice on labor markets
Turkey: Poverty and Inequality