Employment dilemma

Turkey’s Employment Mobilization

Dunya Executive - - COVER PAGE - by Ismet Ozkul

Will a national campaign to create 2 million jobs be

successful?

President Tayyip Erdogan launches a national campaign to encourage businesses to create 2 million new jobs this year.

1 How has the labor market been performing in Turkey in recent years?

Turkey’s unemployment rate has risen every year since 2012. It reached 10.9 percent in 2016, nearing levels it saw during the global financial crisis in 2009, when it was 13.1 percent. In 2010, it was 11 percent. 2 Which areas of employment are deteriorating the most? The deterioration of the labor market is not limited to higher unemployment. First, the number of people joining the workforce is declining in proportion to the population. The size of the labor force grew faster than the growth of the working-age population in past years, but in 2016, the working population expanded by 886,000 people while the labor force grew by 870,000. Despite labor force increase is lower than poulation growth, continuing unemployement increase shows how big the problem is. 3

Which sectors have the highest capacity to create jobs? The services sector ranks first with a 54 percent share of employment. This is followed by agriculture, which has a share of 19.5 percent. Industry accounts for about 18 percent of jobs. All of these sectors face challenges in creating employment.

4

Can these sectors hire more workers in the current environment?

Industrial sales last year lagged rises in gross wages and salaries. It wasn’t just employment that decreased last year; the total number of hours worked and the hours worked per person also declined. This data shows that there will be no meaningful increase in employment without a substantial rise in investment in industry. Employment in agriculture has seen a downward trend in recent years. Sub-sectors that have the largest share in services are trade, tourism and restaurants and education, health and public administration.

5

What incentives is the government offering to mobilize employment?

The government has offered employers 10 incentives to encourage job growth: -5 points of social security premium support for employers who pay wages on time. A discount of 5 percent in General Health Insurance premiums for employers who take their employers abroad. An additional discount of 6 percent for employers who recruit from rural regions. The Treasury will pay income tax of 106 lira per worker. The state will pay 666 lira of premiums of new employees. Employers that recruit women and young people will not pay premiums for 48 months. Premiums of disabled people will be covered by the Treasury.

The minimum wage support will continue. The Turkish Labor Agency will pay premium for up to 42 months of employees who are recruited through on-the-job training programs.

Employers’ December, January and February premium payments will be postponed without interest for nine months. 6 What were the results of similar campaigns in the past? The increase in employment appears to be attached to the overall vitality of the economy and investment, rather than government programs. If the economy and investment are growing, jobs will too. The effect of campaigns, which are particularly prominent during election periods, and measures that directly or indirectly increase employment are short-lived. 7 Why is the government targeting 2 million new jobs? There is no clear explanation about what the calculation for the targeted number of the employment mobilization is based on. The target may be based on considerations of public opinion, rather than realistic projections.

8 Will a possible surplus in recruitment create a productivity problem?

The Turkish economy has a serious productivity problem and lacks efficiency. It is mainly based on low wages and under-the-table jobs. It will be difficult to see employment increase without serious industrial investment. Any increase due to political influence will be temporary. A significant portion of any increase in employment will be in the form of unregistered workers who are now partially registered and benefit from income supports.

9 Why unemployment in Turkey doesn’t fall below a certain level?

The main factor that will guarantee employment growth is the vitality of the economy and a steady increase in investment. For this, it is necessary to remove destabilizing factors in the market, especially the fluctuating exchange rate and inflation. Stabilizing the currency and interest hike depts of the debtor companies is also essential.

10 How can problems be overcome in the near term?

Policies to limit the impact of war in the region, especially Syria, are important. The revival of the peace process, the termination of the state of emergency following the failed coup attempt and eliminating concerns about the separation of powers and the rule of law are of great importance to revitalize the investment climate.

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