Where was all that debt spent?
High unemployment is among the most serious economic problems Turkey faces, and perhaps the most important as all other economic problems reflect on the unemployment rate. That rate was 10.1 percent in November last year. The 2017 average was higher than that: 11 percent.
Farm payroll data can be misleading. Therefore, labor market experts rather consider the nonfarm data, and that is even higher: 13.1 percent.
According to November 2017 data, the unemployment rate is 2.7 percent in Japan, 3.6 percent in Germany, 4.1 percent in the U.S. and 4.3 percent in UK. Other G20 nations, of which Turkey is also a member, show similar unemployment rates: 3.6 percent in Mexico, 4.0 percent in China and 5.4 percent in Indonesia. South Korea, which was, not long ago, among emerging countries but now enjoys the stature of fully emerged, has an unemployment rate of 3.8 percent.
The unemployment issue does not receive the attention it deserves in the “deep” political debates of the day. But actually the problem is more serious than the figures reveal. To see this, we must analyze the unemployment rate from two different perspectives.
People at or older than 15 years who are working or unemployed and looking for a job represents the total labor force. The unemployment rate is calculated like this: The number of unemployed looking for a job is divided by the total labor force. But the unemployed who are not looking for a job are not included in the unemployment rate. This is a universally used method of calculation.
For Turkey, the problem is we have a huge number of people older than 15 who do not wish to work. Therefore, workforce participation (employed people and unemployed people looking for a job divided by total labor force) is very low: the 2017 average is 52.9 percent.
But this rate for all other G20 countries I mentioned above are much higher. According to the European Statistical Office (Eurostat), workforce participation is calculated for the population aged between 15-64. The average labor force participation in the European Union is 73.3 percent - 77.9 for Germany and 77.5 percent for United Kingdom. When we do the same calculation for Turkey, labor force participation is 58.2 percent.
Consider this: What if all unemployed people not looking for a job suddenly decide to look for a job and participate in the labor force. What would be the unemployment rate in Turkey then? To answer this question let me get back to the 15 and over population and calculate what unemployment rates would look like if the labor force participation rate jumped up just a couple of percentage points to 60 percent. Within the frame of these examples, the average unemployment rate for 2017 would skyrocket by over 9 points and would be 20.2 percent instead of 11. This alone reveals that the unemployment problem is much more severe than the current rate suggests.
Among the biggest emerging countries in the G20, Turkey also has the biggest imbalance between debts in foreign currency and holdings in foreign currency as a share of GDP. The question is: Despite such a high level of debt, why do we have such a high level of unemployment? Or another question: Where was all this debt spent?