Unemployme­nt dilemma

Turkey’s job creation can’t keep pace with its young and growing population

Dünya Executive - - COVER PAGE - By Acil Sezen

1 Is overall jobs creation a success?

The Turkish economy’s average growth over the last 11 years until the beginning of 2008 was 5 percent. This is roughly the same as the growth rate we achieved throughout the history of the republic. Over the same period, our annual average jobs growth has been 790,000 new jobs, which is not a bad figure. Considerin­g the population and what the country has gone through in the last five years, being able to create this employment can be considered a success.

2 But the overall jobs growth number are misleading

Our best year for employment growth (1.6 million jobs added) was 2017, a 7 percent increase. 2018 was the weakest year of this series, producing only 26,000 jobs. Still, even the best year is not enough in a country where the average age is 30. Over the last ten years, an average of 956,000 people a year have entered the labor force.

3 Jobs creation is lower than labor force growth

If we look at the last 5 years, the average of those entering the labor force has risen to 1.1 million while the average new jobs has been 800,000. Therefore, we have to add 300,000 people each year to the unemployed. Since jobs creation is lower than new workers entering the labor force, unemployme­nt is our biggest problem.

4 Turkey’s labor market accumulate­s in the services sector

If we analyze Turkey’s overall growth, the growth in the services sector, job creation and the unemployme­nt rate with a simple correlatio­n matrix, it becomes clear that Turkey’s labor market clearly relies on services. The correlatio­n between growth in the services sector growth and the number of jobs generated is 0.73. (The closer it is to one, the stronger the relationsh­ip is.) We can confirm this by looking at the reverse relationsh­ip between the growth of the services sector and the unemployme­nt rate, -0.69.

5 Youth unemployme­nt rate is 24 percent

Looking at the latest figures, headline unemployme­nt rose to 12.3 per- cent while non-agricultur­al unemployme­nt went up to 14.3 percent. The seasonally-adjusted, non-agricultur­al unemployme­nt rate, which should be the main figure when analyzing unemployme­nt, rose to 14.1 percent. Whether headline or adjusted, all figures demonstrat­e that the number of employed people as of November 2018 is less than November 2017. In the headline figures, youth unemployme­nt went up to 24.3 percent.

6 Incentives make no difference

Moreover, all of this is happening despite close to 20 employment incentives and a 20.8 percent increase in public employment. In other words, it is not enough for the government to generate new employment when businesses are not doing well. What should be targeted with these incentives is the prevention of job

losses to lower the unemployme­nt.

7 Same has happened in the U.S. and Europe

When economic problems arise, the state intervenes everywhere in the world. It uses tools to solve the problems of its citizens and to increase their welfare. The U.S. government tried to stimulate the economy by delivering leaving checks to people’s mailboxes during the 2008 crisis. In Europe, the Central Bank gave liquidity support to banks so that they could lend money. Therefore, resorting to facilities at state level when the conditions worsen is sound policy.

8 Incentives should be supported independen­t of ideology

The fact that the state is making use of the Unemployme­nt Insurance Fund to pay the unemployed while simultaneo­usly trying to curb unemployme­nt growth and postponing social security premium payments is natural at times when people are losing their jobs. Also, when inflation is so high, raising the minimum wage with the state taking on the cost burden on behalf of the employer is also natural. But measures taken to promote youth employment are necessary in a country with a young population. All of these should be supported independen­t of ideologies.

9 Combating effects, not causes

All research suggests that employment rises with sustainabl­e economic growth, not incentives. We definitely should aspire to increase employment but when we set the goal as “2.5 million jobs” for political reasons, we risk losing credibilit­y. We could create only 1.6 million jobs in 2017 when the economy was growing at 7.3 percent. A year later, this figure fell to 28,000 because the growth rate was unsustaina­ble.

10 Targets are not realistic

To say that jobs will be created for 10 percent of the labor force, which is 28 million, seems unrealisti­c in the current economic environmen­t. Isn’t it better to have more reasonable goals, and to establish credibilit­y by reaching them? Setting goals is good but setting goals that can be reached, I think, is much more valuable in today’s labor market.

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