Obviously one important dimension of this transformation can be observed in employment and productivity figures. Official unemployment stayed at 9.8 percent, despite the high growth performance of the last five consecutive years. In other words, employment creation performance remained limited.
On the other hand, as seen from Table-1, surge in labor productivity has been impressive since the crisis.
Additionally, as seen in Table 2, the same process is valid for the surge in total factor productivity (TFP). Therefore it is not surprising that the rising or growing sectors are those in which the surge in productivity is higher, while declining or shrinking sectors are those in which productivity is insufficient. For instance, the automobile industry is supported by high productivity and is expanding, whereas the textile sector sees low productivity and is shrinking.
Here we have two problems. On the one hand, the economy must be able to create enough employment so as to reduce the current rate of unemployment to below 6 percent in order to have a socially sustainable growth path for the coming years. On the other, in order to reduce the current balance of payment deficits to a sustainable level, the rate of value added to a product must be increased, requiring the competitive strength of the industry to be improved.
This requires Turkey to focus on high-productivity sectors rather than insisting on low-productivity ones. As a matter of fact it is unlikely that Turkey could survive in many of the low-productivity and labor-intensive sectors in the long run. This is because as Turkey’s development improves, life becomes expensive and therefore the cost of labor dramatically exceeds that of China, India and so forth.
Therefore we are in a position to seek out sufficient employment sectors while concentrating on high-productivity industries. It could be suggested here -- in terms of productivity -- manufacturing industry at modern sectors and -- in terms of employment creation -- non-tradable or service sectors such as tourism, health, construction and transportation are the way to go.
In comparison to manufacturing, the service sector has higher employment creation capacity. In order to succeed in this sector, however, a technical education revolution that will increase overall human capital is the main challenge awaiting us. We must also be able to create flexible labor markets in the country in order to reduce labor costs.
