Unemployment fund not used for what it should be, say experts

The unemployment fund, introduced in 2002, had -- through the collection of a small portion of workers' wages, employers' contributions, government funding and returns from investing this money -- accumulated a whopping TL 44.4 billion as of the end of March.

The fund, which was set up with the intention of helping provide emergency funding to the unemployed as well as assisting them in finding employment has, according to many in the know, been a complete and utter failure. This is in part because the massive amounts of money amassed by the fund has been used by the government for its own purposes, including purchasing Treasury bills and bonds to meet various state financing requirements, rather than aiding the unemployed. In their defense, however, the use of the money in the fund is strictly regulated, and the purchase of government debt instruments is one of the few investment vehicles that the fund can engage in.

According to statistics provided by the Turkish Employment Organization (İş-Kur), of the TL 44.4 billion collected by the fund between its establishment and the end of March, 33.26 percent came from contributions from employers and employees, while the lion's share, 57.32 percent, came from interest earnings on investments.

But, during this same period, the fund spent less than TL 4.2 billion. And despite the fact that over 3.61 million people in Turkey are currently unemployed, as of April, the fund only provided benefits to 311,000 people, in other words, less than 10 percent of the unemployed. Of the fund's total income of TL 44.4 billion, the unemployed received less than TL 4.12 billion, or 9.44 percent of the fund's total revenue.

“The fund should be used for the unemployed,” said Professor Seyfettin Gürsel, director of Bahçeşehir University's Center for Economic and Social Research (BETAM) in İstanbul, who felt that the fund had failed to live up to its mandate. In his view, the state “either has to decrease the premiums paid to the fund or use the money for the unemployed.” Indeed, the amount of money paid to the fund by employers is no small change -- 3 percent of a wage earner's salary. And workers are expected to contribute an additional 2 percent of their salaries, an amount that is matched by the government.

System needs to change

According to Gürsel and others, immediate action needs to be taken in order to lower the bar of who qualifies for unemployment benefits. He described the present legislation governing the fund and the fact that it only benefits 8 to 9 percent of the unemployed as “totally ridiculous.”

One reason for the low number who qualify for benefits, many say, is that the requirements for receiving funds have been set too high. In order to be eligible to receive unemployment benefits, one has to have been employed and contributed to the fund for at least 600 days and has to have worked for at least the previous 120. There is talk now of amending this requirement to 400 days, 120 days of which has to have been within the previous year.

In a context where about half of the workforce is employed in unregistered labor or in seasonal occupations, these requirements far from satisfactory.

Many feel proposals to ease the requirements that need to be met in order to qualify for unemployment benefits are not enough; Gürsel and others say it is far too little to late. In his opinion, the unemployment situation had reached emergency proportions, and anyone who applies to the fund for help should receive benefits. “I am even in favor of paying regardless of whether the person was working in a registered job or not. If we find a job for him or her, and it is refused, then they should be cut off, of course,” he said, but unless that happens, he feels, everyone who applies should be entitled to benefits.

Turkish Union of Chambers of Commodity Exchanges (TOBB) Chairman Rıfat Hisarcıklıoğlu has been among the most vocal advocates for expanding the uses of the fund in times of emergency. In addition to calling for shifting the focus of the fund to training individuals out of work in order to increase not only their employment opportunities but also the quality of the Turkish labor force, Hisarcıklıoğlu has said repeatedly that one of the best ways to overcome waning demand in export markets is to increase domestic consumption.

Fund whets appetites

He has proposed that the fund be used for measures such as providing funding to the private sector in order to help ease the difficulty of the crisis and prevent massive layoffs. “Everyone is now looking to get their hands on this fund,” said Mustafa Çelen, a professor of economics at Marmara University, who is a specialist in public finance. But, he emphasized, the fund and the legislation surrounding it were created for one and only one purpose: helping the unemployed -- not helping small businesses who are forced to lay off employees or factories that are forced to lay people off as demand continues to shrink.

Nonetheless, the government recently passed legislation diverting part of the unemployment fund to support the Southeastern Anatolia Project (GAP), a massive project that envisions construction of a network of dams and irrigation facilities.

And recent amendments to the law allow the government access to two-thirds of the profit made from investments of the fund in Treasury bills, a massive sum of money which some say would well serve the unemployed.

Professor İbrahim Öztürk is another expert who believes the current laws are too strictly defined and that legislative change is in order. “Legal changes are needed to help fight unemployment. We need an immediate solution to the problem of unemployment,” he said. He thought that the fund's assistance with retraining not only excluded far too many, but was also of too long term a nature. According to Öztürk, changes in the legislation needed to be made “for the sake of emergencies,” and the present situation, he said, constitutes an emergency.

But changing legislation is no easy task. For years, the government has used the money in the fund as a means to meet government financing needs through the purchase of Treasury bills and bonds. Ironically, today, when new legislation is required to allow the fund to help the growing ranks of the unemployed stay above water, the government may find it more difficult than ever to implement the required changes; in June, the budget deficit grew to TL 2.52 billion, and the strain on the government to meet external financing needs is on the rise. As the government becomes increasingly dependent on financing instruments, creating the necessary legislative changes to allow the fund to fulfill its duty has become more difficult than ever.