Turkey in search of a cure for its gravest malady: unemployment

Turkey has long had a chronic unemployment problem, which intensified over the past year amid a global financial crisis that left much of the world in economic shambles. According to data from the Turkish Statistics Institute (TurkStat), the unemployment rate reached 14.4 percent in February of this year, nearly 3 percentage points more than at the onset of the crisis. During this period, a total of 1.27 million people joined the jobless army, which currently boasts more than 3.56 million people.

Last week, Prime Minister Recep Tayyip Erdoğan said that he expects to see a drop in the unemployment rate from its current 14.4 percent to around 10 percent within the next three months, bringing the issue back to the agenda again. Due to the fact that Erdoğan has yet to provide a formula for pushing unemployment down to such levels, business circles have expressed doubt about how such a stunning drop can be achieved in the space of a quarter. In order for the prediction of the prime minister to come true, about 1.08 million new jobs must be created by the end of August, a rough calculation which assumes that the labor force will remain unchanged for the next three months.

Commenting on Erdoğan’s remarks, Ümit Boyner, the chairwoman of the Turkish Industrialists and Businessmen’s Association (TÜSİAD), stated that the Turkish economy can create 500,000 jobs at most in a year unless its growth rate exceeds 7 percent. “So, I don’t think this goal can be achieved easily. But, if they have miraculous suggestions to enable this to come true, we will be happy for sure,” said Boyner, voicing her reservations over the possibility of such an objective.

Seasonal factors to ease unemployment in summer

Economist Fatih Özatay, who is also a former vice governor of the Central Bank of Turkey, however, believes that the unemployment rate can approach the targeted level thanks to seasonal factors. Unemployment in the summer months tends to decline by some 2.5 percentage points on average compared to in winter, he wrote in his column at the Radikal daily this week, thanks to a rise in operations in services and tourism sector, especially. “A 12 percent unemployment rate can be achieved easily in August without the need of implementing any extra labor policy or the requirement of better economic performance,” he added, stressing, however, that “this improvement will not be a permanent one but most probably will change later on in line with the seasons.”

Many analysts also draw attention to the need for a much more comprehensive plan to battle unemployment in the long run. This is in fact what the government is currently working on. A strategy document, titled “National Employment Strategy,” is being prepared with the participation of more than 200 representatives from various ministries and business organizations. Details of the package are expected to be unveiled by July at the latest. Giving information about the package, Economy Minister Ali Babacan noted that the strategy will bring about a “middle-term perspective with only a few steps to be taken in the short run,” and added that incentives will be concentrated on the services sector, which employs some two-and-a-half times as many people as the manufacturing industry.

Finance Minister Mehmet Şimşek elaborated on the strategy of the government as “a triple-sided approach.” He cited the first one as the educational dimension. Unemployment partly stems from a lack of professional knowledge, Şimşek remarked, adding that the government aims to increase employment in the long term and that a sizeable amount of money had been allocated to education to achieve this goal. In the second dimension, the government is looking to boost employment in the middle term by implementing development projects like the Eastern Anatolia Project (DAP) and the Konya Basin Project (KOP). Lastly, the government has also allocated serious funds to continue the implementation of active labor policies in the short term, he said, adding that work is currently being carried out under the leadership of the Labor and Social Security Ministry.

Call on firms to hire employees

The government also places great emphasis on cooperation between the private and public sector to battle unemployment. Last month Erdoğan urged on each member of the Turkish Union of Chambers and Commodity Exchanges (TOBB) to hire one additional employee. Although TOBB members initially said that they were unwilling to comply with this invitation, they agreed to do so during a general assembly meeting last month. TOBB President Rifat Hisarcıklıoğlu said that the member businesses could create 1.3 million new jobs. Before this move, the Turkish Exporters Assembly (TİM) also announced that its member firms could create around 250,000 new jobs this year; this was followed by the Young Businessmen’s Confederation of Turkey (TÜGİK), whose members vowed to hire 26,000 personnel before the end of 2010.

The Independent Industrialists and Businessmen’s Association (MÜSİAD) and the Turkish Confederation of Businessmen and Industrialists (TUSKON) were also among organizations that announced they would shoulder the burden of helping to solve the unemployment problem.

Even though it is unknown whether these organizations’ pledge to hire more workers this year will be a remedy to the problem, the sum of these figures and support from business organizations strengthens the prime minister’s 10 percent target.

Job creation falls short of absorbing growing labor force

Unemployment has been plaguing the Turkish economy more than usual since the emergence of the 2009 global economic crisis; the rate reached its worst level in Turkish history in February 2009 when it hit 16.1 percent. But since October of last year, employment has been on the rise again. Recent figures show that an extra 1.49 million individuals found jobs in the span of a year, while the number of unemployed individuals also fell by 238,000 in February over the same month of 2009.

However, these positive developments were not enough to remedy unemployment, mainly due to a higher labor participation rate compared to pre-crisis levels -- which exceeded 49 percent amidst the economic meltdown, up from its normal trend of hovering around 46 to 47 percent -- along with a greater increase in this year’s labor force due to the added worker affect caused by the crisis.

In addition to Turkey’s current jobless army, there is also a huge cast of newcomers each year. On average, more than 700,000 youths enter the employment pool annually. Warning Turkey of the risk of increasing unemployment in its latest report last week, the Organization for Economic Cooperation and Development (OECD) also drew attention to this issue. “Job creation in Turkey will not be strong enough to absorb the rapidly growing labor force,” the report read.

The OECD forecast that the unemployment rate will rise further in the next few years, up from 13.7 percent as of the end of 2009 to 14.9 percent this year and increasing further to 15.9 percent in 2011. The government’s forecast was also set at 14.6 percent in 2010 in the medium-term economic program.

To address the problem, the OECD pointed to the need for fundamental labor market reforms and the implementation of new and more flexible rules to address the problem.