Efficiency of the Turkish Labor Market: Future Employment Prospects

Introduction

The Turkish labor market, like most developing countries, has many inherent, intricate, and everlasting structural problems that tend to fester over time rather than self-heal unless drastic measures and structural reforms are put into effect. Turkish employment levels have hovered below and around 50% (TUİK, 2022a) for the last decade, far below the OECD or Eurozone average of 69%, let alone Germany at 77% (OECD, 2022a). Likewise, Turkish labor force participation rates are well below the 80% OECD average, standing at merely 61-62% (OECD, 2022b).

This huge, almost 20% gap between the Turkish labor market and the OECD average, on the surface, comes from female labor force participation (FLFP) and employment figures (OECD, 2022c), which Turkey has been desperately trying to increase for the last two decades to little avail. FLFP in Turkey has dipped from a peak of 36% in 1989 all the way down to 23% in 2004 (TUİK, 2022b) only to rebound to 34% in 2019 (TUİK, 2022c), in contrast to the OECD average, which has been continuously increasing from 58% in 1990 to 63% in 2015. Not only is there a huge gap between total and female employment and participation rates, but it has also been increasing since the 1990s. Of course, this has both Turkish (domestic) and OECD (foreign) aspects to it, but we will only tackle the domestic part in this book.

Even though the FLFP and employment rates had been declining until 2005, as previously mentioned, according to the figures we have compiled from Karabıyık (2012), the results are actually both more promising and more humbling than once thought. Non-agricultural female employment has more than doubled, constantly increasing from 1.37 million (7.6%) in 1989 to 3.7 million (7.6%) in 2010. In other words, Turkish female employment, apart from urbanization, has been on a constant and rapid upswing since the late 80s, as clearly seen and experienced in urban life.

The caveat here is that urbanization in Turkey started much later than in Western nations (Işık, 2005) and experienced a rushed, haphazard, and unbalanced development, with highly limited urban employment opportunities for women who lost their agricultural jobs in the countryside. This is particularly true for countries like Turkey with very low (foreign and domestic) investment and funding opportunities (OECD, 2021) in order to boost employment, especially in the service sector (Karanassou & Salvador, 2008). So, given the financial opportunities and the limited time frame, it would be erroneous to call the relatively low level of female employment a failure. It certainly is far from the desired outcome, but it would only be beneficial to understand the true nature of the issue before an actual solution can be found.

The contributions of the study will be to introduce a new and simple regression-based efficiency analysis technique, explore the root causes of Turkish unemployment, by using a two-stage efficiency analysis, and estimate future (un)employment figures based on historical efficiency trends. This chapter is, therefore, composed of five parts. In Section 1, we touch upon the employment struggles in Turkey, particularly with regard to female employment. In Section 2, we define efficiency and the related concepts, with a brief look at the seminal steps in efficiency measurement in the literature as well as the relevant studies in Turkey, before explaining the methodology used in this study. Section 3 will tackle the efficiency measurement of the Turkish labor market in two stages, while Section 4 will make predictions regarding future (un)employment based on the analysis in Section 3. Finally, we will conclude the chapter in Section 5 with a summary and solutions to increase employment in the future.