İnsan Tunalı Prepared for presentation during the launch event 27 February Koç University Page 1/19
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1 How to frame Labor Market Policy for Turkey: Lessons from WDR 2013 İnsan Tunalı Prepared for presentation during the launch event 27 February 2013 Koç University Page 1/19
2 WDR 2013 Jobs March 6, 2012 (White Cover) WDR format: Paint a big picture by distilling the evidence from a massive literature; extract policy implications. Tools: Minimal theoretical baggage. Lots of conventional wisdom, puzzles, examples and comparisons; figures and tables. What matters, beyond the examples, is to have a clear analytical framework to address jobs challenges at the country level, and to derive its implications for international arrangements and for development assistance. (emphasis added) The ambition of WDR on Jobs is to articulate such a framework and provide answers to difficult questions policy makers face. Koç University Page 2/19
3 What WDR 2013 offers Manual for policy: A. Identify where you are B. Establish objectives Pick the tools for getting you from A to B. Jobs lens to development: Identify pre conditions and constraints, policy options, and do cost/benefit analysis to balance options for productivity enhancement against concerns for standard of living and social cohesion. What does the policy manual/job lens offer for Turkey? Koç University Page 3/19
4 A. Identify where you are 1. Demography 2. Female LFPR 3. Agricultural employment 4. Productivity 5. Open questions B. Establish objectives Koç University Page 4/19
5 Demography: Working age population increased by 1.5% in 2012 (ADNKS). Between , Turkey s population is expected to increase by 10 million. Koç University Page 5/19
6 Demographic bulge: Is a reassessment needed? Yaş guruplarına göre nüfus Oran Kay nak: Düny a Bankası 0-14 yaş yaş yaş 65 üstü Koç University Page 6/19
7 Female Labor Force Participation: Sharp LFPR rises for young cohorts Urban Turkey Source: HLFS (1989, 1994, 1999, 2004, 2009). Koç University Page 7/19
8 Female LFPR by education All Turkey Primary (5 yrs or less) (Rural areas dominate) High school (11 12 yrs) (Urban areas dominate) Middle school (8 yrs) (weight still small) University (Urban areas dominate) Koç University Page 8/19
9 Female LFPR by education Urban Turkey Primary (5 yrs or less) High school (11 12 yrs) Middle school (8 yrs) University Koç University Page 9/19
10 Increased market orientation! (Need to explore productivity links.) Share of Wage & Salary earners among the employed All Turkey Males Females What is responsible for these changes? Services and formalization Payroll tax reductions? Other incentives? Improved public transportation infrastructure in urban areas? Koç University Page 10/19
11 Dramatic rise in agricultural employment after 2007 Anachronism? Agricultural Employment by Gender, Thousands Male Female All Source: HLFS database, TURKSTAT. *** Old HLFS: ; New HLFS: ; Revised estimates: This trend continued in Koç University Page 11/19
12 Agriculture s dominance in rural employment was restored after 2007 Shares of Agricultural and Rural Employment in Total, and Share of Agricultural Employment in Rural Employment Ag share Rural share Ag share in Ru Koç University Page 12/19
13 The young appear to have returned to agriculture (esp. females) Rural Turkey Males Females Source: HLFS (1989, 1994, 1999, 2004, 2009). Koç University Page 13/19
14 Sector specific productivity trends We study aggregate productivity and four sectors: Agriculture, Manufacturing, Services and Construction. Average Productivity in sector j = AP j AP j = GDP j /employment j (1998 prices) Technical note: Total GDP includes the main sector contributions plus two other items: Indirectly measured Financial Intermediation Services (*) Taxes and Subsidies These two items have an increasing share in GDP over time. (*) What are these? Repatriated profits of Turkish firms? Koç University Page 14/19
15 Note the initial boost in Ag-AP during the post-arip period, and the leveling off starting with Note, also, the recent decline in Const-AP. 7 Average Productivity 6 TL per employed person Total Agriculture Manufacturing Services Construction Source: Ministry of Development Koç University Page 15/19
16 Next, we examine sector-specific AP relative to Total AP. 1,8 Relative Productivity 1,6 1,4 Fraction 1,2 1 0,8 0,6 total/total ag/total man/total serv/total const/total 0,4 0, Note how AP-Ag rose relative to AP-Total up until 2006 while AP-Man and AP-Serv declined. This suggests that agriculture became relatively more attractive. Koç University Page 16/19
17 Next, we examine the rates of increase of sector-specific APs. 220 Change in Productivity = Total Agriculture Manufacturing Services Construction Note the remarkable gains in AP-AG between The slope is steeper than AP-Total! Once again, 2006/7 is a turning point. Koç University Page 17/19
18 Finally, we examine the sector-specific rates of increase in AP relative to the rate of increase of AP-Total. 1,5 Relative Change in Productivity Own index/total index Fraction 1,25 1 0,75 tot/tot ag/tot man/tot serv/tot const/tot 0, While relative attraction of Agriculture rose, Manufacturing and Services declined. Agriculture did well by this measure over as well. Koç University Page 18/19
19 Other open questions: Growth employment elasticity where do we stand? Is extraordinary rise in employment export driven or domestic demand driven? Sectors: Textiles did reallocation happen? Construction when will the bubble burst? Services sky is the limit! Are these good jobs? Retirement rates is the exit rate slowing down? Is this good? 3 children per family who will bear the additional kids? Usual suspects? Kurdish settlement is there a peace dividend? Occupational safety time to reprioritize? Koç University Page 19/19
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