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    Some unpleasant facts about unemployment

    Fatih Özatay, PhD03 March 2012 - Okunma Sayısı: 1157

    Unemployment rate around 10 percent is about to become the fate of Turkey. This should be prevented.

    Last Thursday average unemployment rate for 2011 was announced. In 2009, when the impacts of the crisis on the labor market was felt the harshest, the rate stood at 14 percent. During the next two years, the rate decreased sharply to 9.8 percent. More importantly, non-agricultural unemployment rate also dropped by five points to 12.4 percent.

    This is quite pleasing. Nevertheless, this should not cloud the critical structural problems of Turkey. First one is the low labor force participation rate defined as the percentage of the labor force to the total working age population. Positive outlook observed during 2010 and 2011 was reflected also on the labor force participation, which increased by two points to 49.9 percent. Still, the rate is low compared to international averages. In other words, Turkey fails to utilize the production potential it has, which points at another structural problem: labor force participation is extremely low among women, which albeit the recent improvement stands at 28.8 percent.


    Rigidity observed
    The second structural problem about the labor market is the rigidity of unemployment rate. Excluding the crisis period of 2008-2010, unemployment rate floated between 10.6 percent and 9.8 percent since 2005. The second lowest rate was 10.2 percent, recorded in 2006. The picture is all the same for non-agricultural unemployment: lowest rate was recorded in 2011 while second lowest which was achieved in 2007 was only 0.2 points higher.

    All these figures prove that unemployment rate stubbornly remains at high levels in Turkey. Please note that I omitted high rates in 2008-2010 period. The picture becomes even worse when you take into account that average growth rate for the 2005-2011 period excluding the crisis years was 7 percent. Unemployment rate stuck at 10 percent during a period when growth rates which are significantly above the average growth of the last five decades were achieved. Given that even most optimistic accounts estimate that 2012 growth will be significantly below 7 percent, we have to expect a certain rise in unemployment rate. In short, unemployment rate around 10 percent is about to become the fate of Turkey. This should be prevented. 

    High unemployment rate

    Let me make an international comparison now. This time I will examine the results for the entire period between 2005 and 2011. The above table demonstrates the results. “Other developed” refers to developed countries out of the G-7 and the Eurozone. I have the average for G-7 and for four of the seven countries in the group. Among the G-7 group, Japan has the lowest unemployment rate and France has the highest.

    The message is all clear: Unemployment rate is high in Turkey. Moreover, the picture does not change if we omit the crisis years for Turkey and keep them for other countries on the list. We can of course pick and choose developed countries where employment rate is higher than it is in Turkey. Spain, for example. But that is Spain’s problem. And unemployment rate in Turkey being lower than that in Spain or its peer countries does not change the fact that Turkey suffers from high unemployment rate.

    This commentary was published in Radikal daily on 03.03.2012