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The Turkish Statistical Institute (TÜİK) released unemployment figures in Turkey this week. The youth unemployment rate has now reached 25.3 percent, which of course, only counts people who are still actively looking for a job. If you add young people who have lost their hope of finding one, that figure rises to 36.5 percent in the first quarter of 2021. You might say that it is the responsibility of the government of Turkey to fix this, and you would be right. Realistically, however, we know that even if that is possible, it is highly improbable. I believe that what we see in Turkey points to a broader economic reality that global policymakers, who are currently designing pandemic recovery, need to take into account.
Mind you, Turkey grew in 2020 and many of its leading indicators aren’t looking bad in 2021. Growth in 2021 could easily surpass 6 percent, which means that the 2020-2021 growth rate could be an average of more than 4.5 to 5 percent. Considering the global situation, those look like very strong numbers. Yet one third of Turkish youth is still unemployed. The rift between the haves and have nots is widening at an alarming rate, and yes, the average person on the street has noticed. The country feels like a pressure cooker these days.
Look more closely at the data. Despite strong Turkish domestic demand in 2021, the number of those who joined the ranks of the unemployed in the “last 30 days or less” has increased by 106 percent in April 2021. That means that the “reserve army” has risen from 242,718 to 499,174, reaching 17.2 percent of total unemployment. In April 2020, the newly unemployed made up only 6.7 percent of total unemployment. That is a significant increase and requires close monitoring.
The impact of COVID-19 has been highly asymmetrical, as is now widely known. Why is that? First, not all sectors were hit in the same way. The services sector took the brunt of it, and considering that the share of the services sector in total employment in Turkey is around 54.3 percent, the country is still reeling. Young people are often easier to let go, and hence the high rate of youth unemployment in the country. Second, among the new entrants to the “reserve army” in April 2021, 46.5 percent had left education after primary school, and are likely classified as low skilled. Third, poorer communities have impaired access to healthcare everywhere in the world, and are more susceptible to disease.
Post-pandemic recovery policies are already taking shape on both sides of the Atlantic, but they are not designed with sufficient appreciation for their global impact. Digitalization and green transformation require a more capital-intensive growth process and a more skilled, better educated workforce. Just have a look at educational attainments. As of 2019, 60.5 percent of Turks have an educational attainment of middle school or below. The same figure is 39.6 percent in Spain and 19.5 percent in Germany. The share of high school graduates is 21.1 percent in Turkey and 54.5 percent in Germany. Incentives towards green energy and technology tend to favor educated people, which means that they could contribute to making this gap wider over time.
When it comes to a just transition, it is not only troubled banks and high CDS risk premiums that are going to make transition to a digital and green economy harder. Turkey has the highest CDS risk premium right after Argentina now. It also lacks an educated workforce that could adjust to the new employment landscape rapidly, all of which makes it a good example of a country that could be left in the dust if recovery goes ahead as planned.
A just transition requires more effort on the part of the developed world. Otherwise, the green and digital transformation will be a global gentrification project. That means more fragilities in our part of the world, less stability and more refugee flows. We all know what kind of political consequences that has.
The Green Deal is supposed to save the planet. It must be designed to bridge the gap between the rich and poor parts of the world. Do not let it become a big gentrification project.
This commentary was published in Hürriyet Daily News on 24.05.2021
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