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Countries other than Turkey take measures against unemployment
After the deep crisis in 1997, unemployment rate in South Korea jumped from 2.5 percent in 1996 to 7 percent in 1998. With the policies implemented that point onwards, Korea reduced the unemployment rate to 3.3 percent in 2002. How did Korea achieve this?
To ease the impacts of the 1997 crisis, small enterprises where provided with support for credits and employees were tried to be kept at employment through the utilization of unemployment fund facilities. On the other hand, mass vocational training courses were launched and skill set of the labor force was improved. It is stated that more than 700 thousand people participated in the trainings. At the same time, terms of benefiting from the unemployment fund was relaxes. We should also emphasis that the public sector initiated a significant infrastructure rehabilitation attempt.
USA introduced a series of measures against the crisis since the end of 2008. In a period where it is generally accepted that world economies started recovering USA does not leave it to change. Congress adopted a new law on March 17: unemployed and small and medium sized enterprises will be provided with $18 billion support under the employment law.
Tax cuts will be introduced for firms who employ people unemployed more than six months. Moreover, if you keep the formerly unemployed people at your firm for more than a year, you are given additional tax cut incentives. On the way, there are steps to prevent falls in public employments in states and steps to ease the finance problems of small and medium sized enterprises.
And now let's talk about Turkey. Unemployment rate varied between 6.5 and 7.7 percent in 1995-2000 period. After the 2001 crisis, unemployment rate jumped up to the next stage and 2002-2007 average reached 10.5 percent. The interesting part is, in this period unemployment rate barely fluctuates; it varies between 10.8 and 10.2 percent. What is more, over this period Turkey grew at a rate above the potential growth rate.
In 2009 unemployment rate increased by 3 points compared to the year before and reached 14 percent. Experience reveals that unemployment rate does not immediately fall back even if the economy grows rapidly. So, we should use any means to prevent 14 percent becoming the new stage of unemployment rate.
Some promising steps in this regard were taken in 2009: Upon decisions made in March, unemployment payments were improved, that skill improving trainings covering 200 thousand unemployed people will be launched was announced, and short term employment was encouraged. As one of the most important decisions geared to labor market was announced in June, it was decided to transfer funds from budget to the credit guarantee system. However, a part of these decisions were not realized yet or is being implemented slowly.
For instance, take the law pertaining to credit guarantee funds. The Law gave the Council of Ministers the authority to make regulations. Relevant decision was promulgated in the Official Gazette in July 2009. In the context of the Law and the Council of Ministers Decision, funds of one billion TL was allocated for the existing Credit Guarantee Fund as an indemnity for the credits banks will extend to SMEs. But the system did not become operational since then. There exists an important problem with the design.
As per the Council of Ministers Decision, banks have to ask some documents from banks. But the problem is that it is impossible for banks to access some of these documents while it is troublesome to access some of them. Therefore, banks are not willing to extend credits under this system. As a result, the prerequisite to ensure the operability of the system turns to be amending the Council of Ministers Decision.
One cannot stop wondering, how many unemployed people benefited from the trainings launched as per the mentioned Decision or what is the number of people benefited from short term employment. But, we should see the bright side: attempts are made with good intentions. We should hope that the lessons learned from mistakes will accelerate the process at least this time. But we should also keep in mind that we cannot prevent unemployment rate sticking at the new stage of 14 percent solely upon the mentioned decisions made in March and June. We can do better following from South Korea's experience.
This commentary was published in Radikal daily on 25.03.2010