Medium-term economic plan foresees long-term unemployment trouble

Medium-term economic plan foresees long-term unemployment trouble

It will be years before Turkey’s unemployment rates drop to anywhere in the region of pre-crisis levels — a grim prospect for a nation with a booming population.
Small month-on-month improvements in the unemployment rate still fall drastically short of returning to pre-crisis levels, and the government’s grim forecasts for employment recovery reflect the reality that Turkey has its work cut out in terms of creating jobs.

Experts say minute statistical improvements are not enough to mask what is becoming increasingly clear: Unemployment recovery is not around the corner, and Turkey stands to struggle with high jobless rates for several years to come. Economy Minister Ali Babacan unveiled a medium-term economic plan last week that focuses on putting budget balances back on track between 2010 and 2012. While the minister said in his announcement that the government expected modest recovery in unemployment, the economic plan does not include extensive measures to minimize the soaring numbers of jobless in Turkey.

The government is forecasting unemployment as an average 14.6 percent in 2010 — very close to this year’s expectation of 14.8 percent. Analysts have pegged the government’s medium-term plan as realistic. “From what I’ve seen of the medium-term plan, there are no microeconomic measures included to address unemployment,” Dr. Murat Yülek, a former World Bank economist and now chairman of PGlobal Global Advisory Services, told Sunday’s Zaman. Yülek was careful to note that Turkey was still dealing with a crisis and that beyond a slow pace of improvement in unemployment rates, it still remained to be seen whether many firms would be able to stay on their feet amidst the financial turmoil. Further layoffs and company closures are still a very real possibility, he noted. At first glance, unemployment trends seem to be improving. On Tuesday, the latest Household Labor Survey released by the Turkish Statistics Institute (TurkStat) said Turkey’s unemployment rate dropped to 13 percent in June, a drop from the May rate of 13.6 percent — which was in itself a significant drop from April’s figure of 14.9 percent. But the numbers remain well above the 10.8 percent levels enjoyed before the global financial crisis broke. Unemployment rates rose to highs of 16.1 percent and 13.6 percent, respectively, in the first two quarters of 2009 as Turkey was buffeted by the effects of the crisis. The number of unemployed in Turkey grew by 972,000 over the same month of 2008, representing a 3.6 percent increase. Some 3.27 million people are currently without jobs in Turkey.

Yülek said the acting assumption of the government’s medium-term plan in terms of employment could be the generation of private sector activity and investment through macroeconomic-level balancing of the country’s budget. On Friday, Turkish Confederation of Employers’ Unions (TİSK) Chairman Tuğrul Kutadgobilik criticized the medium-term economic program, saying it was not clear how the government was going to achieve even a slow improvement in unemployment rates. Noting that the program foresaw the creation of 1.25 million jobs, he said: “During the crisis period the same number of people lost their jobs; in the three years in question [the program says that] 1.8 million more people will enter the workforce. When it is noted that unemployment isn’t a problem that will resolve itself, the need for special measures becomes obvious.”

Capacity to create new employment restricted

There is also, of course, the issue of the reasons for change in employment statistics. On Thursday, the Economic Policy Research Foundation of Turkey (TEPAV) released a report titled “The Effects of Business Size and Regional Differences over Employment Losses during the Crisis.” However, the TEPAV report notes that the relative improvement in the unemployment rate in the second quarter of the year stemmed from a decrease in the number of people looking for a job and the growing number of people who have lost hope over employment prospects, emphasizing that the number of people employed in the first two quarters of 2009 dropped by 85,000 in the first quarter and by 387,000 in the second quarter compared to the same periods of 2008.

TurkStat does not count those not actively seeking employment in its unemployment figures, thereby approximately halving the number of those counted in the statistics. Yülek noted in his comments that in terms of employment participation Turkey has a different demographic than many developed European countries, with higher numbers of people without the intention of entering the workforce.

Even more troubling, TurkStat’s data demonstrate that along with a drop in the number of employed, Turkey has seen an increase in the size of the nation’s working-age, non-institutional population (which excludes students, prisoners and those serving in the military) — up by 875,000 people in June 2009 compared to the previous year. Turkey has one of the world’s fastest-growing populations, which means that this trend is also likely to continue. And with employment opportunities not rising in parallel to population growth, the road ahead could be rocky.

“I don’t see the employment situation improving in the near future,” Yülek said, in an assessment that reflects what many have been saying in reaction to the unemployment rate forecasts. “The first reason for this is that we are amidst a crisis. Employers are trying to maintain production levels with minimum staffing; this is an increase in efficiency but does not generate employment.” The economist also noted the current volatility in foreign exchange rates that place a heavy burden on Turkish exporters. “Turkish companies have to deal with competition both at home and abroad. When exporting to, say, Spain, Turkish products compete with what’s on the market there. Here in Turkey, Turkish items are sold alongside items made in other places, like Belgium, that are priced similarly or even more cheaply,” he explained.