Turkey : Managing Labor Markets through the Economic Cycle

Abstract

The Turkish economy was hit hard by the
 global economic crisis, but recovered fast and strong. The
 economy had already started to slow down in 2007, but the
 global financial events of late 2008 led to a sharp
 contraction starting in the last quarter of 2008 until
 growth resumed in the last quarter of 2009. The recovery was
 rapid, with growth reaching 9 percent in 2010 and 8.5
 percent in 2011. This study looks at how the labor market
 fared during the recent downturn and recovery and informs
 policies to manage labor markets through the economic cycle
 and address the jobs challenge in Turkey. The study
 investigates: 1) pre-crisis labor market trends and the
 structural jobs challenge in Turkey; 2) aggregate and
 distributional impacts of the recent crisis, and subsequent
 recovery, on the labor market; and 3) recent policy measures
 and existing labor market institutions in the context of
 observed labor market outcomes. Finally, the study links
 policies to manage labor markets through the cycle with
 measures to address the longer term, structural jobs
 challenge in Turkey. Ongoing structural transformations and
 the large 'stock' of low-skilled workers are
 behind the jobs challenge in Turkey. Continued urbanization
 and labor shedding in agriculture, along with the increase
 in the Working Age Population (WAP), will continue to
 increase the number of (mostly) young and low-skilled
 workers looking for non-agricultural jobs. The Turkish
 Employment Agency (ISKUR) plays a key role in activating
 low-skilled workers into productive employment. ISKUR has
 come a long way since 2008, increasing the coverage and
 quality of vocational training, introducing job and
 vocational counselors and linking social assistance receipts
 to registration in ISKUR.