Stipends and ban on layoffs mask Turkey’s economic pain
• Keeping the jobless count in check is a priority for the president and his party, but employment losses are limited only ‘on paper’
Look beyond unemployment to get a read on Turkey ’ s labour market. The government ’ s temporary ban on layoffs, coupled with allowances for workers, are helping to mask the extent of the distress in an economy tripped up by the coronavirus pandemic.
Reported with a lengthy lag, official data shows Turkey’s unemployment rate at 13.2% in February-April, a slight drop from the first quarter.
But the numbers of employed and those who depend on cash support from the government tell a different story. Turkey’s labour force participation rate — or the share of the population that has a job or is looking for one — fell 4.5 percentage points annually to 48.4% in February-April, the least since January 2014. Employment tumbled to its lowest level in over eight years.
The government’s measures only limited employment losses “on paper”, according to a report by Istanbul’s Bahcesehir University Centre for Economic and Social Research.
Keeping the jobless count in check is a priority for President Recep Tayyip Erdogan and his ruling party, which last year lost local elections in most of the municipalities where unemployment was running in double digits, including the biggest city, Istanbul, and the capital, Ankara.
But whereas Europe’s biggest economies could afford to spend about €100bn on furlough programmes from March to May, Turkey had to strike a more moderate path, since its budget was already under strain after an election spending splurge and a brief recession that followed a currency crisis.
Still, as parts of the economy shut down to contain the contagion, the government banned layoffs for six months from March 10 and offered a 1,177 lira monthly allowance to those placed on leave by their employees.
The drop in the labour force participation rate coupled with the government allowances will prevent a sharp increase in the unemployment rate in the short term, said Haluk Burumcekci, the founder of Istanbul-based independent research firm Burumcekci Research and Consulting.
The result has been to bottle up unemployment. But as it fell, so did the number of working Turks, which dropped by 1.5million to 26.1-million since the beginning of the year. That added to the labour market’s loss of 2.4-million employees in the past two years, when the nation’s population grew by almost the same number.
The headline figures also leave out the millions of people who are effectively out of a job but cannot be fired due to the layoff ban.
The costs are adding up. By May, about 3.1-million people were taking advantage of a short-time working allowance programme, which gives support payments to employees whose workplaces were partially or fully shut down in a bid to contain the outbreak.
The government spent 10.3billion lira for the programme in April and May alone.
Another 1.4-million Turks who are not eligible for the short-time work programme and lost their jobs after March 15 qualify for another cash support initiative. Turkey spent an additional 1.7- billion liras on this programme in April and May.
As a result of the layoff ban and stipends, the total assets of Turkey’s unemployment fund dropped by almost 9% from 2019 to about 120-billion liras by June 9.
MANUFACTURERS ARE SEEING SIGNS OF A RECOVERY, TAKING ON ADDITIONAL STAFF IN JUNE AFTER TWO MONTHS OF SCALING BACK EMPLOYMENT
The extent to which revenue losses will lead to payroll cuts in the services sector, which accounts for 57% of the labour market with 15-million workers, could determine if Turkey can claw back jobs lost during the pandemic, Burumcekci said.
Turkish manufacturers are seeing signs of a recovery, taking on additional staff in June after two months of scaling back employment, according to a report compiled by the Istanbul Chamber of Industry and IHS Markit.