Strengthening the Turkish Labour Market through More Efficient Regulations

Abstract

Turkey was directly affected by the great recession of 2008–2009, but showed considerable resilience thanks to a decade of sound macroeconomic policies and reforms implemented after several economic shocks. The large contraction in GDP (by 4.7 per cent in 2009) was largely due to the collapse in foreign demand and was amplified by domestic confidence effects. While unemployment reached 14 per cent in 2009, it soon went back to its pre-crisis level, falling to 10.8 per cent in March 2011. In addition to strong stability-oriented macroeconomic policy, employment and labour market policies were enhanced to support labour demand, develop non-agriculture employment and reduce informality, such as an overall reduction of social security contributions, hiring subsidies or VAT tax reductions. The recent crisis differs, however, from past episodes in Turkey in two ways: first, white-collar educated workers were hit and lost their jobs; second, informal manufacturing and service sector occupations were severely affected so there were proportionately lower formal sector job losses.