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December 20101 Asymmetric Labor Market Effects of the 2008-2009 Crisis Prof. Dr. Seyfettin Grsel Baheehir University Center for Economic and Social Research (Betam) Assist. Prof. Gke Uysal-Kolain Baheehir University Center for Economic and Social Research (Betam) Slide 2 December 20102 Outline of the Presentation I.Origins of the Asymmetric Shock II.An Overview of the Turkish Labor Market III.Added Worker Effect IV.Sectoral Asymmetries V.Impact of Informality on Unemployment Slide 3 December 20103 I. Origins of the Asymmetric Shock Slide 4 December 20104 Structural Particularities Structural particularities make Turkish LM prone to asymetric shocks. Low female participation rate: Given that the urban female LFPR is very low at 19.8% in 2007, there is room for a strong added worker effect. Low coverage of unemployment protection: Only 13.8% of unemployed benefited from unemployment insurance in 2009. Lower unemployment insurance implies a stronger added worker effect. Large informality: Low firing costs of unregistered wage earners. Large agricultural employment: 23.6% of total employment in 2007. Slide 5 December 20105 II. An Overview of the Turkish Labor Market Slide 6 December 20106 Employment and Labor Force (SA) Slide 7 December 20107 Employment and Labor Force (SA) Increase in the LF has been accelerating since 2008 due to: unexpected increase in agricultural employment strong added worker effect Employment decreased during the crisis from 2008 Q2 to 2009 Q2. Job creation increased due to robust recovery, but there seems to be a slow down during the last months. Slide 8 December 20108 Unemployment (SA) Slide 9 December 20109 Unemployment (SA) Economic crisis added 1 million 400 thousand unemployed on its peak. Unemployment rate jumped from 10% to 15%. Almost half of them got back to work during the recovery period, but 3 million unemployed (12%) seems to be the new plateau. Unemployment is largely non-agricultural as the agriculture is dominated by family farmers. Slide 10 December 201010 Agricultural and Non-agricultural Unemployment (SA) Slide 11 December 201011 Non-Agricultural Labor Force and Employment (SA) Slide 12 December 201012 NA Labor Force, Employment and Unemployment (SA) Non-agricultural labor force is reverting back to its structural trend. Non-agricultural employment is slowing parallel to the slowing growth. Non-agricultural unemployment rate seems to have reached a new plateau of 15%. Slide 13 December 201013 Non-Agricultural Unemployment (SA) Slide 14 December 201014 Decomposition of NA Unemployment (YoY change) Slide 15 December 201015 Decomposition of NA Unemployment (YoY change) Unemployment exploded through two channels: Output losses caused job losses. Labor supply shifted upward. Strong recovery increased employment more than labor force and it is continuing to do so on a y-o-y basis. Slide 16 December 201016 Employment and Growth in the NA Sectors Labor ForceEmploymentGDP 2005.Q2-2008.Q13.1%3.5%6.9% 2008.Q2-2009.Q14.2%-1.7%-15.5% 2009.Q2-2010.Q32.1%4.0%9.4% Annualised q-o-q average growth rates Manufacturing OutputEmployment 2005.Q2-2008.Q11.8%0.8% 2008.Q2-2009.Q1-5.7%-2.4% 2009.Q2-2010.Q34.6%1.2% Quarterly average growth rates Slide 17 December 201017 Employment and Growth in the NA Sectors Pre-crisis period Structural growth rate of NA labor force is estimated around 3%. Long run employment elasticity of growth is estimated to be 0.5. During the crisis An enormous contraction occured from peak to bottom The NA employment did not decrease accordingly. Part of the adjustment has been made through decreasing working hours. Also subsidies to maintain employers at work have been implemented. Recovery is mainly based on the employment increase, but working hours also increased. Slide 18 December 201018 III. Strong Added Worker Effect Slide 19 December 201019 Male Unemployment (NA, YoY change) Slide 20 December 201020 Male Unemployment (NA, YoY change) Male labor force: The increase has been slowing down. It could be due to the discouraged worker effect. Male NA employment: Decreased almost as much as total NA employment. Not surprising, since most of the labor force is male. Slide 21 December 201021 Male Unemployment (NA, YoY change) Slide 22 December 201022 Female Unemployment (NA, YoY change) Slide 23 December 201023 Female Unemployment (NA, YoY change) Female labor force: Strong increase in the female labor force. Due to the added worker effect. Female NA employment: There is no decrease. Surprisingly, there is a slight increase in female NA employment. Slide 24 December 201024 Female Wage Earners, Self-employed (NA, YoY change) Slide 25 December 201025 Female Wage Earners, Self-employed (NA, YoY change) Number of female wage earners decreased only at the end of the crisis. Increase in female employment should be attributed mostly to self-employed women. It seems that added worker females created their own jobs. Slide 26 December 201026 IV. Sectoral Asymmetries Slide 27 December 201027 Sectoral employment (SA) Slide 28 December 201028 Sectoral employment (SA) Industry: Job losses due to decreasing domestic as well as foreign demand mainly in durables. Services: Crisis does not seem to have a negative impact, But this is misleading due to added worker effect; number of wage earners in service decreased moderately. Agriculture: An unexpected increase occured in agricultural employment. Note that this increase started before the crisis and continued throughout. Slide 29 December 201029 V. Effect of Informality on Unemployment Slide 30 December 201030 Informality in the Turkish Labor Market * Workers not registered at a social security institution Slide 31 December 201031 Informality in the Non-Agricultural Sectors * Workers not registered at a social security institution Slide 32 December 201032 Informality in the Turkish Labor Market Informality is widely a phenomenon of self-employment and family agriculture. In September 2010, in the non-agricultural sector: 49.2% are informally employed. 25.3% are self-employed. 6.6% are unpaid family workers. Approximately one in five wage earners are not registered in the Social Security Institution. Slide 33 December 201033 Formal and Informal Wage Earners (YoY change) Slide 34 December 201034 Formal and Informal Wage Earners (YoY change) Informality decreased steadily until 2008 Q3. Informal employment increased as formal employment decreased during the crisis. Interestingly, formal employment has suffered major losses. In the recovery period, formal and informal employment increased in a parallel manner. Since 2010 Q2, we observe a decrease in both formal and informal employment, although it seems to be more important for the latter. Slide 35 December 201035 THANK YOU