Minimum wage increase is adversely affecting informal employment

Ozan Bakış, Seyfettin Gürsel and Melike Kökkızıl

Various effects of minimum wage increased in January 2016 by 30 percent are still question of debate. One of the concerns for the possible effects of this high increase is on wage-employment relation. More specifically, it stands an important question about the effect of wage increase; in which direction and to what extent it will affect the informality among wage earners. Even though relevant studies from several countries claim that the effect of minimum wage hike has no significant effect on employment, they reveal an adverse effect on informal employment. In the context of Turkey, the studies establish that relatively same increase of minimum wage recorded in 2004 has an impact on informality, albeit related publications are few. It is too early to make a comprehensive research on the effects of the recent rise in minimum wage. Nevertheless, this study illustrates a notable indication that minimum wage increase is adversely affecting informality based on the large differences observed in the share of minimum wage earners in sectors and informality rates in sectors in the period of February 2014-2015 and February 2015-2016.

pdf. ResearchBrief196

Economic Outlook & Forecasts: May 2016

Moderate Growth

Ozan Bakış, Mine Durmaz, Melike Kökkızıl

Leading indicators continue to move in opposite directions as mentioned in our previous research briefs. The first quarterly data of 2016 reveals that recovery in investment stands out and a moderate progress in consumption persists. Nonetheless, government spending exhibits a sharp decline. As for investment, significant increases are seen in import of investment goods and its production; however, production of commercial cars will remain limited compared to our previous calculations.

Updated data indicate that negative contribution of net export to the growth will become clearer. Our estimates for quarter-on-quarter and year-on-year growth rates are revised to 0.6 percent and 3.5 percent, respectively. In addition, we predict the current account deficit to GDP ratio to be 4.2 percent and the gold-excluded ratio to be 4.8 percent.

doc. EconomicOutlook2016M05

pdf. EconomicOutlook2016M05

Labor Market Outlook: June 2016


Seyfettin Gürsel, Gökçe Uysal and Melike Kökkızıl

Seasonally adjusted labor market data shows that nonagricultural unemployment rate decreased from 11.8 percent to 11.5 percent (0.3 percentage points) in the period of March 2016 compared to the previous period. Betam’s forecasting model had predicted a 0.1 percent decrease for this period. We expect that the nonagricultural unemployment will continue to decline in the period of April 2016. In March 2016, increases in both non-agricultural labor force and non-agricultural employment strengthened. In addition, employment in manufacturing, construction and services increased by 19 thousand, 42 thousand and 140 thousand, respectively. In parallel, non-agricultural unemployment decreased. In this period, increases in the male labor force exceeded those in the female labor force and respective increases in employment were recorded at the same levels. Hence, female (male) unemployed decreased (slightly increased), annually.

doc. LaborOutlook2016M06

pdf. LaborOutlook2016M06


Gökçe Uysal, Melike Kökkızıl and Selin Köksal

This research brief evaluates the education and labor market status of young people aged between 15 and 19 in Turkey by using the 2013 and 2014 Household Labor Force Survey data.  According to the data, one third, i.e. 2 million 175 thousand young people do not pursue their education. 73.6 percent of young people who do not pursue education are at most primary school graduates. Unusual proportions of dropouts do not enter to labor market, either. Almost 900 thousand young people are neither in education nor in the labor market and 73 percent of them are women. Even though 12 years compulsory education provides higher enrolment rates, the absenteeism remains unaddressed. Investing in youth’s human capital and increasing labor productivity by reintegrating the youth back into the education system are crucial if Turkey aims to escape the middle income trap.

doc. ResearchBrief195

pdf. ResearchBrief195

Labor Market Outlook: May 2016


Seyfettin Gürsel, Gökçe Uysal and Mine Durmaz 

Seasonally adjusted labor market data shows that nonagricultural unemployment rate decreased from 12.1 percent to 11.9 percent (0.2 percentage points) in the period of February 2016 compared to the previous period. Betam’s forecasting model had predicted a 0.1 percent decrease for this period. We expect that the nonagricultural unemployment will continue to decline in the period of March 2016. In this period, the driving force behind the decrease in nonagricultural unemployment is the almost constant labor force. While employment losses in manufacturing continue, employment in services and construction increased. Female nonagricultural labor force and employment continue to increase faster than male labor force and employment. However, due to the strong increase in the labor force, female unemployment increased while male unemployment continues to decrease.

doc. LaborOutlook2016M05

pdf. LaborOutlook2016M05



Seyfettin Gürsel, Melike Kökkızıl ve Selin Köksal

Turkstat’s inflation consumption index (CPI) reflects in fact the changes in the value of the representative household’s consumption basket based on market prices.  However, inflation faced by households which belong to different income and expenditure groups may differ since the composition of their consumption basket differs widely comparing to the basket of the representative household. In this research brief, different price indexes are calculated for each income quintile from the poorest to richest by using consumption data from the Household Budget Surveys (HBS) released by TurkStat for the period December 2003 – April 2016. The results indicate that poorer households faced higher inflation rates than richer ones during the last eight years. Inflation difference between poor and rich households increased by 3.3 percentage points compared to December 2014 and the cumulative difference reached 21.4 points since December 2003. This inflation gap against poor households is originated mainly by significant increase in food and housing-water-heating prices.

doc. ResearchBrief194

pdf. ResearchBrief194


Economic Outlook & Forecasts: April 2016


Seyfettin Gürsel, Mine Durmaz and Melike Kökkızıl

February statistics and partially March statistics point out opposite changes as in January. We observe that the increase in industrial production slows down while the revival in consumption is becoming apparent. Both productions of investment goods and passenger cars, as well as real sector confidence index all have declined whereas imports of investment goods significantly increased. We expect that the contribution of net exports to the growth will be limited and negative. Our estimates for quarter-on-quarter and year-on-year growth rates are, respectively, 0.4 percent and 3 percent. In addition, we predict the current account deficit to GDP ratio to be 4.3 percent and the gold-excluded ratio to be 3.9 percent.



Economic Outlook & Forecasts: March 2016


Seyfettin Gürsel, Mine Durmaz and Melike Kökkızıl

Following to the completion of December 2015 data, we present our 2016 1. quarter growth rate forecast along with our final 2015 4. quarter growth rate estimation in this month’s report. For the last quarter of 2015, we revise up our growth rate forecast from 0.6 to 0.8 due to the increase in industrial production.  Taking into consideration of the actual GDP announced in first three quarters and our GDP growth estimation for the fourth quarter, we expect that year-on-year GDP growth will be slightly over 4 percent. Moreover, we predict the current account deficit to GDP ratio to be 4.5 percent.

We estimate quarterly growth to be 0.5 for the 1. quarter of 2016. Also, we expect 2.3 percent of decline in annual growth due to base effect. Leading indicators of January and February point out that the rise in private consumption has weakened. Also, it is indicated that the relative stagnation of investments persists. Net exports contribute negatively whereas public expenditures contribute positively to GDP growth. Finally, we expect a decline in the current account deficit to GDP ratio for the first quarter of 2016.



Economic Outlook & Forecasts: February 2016


Seyfettin Gürsel, Mine Durmaz and Melike Kökkızıl

Even though 2015 December statistics pointed out opposite changes in GDP components, we preserved our forecast of 0.6 percent due to the compensative character of these changes. In December, regarding the components of GDP, the rise of private consumption keeps its relatively strong level and a recovery occurred in investments. However, we observe a decline in government expenditures (tightening in fiscal discipline) and the negative contribution of net export becomes more evident. Considering the actual GDP in the first three quarters and the forecast for the growth rate for the fourth quarter, we estimate the annual GDP growth as 4 percent. Also, we predict the current account deficit to GDP ratio to be 4.5 percent and the gold-excluded ratio to be 5 percent.



Growth Evaluation: 2015


Seyfettin Gürsel, Mine Durmaz and Melike Kökkızıl

Turkish economy grew by 4 percent in 2015 in parallel with Betam’s forecast. It is relatively higher compared to 2015 growth rate which was 2.9. Also, actual GDP growth rate is consistent with the forecasts of the Medium Term Programme. However, while the Medium Term Programme expected a “balanced” growth (increase in private consumptions and positive contribution of net export), it was realised as unbalanced. Private consumptions provided the highest contribution by 4.5 percent (3 percentage point). Second biggest contribution belongs to government spending. Public spending including public investments increased by 7 percent. Private investment growth remained limited by 2.7 percent. On the other hand, net export showed a negative contribution; export has decreased by 0.8 percent while import increased by 0.3 percent.

In 4th quarter, GDP grew by 0.7 percent compared to previous quarter which Betam predicted as 0.8 percent. Main source of 4th quarter’s growth is the positive inventory investment. While private consumptions recorded a limited growth, a significant recovery occurred in investments. After the recent elections, we observe a severe deceleration in growth of public spending. On the contrary, net export contributed negatively due to the declining export and the extensively increasing import.



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