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December 20101 Asymmetric Labor Market Effects of the 2008-2009 Crisis Prof. Dr. Seyfettin Gürsel Bahçeşehir University Center for Economic and Social.

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Presentation on theme: "December 20101 Asymmetric Labor Market Effects of the 2008-2009 Crisis Prof. Dr. Seyfettin Gürsel Bahçeşehir University Center for Economic and Social."— Presentation transcript:

1 December Asymmetric Labor Market Effects of the Crisis Prof. Dr. Seyfettin Gürsel Bahçeşehir University Center for Economic and Social Research (Betam) Assist. Prof. Gökçe Uysal-Kolaşin Bahçeşehir University Center for Economic and Social Research (Betam)

2 December 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

3 December I. Origins of the Asymmetric Shock

4 December 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 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.

5 December II. An Overview of the Turkish Labor Market

6 December Employment and Labor Force (SA)

7 December 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.

8 December Unemployment (SA)

9 December 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.

10 December Agricultural and Non-agricultural Unemployment (SA)

11 December Non-Agricultural Labor Force and Employment (SA)

12 December 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%.

13 December Non-Agricultural Unemployment (SA)

14 December Decomposition of NA Unemployment (YoY change)

15 December 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.

16 December Employment and Growth in the NA Sectors Labor ForceEmploymentGDP 2005.Q Q13.1%3.5%6.9% 2008.Q Q14.2%-1.7%-15.5% 2009.Q Q32.1%4.0%9.4% Annualised q-o-q average growth rates Manufacturing OutputEmployment 2005.Q Q11.8%0.8% 2008.Q Q1-5.7%-2.4% 2009.Q Q34.6%1.2% Quarterly average growth rates

17 December 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.

18 December III. Strong Added Worker Effect

19 December Male Unemployment (NA, YoY change)

20 December 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.

21 December Male Unemployment (NA, YoY change)

22 December Female Unemployment (NA, YoY change)

23 December 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.

24 December Female Wage Earners, Self-employed (NA, YoY change)

25 December 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.

26 December IV. Sectoral Asymmetries

27 December Sectoral employment (SA)

28 December 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.

29 December V. Effect of Informality on Unemployment

30 December Informality in the Turkish Labor Market * Workers not registered at a social security institution

31 December Informality in the Non-Agricultural Sectors * Workers not registered at a social security institution

32 December 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.

33 December Formal and Informal Wage Earners (YoY change)

34 December 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.

35 December THANK YOU


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