Why is it difficult to implement flexicurity in Turkey? Should we, anyway? Hakan Ercan Middle East Technical University February TAIEX at TOBB, Ankara

Flexicurity: A European answer to US job market performance US is the benchmark labour market in terms of employment performance. Low unemployment rates are achieved at the expense of high wages and job security. At the top, highest wages of the high-skilled workforce have risen in absolute and relative terms in the past decades. This wage inequality has been caused by skill-augmenting technological change during the 1980’s and 1990’s TAIEX at TOBB, Ankara2

It works in increasing the employment of women and youth, but… Europeans were (and are) reluctant to let their social systems go in the way of the US. Europeans claim that they may preserve their ‘security’ and create jobs at the same time (despite the French and Spanish experiences, for example). French refuse to change in any way despite ‘suburban’ troubles a few years ago; Spain is ‘flexible’ for new entrants, ‘secure’ for the old-timers TAIEX at TOBB, Ankara3

It worked in one part of Europe: In the northern part. Europe could not adjust its employment or wage levels as the US did in response to technological change. Unemployment rates have risen. In the mid-1990’s two Nordic countries experienced high unemployment rates. They had to respond. ‘Flexible’ labour market practices came into being in Europe TAIEX at TOBB, Ankara4

Turkey looks like the southern rim: Spain, Italy, Greece… Could flexicurity work here? There is a ‘flexible’ informal sector and a ‘secure’ and small formal sector (Italians would understand, also the transition countries). Note that, labour flexibility is typically implicitly or explicitly associated with economic growth, that is, job creation performance (although the two do not necessarily go hand-in-hand in the short-run) TAIEX at TOBB, Ankara5

After all, Spain has reduced its unemployment rate by segmenting its labour market… Spain had the highest temporary employment rate in the European Union. This was a consequence of the flexible labor contracts (the expansion of temporary employment) as a way to reduce the sky high unemployment rates of 1980s. In 2007, before the crisis, temporary contract employment proportion for year olds was 60% with an unemployment rate of 18%. Temporary contract employment proportion for year-olds was 33% with an unemployment rate of 8% TAIEX at TOBB, Ankara6

…only to see its unemployment rate shoot up in the recent crisis. WSJ, February 2, 2011 MADRID—Spanish jobless claims rose in January, providing new evidence that unemployment may have still a way to go before it reaches a peak. The government has tried to loosen up the labor market but so far reforms have been limited, partly because of opposition from powerful trade unions. Finance Minister Elena Salgado admitted the data were "bad" and said the government is preparing a new plan to lower unemployment. Last week, Spain's statistics institute said the overall unemployment rate in the country soared to 20.3% in the fourth quarter of 2010 from 19.8% in the third, with more than 138,000 jobs lost. Spain's unemployment rate is the highest in the developed world TAIEX at TOBB, Ankara7

Shouldn’t we think about this again? While flexicurity was first touted as security for flexible work forms, it came to mean flexibility in recent years, in the name of job creation. Lifelong learning was so squeezed out of the flexicurity context that, the EU had to start a new initiative, ‘New Skills for New Jobs’. In Spain and in Turkey, labor adjustment was done exclusively on the number of employed persons during the crisis, not on hours worked. In Germany, hours were adjusted more than the employment level. Spain is a flexibility country, Germany is not. Is there something wrong here? Seriously wrong? TAIEX at TOBB, Ankara8

Some of it would be useful, like part- time work, but There is a high tax burden on employment and high social security contributions. New jobs will not be the only component of labour demand that will produce employment for new job seekers. As Turkey becomes older, more job openings will be available from existing jobs to replace retiring workers. That is, lifelong learning and skill upgrading will be crucial labour market institutions. By necessity, technical skill upgrading will have to use the vocational school infrastructure in Turkey. This infrastructure has problems TAIEX at TOBB, Ankara9

Maybe not in Turkey: the employers and government are pro-flexicurity, unions are not. One would expect that trade unions would be in favour of training programs. As it is hard for a union member to be fired, in unionised establishments, the employer tries to hire higher productivity workers in the first place. Mainstream trade unions would see lifelong learning and skill upgrading as a government responsibility. Future demand and training for new skills are essentially youth related issues. There is limited scope for older generations. As such, the future perspective could only be a part of a grand scheme that must involve social protection! Then the debate on employment creation will ultimately come to flexibility and security TAIEX at TOBB, Ankara10