Why is it difficult to implement flexicurity in Turkey? Should we

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Why is it difficult to implement flexicurity in Turkey? Should we
Why is it difficult to implement
flexicurity in Turkey?
Should we, anyway?
Hakan Ercan
Middle East Technical University
February 2011
21.02.2011
TAIEX at TOBB, Ankara
1
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.
21.02.2011
TAIEX at TOBB, Ankara
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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.
21.02.2011
TAIEX at TOBB, Ankara
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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.
21.02.2011
TAIEX at TOBB, Ankara
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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).
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TAIEX at TOBB, Ankara
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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 20-24 year olds was 60%
with an unemployment rate of 18%.
• Temporary contract employment proportion for 30-34
year-olds was 33% with an unemployment rate of 8%.
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TAIEX at TOBB, Ankara
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…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.
21.02.2011
TAIEX at TOBB, Ankara
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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?
21.02.2011
TAIEX at TOBB, Ankara
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Some of it would be useful, like parttime 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.
21.02.2011
TAIEX at TOBB, Ankara
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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...
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TAIEX at TOBB, Ankara
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