Labor force participation hit badly

Posted on July 24, 2020 by Ayse İmrohoroğlu ve Samed Küçükikiz

The labor force participation rate (LFPR) in Turkey fell dramatically in the early months of 2020. Compared to April, 2019 the LFPR was lower by 10.78%. In fact, the 47.20% LFPR observed in April 2020 was last seen in February 2013.

Note the differences in labor force participation, employment rate and unemployment rate between Turkey and the U.S displayed in the following graphs (we present not seasonally adjusted data since the large changes in some of these statistics due to the pandemic have presented some challenges to the traditional seasonal adjustment methods). The level of the labor force participation rate and the employment rate in Turkey are much lower than the levels in the U.S. Such differences are likely to be due to structural differences between the two countries. The differential impact of the pandemic in the two economies, on the other hand, is likely to be a result of factors such as the mitigation efforts taken by the different governments and the structure of unemployment insurance. In the U.S., the typical relief for the unemployed due to the pandemic has been through the traditional unemployment insurance programs. In many European countries and in Turkey other programs that keep the tie between the workers and the firms have been used. Some of these measures such as unpaid leave during the pandemic make the right interpretation of the unemployment rate statistic problematic.

The LFPR in Turkey is among the lowest among the OECD countries. As can be seen in the following graphs the main reason behind the low LFPR in Turkey is the low level of labor market participation by female workers.

The time path of the LFPR in Turkey and in the OECD countries between 1996 and 2019 shows how the progress made in Turkey has been slow over time compared to the rest of the OECD countries. While the female LFPR in Turkey increased from 28% in 2000 to 38.7% in 2019, in Spain, for example, the increase was from 52.9% to 70.1% in the same time frame. In Greece the increase was from 50.5% to 60.4%.

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