Turkey: Unemployment rate falls to lowest level since 2014

The unemployment rate in Turkey in August, which was 11.8% in the same month of the previous year, decreased by 2.2 points to 9.6%. When compared to the previous month, it is observed that the adjusted unemployment rate decreased by 0.4 points. While the unemployment rate among the young population is 18%; The rate of idle labor force, which is a broadly defined measure of unemployment, decreased from 22.4% to 19.8% compared to the previous month.

When we look at the comparable periods, August 2021 - August 2022, it is seen that there was an increase of 1.5 points in the labor force participation rate between the relevant periods, with adjusted data. The workforce, which was 32 million 864 thousand people in the similar period of 2021, became 34 million 326 thousand people in August 2022. The labor force participation rate increased from 51.5% to 52%. Again, looking at the seasonally adjusted data; While the employment rate increased by 2.5 points to 47.9% compared to the same period of the previous year, seasonally adjusted employment increased by 366 thousand people compared to the previous month.

Complementary indicators for the seasonally adjusted workforce, August 2020 - August 2022

Despite the decline in TUIK data, the change in both İŞKUR unemployment benefits applications points to an increasing unemployment trend. According to İŞKUR, the number of registered unemployed decreased by 1.8% on a monthly basis to 3.3 million as of September 2022. The İŞKUR figures do not exactly match the official unemployment figures released by TurkStat, but overall trends are typically expected to be consistent. In an environment where the idle workforce is 19.8%, these rates correspond to a total unemployment of 6.8 million. Since the number of people who fit the narrow definition of unemployment is 3.3 million (who can't find a job), 3.5 million people have given up looking for a job, according to TUIK data. In an environment where wages melt so much in the face of inflation and exchange rates, university graduates have difficulty in finding a job because their expectations are not met.

A very serious minimum wage increase is expected at the beginning of the year. Statements made by the economy management and the government indicate that this hike will not be below inflation in any way. As it will be remembered, a 50% increase in the minimum wage was made in January 2022 and a 30% increase in July 2022. Since January-June 2022 inflation was realized as 42.4%, the July interim hike actually remained below the first 6-month inflation. We estimate the half-year inflation in the second 6 months of the year as 21.9%. Assuming that the part that is below inflation in the first 6 months will be added to the hike, we calculate that the minimum wage increase will be at least 35%, and that a hike may occur in higher bands due to the election effect. This shows that the minimum wage may be 7700 TL or a little more (presumably over 8000 TL) for 2023.

If there is a lack of demand in the economy and companies cannot find the flexibility to increase the minimum wage, product and sales prices, without decreasing their sales volumes, this increased labor cost may be reflected as an increase in unemployment. In fact, this is a reflection of the situation brought about by the regulations and hikes without productivity gains and basically reflects the structural deficiency in our labor market.

Unemployment Rate in Turkey, %; Participation rate and number of employees

Kaynak Enver Erkan / Tera Yatırım
Hibya Haber Ajansı