A multi-pronged approach to labor market flexibility: A survey on the Turkish context

Thesis Type: Postgraduate

Institution Of The Thesis: Orta Doğu Teknik Üniversitesi, Faculty of Economic and Administrative Sciences, Department of Economics, Turkey

Approval Date: 2008


Supervisor: EBRU VOYVODA


Turkish labor market has been experiencing low employment performance over the last two decades. This pessimistic picture has become more striking after the crisis in 2001. While output growth has presented a rapid recovery, unemployment could not record such an improvement and has remained around 10 % since then. This fact has introduced a new phenomenon to Turkey called “jobless growth”. As a solution to the bottlenecks in the labor market, the concept of “flexibility” has been more frequently pronounced by policy makers and academicians at both national and international level. In the light of flexibility-based arguments, this thesis takes an impulse from the basic assertion of the neoclassical theory that it is the labor market rigidities that are mainly responsible for high unemployment/low employment performance. Accordingly, the aim of the thesis is to analyze labor market flexibility with a particular focus on the Turkish context. The discussions conducted throughout the thesis are based on the question; whether Turkish labor market actually includes such considerable rigidities constituting impediment for employment creation, as suggested by neoclassical arguments. The thesis starts with a review of main characteristics of the labor market in terms of demographic trends, labor force participation, employment and unemployment. Secondly, labor market flexibility is analyzed through two main indicators: labor cost flexibility and production function flexibility; and these two indicators are divided into six sub indicators. The flexibility indicators covered by the thesis are investigated individually, without an aim of aggregating them into a single indicator. The research involves quantitative findings based on available data and a qualitative survey with reference to related legislation.