Turkish employment reform questioned

ANKARA – A Turkish fiscal stimulus package and an employment reform aimed at creating jobs will not create the desired effects due to a global credit crunch and a slowdown in the economy, an employers’ forum said yesterday. Later yesterday, parliament was expected to start debating a new employment package, which cuts social security premiums paid by employers by 5 percentage points and provides incentives to hire women and people below 30. The reform follows a government decision to cut a key primary surplus target to 3.5 percent of gross domestic product from 4.2 percent earlier this month to boost much-needed spending for a major development project and stimulate a slowing economy. «Unfortunately the employment package coincides with a period of economic difficulties… there is no climate now for creating jobs,» said Bulent Pirler, secretary-general of the Turkish Employers’ Confederation (TISK). TISK is the umbrella organization of 9,100 major firms registered in Turkey. «We cannot guess firms’ behavior at a time of recession and global crisis,» Pirler said. The government cut back its economic growth forecast to 4.5 percent for 2008, from an initial 5.5 percent target and an average rate of 6.8 percent for the last five years. The reform bill is positive for easing financial stress on companies but it does not go far enough, Pirler said. «We can say that the reform’s effect will be limited because it does not include a solution to problems such as (large) severance payments which overburden employers,» he said. TISK says Turkey has some of the highest severance payments in the world, with 86.7 weeks’ pay on termination of a contract after 20 years’ service. Turkey’s largest trade union Turk-Is said the reform would not help reduce unemployment. «We think that the articles in the bill do not bring satisfactory solutions to unemployment. Investments and more production are necessary first of all for lessening unemployment,» said Mustafa Kumlu. He did, however, welcome new incentives in the reform to hire disabled workers. Turkey’s official unemployment rate rose to 11.3 percent in the December to February period, from 11 percent a year earlier, with youth unemployment standing at 21 percent. Economists say the official figures underestimate the true extent of unemployment. «The reform plan and the stimulus package will not give the desired growth-boosting results. Growth will not rise to 6 percent from 4 percent due to these measures while we have a global recession,» said Ekspres Investment’s chief economist Guldem Atabay. The government, which last month passed a long-delayed International Monetary Fund-backed social security reform, is hoping its second major piece of economic reform this year will stimulate the economy. «Our studies show that the reform will contribute to reducing the unregistered economy and this will create positive results for the budget and economic indicators,» said a senior government official, who declined to be named.