Mayday for Turkish workers on May Day
On paper, Turkey has really good laws protecting workers jobs. According to the World Bank’s Doing Business survey, the country has tight and inflexible labor market regulation – one of the most stringent in the world. Working hours are rigid, and it is not only quite difficult, but also costly to fire workers.
It is not only the laws, but also the courts, that favor workers: As any business owner would tell you, judges are usually biased toward employees in a labor dispute. This makes sense. After all, employees are weak against their employers, and so it is understandable for the legal system to protect them, but I feel we are overdoing it a bit in Turkey.
Moreover, such laws end up breeding inefficiencies. For example, as I explained in a column three years ago, high severance payments are shackles for employees and employers alike: Workers won’t quit jobs they hate so as not to lose their severance pay, and bosses won’t fire long-time employees who are not putting in an effort anymore simply because the productivity gains from replacing them are unlikely to make up for the cost of cutting them loose.
Any labor economist would tell you that such firing costs are also hiring costs, as firms take into consideration redundancy expenses when hiring. Not that it is easy or cheap to hire workers in the first place. But wait: Isn’t the minimum wage too low in Turkey? Isn’t one of the key election promises of the two opposition parties to raise it significantly?
In fact, the minimum wage is not low in Turkey compared to productivity. The ratio of minimum wage to value added per worker, one-quarter to one-third in developed countries and Turkey’s peers, is 42 percent. Average wages and labor costs have been rising faster than productivity in recent years. Turkey does not have a low-wage, but a low-productivity problem. On the other hand, regional minimum wages, which have been useful in other countries with significant regional income disparities, are not considered.
According to data from Eurostat, 42 is also the percentage of Turkish workers who officially earn around or below the minimum wage, with Slovenia holding a distant second place in Europe at below 20 percent. But most of these workers actually earn much more than the minimum wage. Companies that want to evade the high social security contributions pay the difference in cash. Both the carrot (easing this burden) and the stick (increasing inspections) would go a long way toward solving this problem.
Unfortunately, inspections are not a forte of Turkish labor regulation. Anyone who did not know this fact already found out after the Soma “murders.” Incidentally, we get inspected regularly by social security and labor civil servants at our family business, usually by aggressive officials who “encourage” our employees “to lie” – which makes me wonder if such inspections are discretionary and politically motivated.
It is indeed mayday for Turkish workers on May Day. But not because they will probably be beaten and tear-gassed by cops. Those wounds will heal in a few days, but Turkish laws will keep on increasing unemployment by restricting employment and protecting jobs rather than workers – not to mention ignoring employees’ health and safety.