Turkey is aging at an inopportune time
“A pessimist sees the difficulty at every opportunity, the optimist sees the opportunity in every difficulty,” former U.K. Prime Minister Winston Churchill once said. I consider myself a born again optimist, yet as an experienced citizen of Turkey, I see much difficulty as well.
Twenty years ago, we were talking about the demographic window of opportunity for Turkey. We were getting into the sweet spot in which the country would have a bulge of working age adults without the burden of seniors who would require high welfare payments. Surely, this window had to be used to enact structural reforms and upgrade the country’s economic standing. Look at where we are now. Today, I must say from experience, is a rather inopportune time for an aging Turkey. Let me elaborate.
In the United States, it took a century for the share of people older than 65 to double from around 8 percent to 16 percent. Yet according to the United Nations population forecasts, the share of people older than 65 in Turkey, which is 8 percent, is going to double by 2040. What took a century in the U.S. is forecast to happen in two decades in Turkey.
We already have more people who are older than 65 than we do who are under five years of age in Turkey. What does that mean? A smaller working age population and consequently, a lower growth rate.
The only way around this is either to open the doors to unprecedented numbers of migrants and refugees, or to become more productive. Turkey is doing a bit of the former, but this is not sustainable, and has all kinds of other costs. I want to reflect a bit on the latter, namely on making the Turkish economy a more productive and profitable place to do business.
Now consider Turkey as being part of European automotive value chains. There is now disruptive technological change in the automotive industry from electrical vehicles to autonomous vehicles. The automobile, as we know, is quickly turning into a mobile digital management system, no longer simply a car, but a digital transportation system of sorts, complete with management, health and entertainment services.
This transformation requires more skilled workers in car factories. A country like Turkey could benefit immensely from this sort of shift, inserting itself into part of the value chain it couldn’t before. Is Turkey ready for this transformation? No.
Let me give you another data point today: 60.5 percent of the Turkish population has an educational attainment of middle school or less, so “less than primary, primary and lower secondary education” (ISCED level 0-2). This ratio is around 19.5 percent in Germany, 14.5 percent in Slovakia and 39.6 percent in Spain, all countries along the automotive value chain. How about the equivalent of high school graduates, so “upper secondary and post-secondary non tertiary education” (ISCED levels 3-4)? Around 21.1 percent in Turkey and 54.5 percent in Germany. What does this mean? It means that Turkey has squandered its demographic window of opportunity.
Looking for opportunities, I see a lot of potential in improving female labor force participation. As of 2020, that ratio is 33 percent in Turkey, 55 percent in Germany and 52 percent in both Slovakia and Spain. Like Japan, Turkey needs to raise its female labor force participation rate. Once again, access to education will be key here.
The pandemic is going to speed up digitalization and technological change, which is only accelerating these trends. Turkey is out of time. Ankara must focus on a strong structural reform agenda to prepare for an aging society. Otherwise, Turkey will once again find out that life speeds up after a certain age, and before you know it, you’re out of time.