Turkey’s unemployment rate fell to 9.9 percent in April. That is good news. The government’s long-term target is 5 percent. To realize this, there will be some changes in the legal framework shaping the labor market. The first attempt might be to introduce an “easy fire, easy hire’’ approach in order to encourage private businesses to employ more. However, the changing nature of unemployment might make these attempts less effective than planned. Let us discuss why.
Recently announced employment figures in the United States have demoralized markets not only in that country but also all over the world. The reason is obvious. If the increase in employment is much more below expectations, it means that the recovery of the U.S. economy is also much slower than the expected rate. And if the end of the crisis is much further away than expected in the world’s biggest economy, hope for the full recovery of the world economy in the near future will be in vain.
This indicates that unemployment is still the biggest problem everywhere. In some troubled European countries, debt and deficit problems might seem bigger, but the result of the austerity measures which have been recommended to solve those problems will again further increase unemployment countries – assuming they can be implemented successfully despite the people’s resistance.
There are even some numerical differences among countries, and that is a worldwide problem. It is understood now that the main reason for this problem is the changing nature of unemployment which became structural instead of cyclical when it responded positively to stimulus packages during the good old days. This new phenomenon disconnects the relation between economic recovery and employment growth. It means that even if there is a fast recovery in the world economy, the volume of employment will not increase at the same pace.
What made that change? There are several reasons. First of all, the pace of technological advancements is so rapid nowadays; for unemployed people who have lost their skills and working habits after two or three years of not working, it is very difficult to adapt to new technologies even if there are new job opportunities for them. Another important factor in technological advancements that limits employment growth is that increases efficiency. This makes hiring new workers unnecessary. It must also be remembered that almost all new technologies are less labor intensive.
The new global business atmosphere contributed to this tendency as business in developed countries, even in countries like Turkey, now prefer to use cheap labor and facilities abroad. The result is a “firing here, investing and hiring there’’ policy for almost all important international firms. This paves the way not only for unjust competition in international trade but also in the international labor market.
Even most governments are aware of the changing nature of unemployment; some of them, especially the U.S. administration, still hopelessly try to implement additional stimulus packages to induce employment. There is always a possibility that these packages may boost the total demand which will push production up and, as a result, will encourage the hiring of new workers. However, these stimulus packages encourage not only domestic production but also increase imports, which contribute to labor demand abroad instead of domestic labor demand.
If it is accepted that this new unemployment problem has become mainly structural, a new approach will be needed to create new job opportunities. It is not possible to fight against this kind of unemployment just through traditional macroeconomic policies. Unfortunately, there are no short-cut solutions to this serious problem, which is not only economic but also social and political. Most of the policies to be designed and implemented can only be effective in the long run, such as a dramatic change in the education and training system to further promote small businesses and growth industries. The unemployment problem is a serious crisis and people are waiting for short-term remedies. It is impossible to explain to them that short-term remedies are a waste of already-scarce resources which will be badly needed for long-term policies.