Transcript The Ninth Asian Urbanization Conference URBANIZATION AND LABOR MARKET

The Ninth Asian Urbanization Conference
Asian Urban Research Association (AURA)
Kangwon National University
18-23 August 2007
Chun-Cheon City/ REPUBLIC OF KOREA
URBANIZATION AND LABOR MARKET
PROBLEMS IN DEVELOPING COUNTRIES:
THE CASE OF TURKEY
Dr. Naci GÜNDOGAN
Anadolu University / TURKEY
1. Introduction
The twentieth century witnessed the rapid urbanization
of the world’s population. The global proportion of
urban population increased from 29 percent in 1950 to
49 percent in 2005.
By 2007, for the first time in human history, more
people in the world will be living in cities and towns
than will be living in rural areas. The global
urbanization rate is predicted to reach 60 percent in
the year 2030.
In developing countries in particular,
the degree of population increase and
the progression of urbanization is
large and although nearly 40 percent
of the world’s urban population was
concentrated in developing countries
in 1950, this figure is predicted to
reach 80 percent in 2030.
As urbanization proceeds in
developing countries, the speed and
scale of urban population growth
generate important challenges for
governments. This is especially true in
countries where urbanization has not
been associated with sustained
industrialization and development.
2.Labor Market Problems in Urbanization
Process
In developing countries, rapid and uncontrolled
migration created by the population moving
from rural to urban areas causes serious
problems from the viewpoint of labor markets.
Increases in rural-urban migration flows is
contributing to a larger urban labor supply. This
increasing labor supply has produced an
increasing urban unemployment rate and a
deterioration in the quality of employment.
2.1.The Informal Sector
Urbanization and informal sector
are joint and rising trends in
developing countries. The informal
sector represents a significant part
of the economy, and certainly of
the labor market, in many
economies, especially developing
economies, and plays a major role
in employment creation,
production and income generation.
In developing countries, the informal
economy tends to absorb most of the
expanding labor force in the urban areas.
Informal employment is at the core of
understanding urban unemployment
problems. Due to the lack of social safety
nets such as unemployment insurance,
the informal sector becomes a necessary
and prime survival strategy for poor
people.
Table 1- Size of the informal sector, 2004
Informal
Workforce as
a Share of
Africa
Latin America Asia
and
Caribbean
Nonagricultural
employment
78%
57%
45–85%
Urban
Employment
61%
40%
40–60%
New jobs
93%
83%
NA
In general, new entrants to the city
often enter the labor market through
the informal sector. Informal jobs are
in family rather than formal
enterprises, are small scale, often
lack a fixed location, involve small
investments, have no fixed earnings,
involve no formal training. Informal
employment is normally unstable and
insecure.
Most informal economy employment
is self-employment. There is a link
between working in the informal
economy and being poor. This stems
from the lack of labor legislation and
social protection covering workers in
the informal economy, and from the
fact that informal economy workers
earn, on average, less than workers in
the formal economy.
2.2.Urban Unemployment
In the late 1990s, the International
Survey of Mayors (UNDP, 1997)
regularly announced unemployment
as the world's number one urban
problem. Indeed, as world
urbanization intensifies with dramatic
population growth, global
unemployment problems move further
into cities and towns of the developing
world.
Empirical studies indicate that from
one-third to half of urban population
growth is the direct result of
immigration from rural areas. The
process, observed all around the
world, is assumed to be a historically
unique, massive movement of
population, resulting in high levels of
unemployment.
In developing countries, economic growth
has been biased towards the urban sector.
Workers gradually migrate to the urban
sector causing urban unemployment.
The Harris-Todaro Model provides a
powerful explanation of such
phenomenon. According to this Model,
people migrate from rural to urban areas
because of their private interests in
improving their economic wellbeing.
In other words, migration is an outcome of
the rational economic decision based on
the benefits and costs of actions to be
taken. This implies that rural-urban
migration in a context of high urban
unemployment can be economically
rational if expected urban income exceeds
expected rural income. That is, migrants
may be willing to endure a period of
unemployment if expected urban income
is sufficiently high.
Therefore, migration from rural to urban areas
will increase if:
Urban wages increase, increasing the expected
urban income.
Urban unemployment decreases, increasing the
expected urban income.
Urban job creation increases the number of
available jobs in the urban sector, increasing
the expected urban income.
Agricultural productivity decreases, lowering
marginal productivity and wages in the
agricultural sector, decreasing the expected
rural income.
2.3. Working Poverty
In developing countries, rapid and
uncontrolled urbanization process has
created a new face of poverty in urban
areas. This new form of poverty is working
poverty. With increasing urbanization, the
informal economy tends to absorb most of
the growing labor force. The creation of
employment through informal sector has
generated poor working conditions such
as; low wages, insecure jobs.
US$1 a day working
poverty share
Region
US$2 a day working
poverty share
1980
1990
2003a
2015b
World
40.3
27.5
19.7
13.1
59.8
57.2
49.7
40.8
Latin America and
the caribbean
15.6
16.1
13.5
11.5
41.2
39.3
33.1
28.8
East Asia
71.1
35.9
17.0
6.5
92.0
79.1
49.2
25.8
South-East Asia
37.6
19.9
11.3
7.3
73.4
69.1
58.8
47.7
South Asia
64.7
53.0
38.1
19.3
95.5
93.1
87.5
77.4
Middle East and
North Africa
5.0
3.9
2.9
2.3
40.3
33.9
30.4
24.9
Sub-Saharan Africa
53.4
55.8
55.8
54.0
85.5
89.1
89.0
87.6
Transition
Economies
1.6
1.7
5.2
2.1
1.7
5.0
23.6
9.8
aEstimates, bProjections
Source: Kapsos, 2004.
1980 1990 2003a 2015b
THE CASE OF TURKEY
Turkey is one of the countries with the
most rapid urbanization process in the
world. Rural-urban migration has been an
important determinant of the urbanization
process in Turkey. There is a great
migration into the cities from rural areas
and the urban population is increasing
rapidly. The unproductiveness of the
agricultural activities and the low income
of the farming are some of the facts that
cause the immigration from the
countryside.
Years
Population
Urban
Population
%
Rural
Population
%
1927
13 648 270
3 3005 879
24.22
10 342 391
75.78
1940
17 820 950
4 346 249
24.39
13 474 701
75.61
1950
20 947 188
5 244 337
25.04
15 702 851
74.96
1960
27 754 820
8 859 731
33.69
18 895 089
68.08
1970
35 605 176
13 691 101
38.45
21 914 075
61.55
1980
44 736 957
19 645 007
43.91
25 091 950
50.09
1990
56 473 035
33 326 351
59.01
23 146 684
40.99
2000
67 803 927
44 006 274
64.90
23 797 653
35.10
2005
73 193 000
49 248 000
67.30
23 945 000
32.71
2015
82 640 000
59 397 000
71.90
23 243 000
28.12
Years
Urban Growth Rate (%)
Rural Growth Rate (%)
1950-1955
5.56
1.69
1955-1960
4.72
1.90
1960-1965
4.15
1.69
1965-1970
4.69
1.22
1970-1975
4.27
1.47
1975-1980
3.36
1.57
1980-1985
5.99
-0.98
1985-1990
4.31
-1.18
1990-1995
2.74
0.29
1995-2000
2.54
0.28
2000-2005
2.17
-0.09
2005-2010
1.98
-0.21
2010-2015
1.76
-0.39
The population is concentrated
especially in the large provinces
and industrial regions. Provinces
such as Istanbul, Ankara, Izmir,
Adana, as industrial or trade
centres, have dense populations.
The rapid urbanization created by
the population moving from rural
areas causes serious problems
from the viewpoint of employment.
The slow pace of employment
creation in the modern sector,
most notably in manufacturing,
means rapid growth in generally
low productivity jobs in the
informal sector.
3.2.Turkish Labor Market Problems in Urbanization
Process
3.2.1. Labor Market Situation in Turkey
The main characteristics:
Population growth rate is relatively high (1.35% in
2004) and in connection with this concern, labor
supply has been increasing.
One-third of total employment in Turkey is in
agriculture. Workers in this sector tend to be
uneducated and unskilled.
Women participation in the labor market at a low level
(26% in 2006).
Another point for labor market in Turkey is
characteristics of employment status. In developed
countries, employees are about 80%, but in Turkey is
just 50%. The employment problem created by unpaid
family workers is very serious.
Unemployment insurance system did not
exist in Turkey until very recently. This
new insurance is in operation at present,
but it covers only 5 million workers, less
than one out of four in the workforce and it
offers very little compensation when
applied.
The migration flow from rural to urban
areas against the limited employment
creation capability of Turkish economy has
generated an increase in unemployment
rates in urban areas.
Today, Turkey’s labor market is facing three
severe challenges.
Firstly, continuous high economic growth has
not created enough jobs, for example,
economy grows at an average of above 6%
while employment only at 1%. This is
characterized by the phrase “jobless growth” in
the literature. Because of the slow
performance of employment generation
capacity of the economy, unemployment is a
severe problem, in particular, among the
young urban labor force reaching 25%.
Secondly, an increasing number of migrant
farmer workers during the progress of
industrialization and urbanization, challenges
the arrangement of traditional social security.
Only in 2005, 1.3 million workers migrated from
rural to cities.
Thirdly, the variety of employment patterns and
informal employment as the main pattern of
employment give rise to new issues regarding
public administration.
Urban unemployment rates are very high
Table 6- Rural vs Urban Unemployment Rates
URBAN
16,00
RURAL
14,00
12,00
10,00
8,00
6,00
4,00
2,00
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
1988
0,00
Women participation in the urban labor market at a
low level
Labor force participation in Turkey is
exceptionally low by international
standards and has been in long-term
decline. The overall participation rate of
48.7 percent in 2004 was the lowest in the
OECD and 21.4 percentage points below
the OECD average. Participation and
employment rates differ significantly with
respect to gender and location.
Labor Force Participation Rate (LFPR) and
Basic Tendencies: Women in Turkey
2006 :Male LFPR is 71 %
Female LFPR is only 26%
Female LFPR in Urban 19,9% in Rural 33%
Female employment in urban areas:
mostly in service sector
Female employment in rural areas:
in agriculture/unpaid family labor
mostly in the informal sector
in low-skilled, low-paid jobs
low level of formal education
Table 7- Labor Force Participation Rates in Turkey, Rural and Urban
Years
Labor Force Participation
(Urban)
Labor Force Participation
(Rural)
Male
Female
Male
Female
1990
76,8
17,0
83,0
52,0
1995
74,1
16,8
82,6
49,3
2000
70,9
17,2
77,9
40,2
2001
70,6
17,4
76,4
41,7
2002
70,8
19,1
74,5
41,4
2003
69,8
18,5
72,9
39,0
2004
70,8
18,3
74,7
36,7
2005
71,5
19,3
73,5
33,7
2006
70,8
19,9
72,7
33,0
There are several reasons for the declining
trends in the urban female labor force
participation rates in Turkey.
First of all, recently, younger populations have
been staying in school longer. This contributes
to the declining trends in the participation rates
of the young.
Second, the changing composition of the
labor force away from agriculture towards
non-agricultural activities is another
reason for the declining participation rates.
In rural areas, men are usually selfemployed in agriculture while women are
largely unpaid family workers. When
women migrate into urban areas they drop
out of the labor force and concern
themselves with household work.
Social and cultural value systems
dictate that men are the primary
breadwinners, and women are
given a secondary role in the
provision of a household’s needs.
Accordingly, women are engaged
mainly in domestic activities such
as childcare.
Informal employment is widespread
In Turkey, as in other developing
countries, the informal labor market is
a major issue with an impact on
economic efficiency, overall labor
market performance, income
distribution and poverty, as well as on
fiscal and budgetary performance.
Therefore, determinants of the
informality, scope and outcomes of
the informal sector must be
carefully considered for a better
understanding of the labor market
problems.
In an environment where the
formal sector has been unable to
create enough jobs to absorb
growth in the urban labor force
resulting from both migrations to
cities and births there, informal
employment becomes a remedy
for the unemployed.
In addition to this, unequal income
distribution and widespread poverty
together with the costly process of
searching for formal jobs appears as
major barriers to entry into the formal
sector.
As it is known, one-third of total
employment in Turkey is in agriculture.
Workers in this sector tend to be
uneducated and unskilled. When they
migrate to urban areas, women are not
likely to participate in the labor force at
first. Younger women go to school or find
employment in textiles until they get
married; this is almost the norm in the
sector. Young uneducated men work in
construction if they can.
This means that low-skilled agricultural
employment and urbanization will continue
to provide fertile grounds for informal
employment in Turkey.
Formal employment-growth performance
in Turkey has been very poor relative to
the growth in unskilled working-age
population.This may be an important
reason for the authorities not to crack
down on informal employment.
Table- 8 Non-registration of employed labor force in social security, 2004
Distribution
of workers
(%)
100
Sector
unregistred
Workers (%)
53
Total
unregistred
Workers (%)
53
Urban
54
36
19
Rural
46
73
34
Non Agriculture
66
34
22
Agriculture
34
90
31
Rural employee
43
21
9
Casual employee
8
91
7
Employer
5
24
1
Self employed
25
65
16
Unpaid
worker
20
97
19
All Workers
family
4.Conclusion
Today, developing countries face greater
urbanization challenges than developed
countries faced. Rapid and uncontrolled
urbanization created by the population
moving from rural to urban areas causes
serious problems in developing labor
markets. This internal migration has
produced an increasing unemployment
rate and deterioration in the quality of
employment (informal sector).
There is no universal remedy for solution
of these problems, but it can be said that
promoting formal urban employment is
probably the most feasible way to reduce
urban labor market problems. Urban
places should be areas where decent jobs
are created. So, it must be concentrated
on reforms that will create environment
where all positive socio-economic
developments lead to enlargement of
formal urban employment.
Thanks for your attention
Komapsumnida