Issues on labor market in Turkey

Abstract

Education is widely recognized as a fundamental driver of economic development and an effective tool for shaping labor market outcomes and reducing inequalities. In recent years, Turkey has implemented significant educational reforms, such as the 2012 compulsory education reform, which extended mandatory schooling from eight to twelve years and lowered the school starting age. This dissertation examines the multifaceted impacts of this reform, investigating its implications for labor market participation, wage dynamics, and employment trajectories. The second and third chapters of the thesis examine the labor market outcomes of the 2012 reform from interconnected but distinct perspectives. Chapter 2 analyzes the impact of the reform's provision for earlier school enrollment, which implicitly offered mothers a form of public childcare, on maternal labor force participation. Chapter 3 focuses on the potential human capital effects of the reform, exploring how compulsory high school education affects a broad range of labor market variables, including individual wages, employment types, and participation in the formal sector. The fourth and final chapter examines the impact of education on wage inequality, investigating the heterogeneity in returns to education across different wage deciles. Chapter 2 provides the first causal evidence in Turkey on the role of public childcare services in enhancing maternal labor supply. Turkey's 2012 education reform reduced the compulsory school starting age from 72 to 66 months and allowed children aged 60–66 months to start school with parental consent. By lowering the starting age for primary education in public schools, the reform created an implicit form of public childcare that could influence maternal labor market participation. Using data from the Household Labor Force Surveys (HLFS) between 2004 and 2019, the analysis employs a difference-in-differences approach. The treatment group comprises mothers whose youngest child was aged 5–6 years (eligible to enroll due to the reform), while the control group includes mothers whose youngest child was 4 years old (ineligible). Key labor supply measures include labor force participation, employment, working hours, and part-time employment. The findings reveal that the implicit childcare option introduced by the reform is not strong enough to significantly increase maternal labor force participation. While minor increases were observed in some subgroups, these effects were not statistically significant. The limited impact is attributed to the prevalence of informal childcare options (e.g., family and community networks) in Turkey and cultural norms emphasizing parental care for young children, which may restrict the substitutability of public schools for other forms of childcare. These results highlight the need for complementary policies to enhance the effectiveness of educational reforms in reducing barriers to women's labor force participation. Such policies could include expanding access to affordable formal childcare services, addressing cultural norms, and providing targeted support for low-income and less-educated mothers. Chapter 3 examines the labor market impacts of Turkey's 2012 compulsory education reform, particularly its effects on human capital accumulation. By extending the duration of compulsory education to 12 years, the reform aimed to raise educational attainment and deliver long-term benefits for individuals and the economy. Using regression discontinuity design (RDD) with birth month and year as an assignment rule, this chapter analyzes the causal effects of the reform on variables such as high school graduation rates, university enrollment, employment status, formal sector participation, and hourly wages. The analysis draws on household survey data from the Turkish Statistical Institute, covering a wide range of variables. The findings indicate that the reform significantly increased high school graduation rates for women by 7–8%, particularly among cohorts born close to the eligibility cutoff, demonstrating its success in reducing early school dropout rates among girls. However, the reform had no comparable effect on male individuals, suggesting that women faced greater barriers to accessing education prior to the reform. Despite successfully narrowing the gender gap in education, the reform did not achieve similar improvements in women's labor market outcomes. Higher education levels did not translate into short-run gains in employment or wages for women. These results suggest structural barriers in the labor market that limit the absorption of highly educated women, such as limited job opportunities, cultural norms restricting female labor force participation, and mismatches between education curricula and labor market demands. The findings underscore the need for complementary policies to maximize the economic benefits of educational reforms, such as expanding childcare services and implementing targeted employment programs for women. Chapter 4 provides a comprehensive analysis of how education reshapes the wage structure in Turkey, with a particular focus on its effects on wage inequality. By examining the impacts of education on wages across different ability groups and over time, this chapter offers new insights into the dynamics of wage inequality. The analysis focuses on both between-group inequality (wage differences between individuals with varying education levels) and within-group inequality (wage disparities among individuals with the same education level). Using quantile regression (QR) and instrumental variable quantile regression (IVQR) methods with data from HLFS, the findings reveal that education exacerbates within-group wage inequality. Highly educated individuals disproportionately benefit from education, which is attributed to the complementarity between education and unobservable abilities. Individuals with higher ability levels derive greater returns from additional education, widening wage disparities among those with similar educational backgrounds. Furthermore, the effects of education on wage inequality have evolved over time. Since 2012, the degree of complementarity between education and unobservable abilities has increased, leading to higher returns for highly able individuals and relatively smaller benefits for lower-ability groups. The results highlight the need for policies that address structural barriers in the labor market and align education with labor market demands. Expanding access to childcare services, developing targeted employment programs for women, and aligning curricula with market needs are essential steps to ensure that increased educational attainment translates into reduced inequalities and improved economic outcomes.