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The Ninth Asian Urbanization Conference Asian Urban Research Association AURA Kangwon National Unive

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Chun-Cheon City/ REPUBLIC OF KOREA. URBANIZATION AND LABOR MARKET PROBLEMS ... Thirdly, the variety of employment patterns and informal employment as the main ... – PowerPoint PPT presentation

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Title: The Ninth Asian Urbanization Conference Asian Urban Research Association AURA Kangwon National Unive


1
The Ninth Asian Urbanization ConferenceAsian
Urban Research Association (AURA)Kangwon
National University18-23 August 2007Chun-Cheon
City/ REPUBLIC OF KOREAURBANIZATION AND LABOR
MARKET PROBLEMS IN DEVELOPING COUNTRIES THE CASE
OF TURKEYDr. Naci GÜNDOGANAnadolu University
/ TURKEY
2
  • 1. Introduction
  • The twentieth century witnessed the rapid
    urbanization of the worlds 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.

3
  • In developing countries in particular, the
    degree of population increase and the progression
    of urbanization is large and although nearly 40
    percent of the worlds urban population was
    concentrated in developing countries in 1950,
    this figure is predicted to reach 80 percent in
    2030.

4
  • 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.

5
  • 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.

6
  • 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.

7
  • 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.

8
Table 1- Size of the informal sector, 2004
9
  • 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.

10
  • 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.

11
  • 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.

12
  • 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.

13
  • 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.

14
  • 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.

15
  • 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.

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  • 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.

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  • THE CASE OF TURKEY

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  • 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.

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  • 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.

23
  • 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.

24
  • 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.

25
  • 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.

26
  • Today, Turkeys 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.

27
  • 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.

28
  • Urban unemployment rates are very high
  • Table 6- Rural vs Urban Unemployment Rates

29
  • 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.

30
  • 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

31
Table 7- Labor Force Participation Rates in
Turkey, Rural and Urban
32
  • 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.

33
  • 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 self-employed 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.

34
  • Social and cultural value systems dictate that
    men are the primary breadwinners, and women are
    given a secondary role in the provision of a
    households needs. Accordingly, women are engaged
    mainly in domestic activities such as childcare.

35
  • 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.

36
  • 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.

37
  • 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.

38
  • 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.

39
  • 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.

40
  • 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.

41
Table- 8 Non-registration of employed labor force
in social security, 2004
42
  • 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).

43
  • 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.

44
  • Thanks for your attention
  • Komapsumnida
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