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Citation Information

Type Working Paper
Title The effect of social security taxes and minimum wages on employment growth in Turkey
Author(s)
Publication (Day/Month/Year) 2007
URL http://www.researchgate.net/profile/Kerry_Papps/publication/228431486_The_effect_of_social_security_​taxes_and_minimum_wages_on_employment_growth_in_Turkey/links/02e7e52321837d6f5b000000.pdf
Abstract
Using both individual-level panel data and synthetic panel data from the Turkish Household Labour Force Survey, this paper analyses the employment effects of increases in both the social security taxes paid by employers and the minimum wage between 2002 and 2005. Variation over time and among low-wage workers in the ratio of total labour costs to the gross wage gives rise to a natural experiment. Regression estimates suggest that social security taxes and the minimum wage have a significant negative effect on both employment levels and the formal/informal employment ratio. A 1 percentage point increase in the total labour cost/wage ratio yields a 1 percentage point decrease in the employment rate and a 2.2 percentage point decrease in the fraction of jobs that are registered for social security purposes. Women, urban-dwellers and those under 30 have the strongest overall disemployment effects, however rural workers are more likely than urban workers to switch from formal to informal employment in response to an increase in labour costs.

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