The Role of Women in Turkish Economy

List of Contributors

Kersten Kellermann

Introduction: Gender and the Economy

“Women’s empowerment is a cause I care about deeply”. With this dedicated statement, Christine Lagarde starts of a widely acclaimed report published in 2017 by the International Monetary Fund (IMF). The report analyzes various linkages and interconnections between gender inequality and the economy. Notwithstanding the commitment of the Managing Director of the IMF, it may probably be still overly optimistic to assume that everybody shares her attitude. Although the World Values Survey Association (WVSA, n.d.) provides evidence that since the mid-1990s, many countries have experienced an upward trend in values of gender equality, some countries show a decreasing or no significant change in support for gender equality values. Gender equality attitudes are particularly restrained with regard to women´s imputed abilities and skills as leaders in business or politics. A newly constructed index, published in the IMF Report, displays that despite notable advances, differences between men and women in decision-making power, economic participation, and access to opportunities persist around the world. The index is based on indicators of educational empowerment, health, legal empowerment, and financial access. Projecting current trends into the future, the World Economic Forum (WEF) Global Gender Gap Report 2018 states that to close the overall global gender gap will take more than another century.

One can indeed find these prospects sobering, and they decidedly have many implications. First and foremost, they indicate that there is still a long way to go on the road to gender equality. It, therefore, is worthwhile to have a closer look at the issue. Gender equality in itself is an important social objective and at the very heart of human rights. Since 1945, a fundamental principle of the United Nations Charter is “equal rights of men and women”. Society as a whole carries the responsibility to improve the circumstances under which women cope.

Female Labor Force Participation

Based on the intrinsic motivation for gender equality, the book presented highlights the economic consequences of gender inequality. It shows, that from both a micro- and macroeconomic perspective, gender inequality causes adverse effects not only to economic welfare and efficiency but also to aggregate growth and income distribution. At the center of the economic problem of gender ←9 | 10→inequality is a lack of female labor force participation. The World Bank estimates that in 2017, women made up little less than half the world’s population, but only two out of five in the global labor force were women. According to the International Labor Organization’s (ILO) annual survey “World Employment and Social Trends”, the women´s labor force share of not quite 40 percent has been stagnating for the last 15 years (ILO, 2017). The labor force participation rate of females population amounts to 49 percent. In other words, only one of two working age women is employed or actively looking for employment. At the same time, 79 percent of men participate in the labor force, leading to a gender gap of nearly 30 percentage points. The largest gender participation gap is in emerging countries. The contributing authors in this book emphasize that in Turkey, the female labor force participation rate is distinctly lower than in advanced economies despite a significant improvement in the last decade.

In economic gender research, most attention is paid to supply-side approaches, where the research goal is to find the factors that impede the participation of women in the labor market. Supply-driven factors contribute to the explanation of why women participate less actively in the labor market than men. The ←10 | 11→primary research objective is generally to deduce the focused measures aimed at the development of approaches activating women to enter the labor force. The probability that a woman participates in the labor force can be modelled as a function of several explanatory variables describing individual, household, social, political, and economic characteristics (World Bank, 2011). A society’s attitude toward gender roles can also influence women`s inclination to participate in the labor force. Hande Paker and Gökçe Uysal investigate factors that shape the labor force participation decision of women in Turkey (Chapter 1). They show that even women with a relatively high level of education are heavily influenced by gender roles and come to the conclusion that there is a high social and political necessity to change the perception of the role of women and girls in society.

In economic theory, female labor supply is often modeled using Becker’s (1965) time allocation framework, which explains the labor supply decisions of women as a leisure and labor consideration enhanced to allow for home-based production of goods and services. Female preferences depend heavily on their family circumstances, marital status, and household size. Traditional gender roles lead women to substitute among work, home production, and leisure while men substitute mainly between work and leisure. Home-based production includes caring for children or other family members. Women thus contribute substantially to the general economic welfare by performing large amounts of unpaid work, which is unaccounted for in Gross Domestic Product (GDP). Econometric studies confirm that family circumstances are a powerful explanatory variable for changes over time in labor participation rates, where the trade-off between family and work is reflected in a negative correlation between female labor force participation and marriage rates or the number of children.

Mind the Gap

From a microeconomic perspective, the decision to participate in the labor force is not only influenced by preferences and productivity but also by wages. Historically women’s labor supply has been more sensitive to wage changes than men’s labor supply. One explanation for that is that working for a salary is chosen by many women only if earnings at least make up for the lost home production. A second explanation is that married women are traditionally the secondary earners in a couple. Whether women join the work force depends, to a significant extent on the income of their spouses – who rank as the breadwinner – and on taxation. Second earners in married couples are often taxed more heavily than single individuals, which creates a further disincentive for women to work. ←11 | 12→Although the wage elasticities of female labor supply have fallen sharply in recent decades, wages are still a factor that affects the time allocation of women. Wage discrimination, therefore, lowers women’s incentives to enter the labor force and thus leads to a loss in economic welfare and aggregate growth. According to Cavalcanti and Tavares (2016), the aggregate effects of wage discrimination against women are large and can explain a significant fraction of differences in output per capita across countries.

However, significant gender wage gaps can be empirically observed, even within the same countries and occupations, which begs the question of what causes unequal pay. Economists have given several explanations such as differences between men and women in qualifications and skills, employer´s preferences for men, the high cost of workplace flexibility, and impediments for women to combine work with family (Goldin, 1990). Levent Yilmaz and Julia Brandl call attention to a third explanation, namely, lower salary expectations of women (Chapter 6). Empirical studies show that salary expectations correlate positively with actual salary, which motivated Yilmaz and Brandl to analyze the gender differences in expected salary between young women living in Innsbruck, Austria and women living in Istanbul, Turkey. They conduct an online survey based on a specific questionnaire. Yet, the evidence shows that only female subjects in Innsbruck expected a lower salary than their male counterparts. The women in Istanbul expected higher salaries than their male counterparts.

Özge Izdeş and Yelda Yücel analyze the wage gap problem within the decent work framework (Chapter 8). The term “decent work” was coined by the ILO (1999) and stands for work that is “…productive and delivers a fair income, security in the workplace and social protection for families, better prospects for personal development and social integration”. Focusing on the Turkish manufacturing sector, the authors come to the conclusion that the most female-populated subsectors feature low workplace safety and high turnovers. They further acknowledge that women’s share in vulnerable employment is high and that a sizable portion of women work without social security. Their results thus indicate that women in manufacturing sectors face significant gender gaps in terms of decent work.

Motherhood Penalty

There is a broad consensus that women experience several disadvantages in the workplace. Mothers, however, are exposed to drawbacks in addition to those commonly associated with gender. Altan Aldan, Cevriye Aysoy, Seyit Mümin Cilasun, and Huzeyfe Torun take a closer look at the difficulties that prevent ←12 | 13→women from rejoining the labor force after giving birth (Chapter 4). Their data show that the labor force attachment of women in Turkey is not very pronounced. Only around two-thirds of the women in the sample who were employed a year before birth are employed 18 months after birth. The labor force attachment of women with higher education is more pronounced. Improving female educational attainment is thus recommended as a key policy tool to reduce the negative effects of birth on employment.

A recent study jointly published by the ILO, OECD, IMF, and World Bank (2016) states, that motherhood plays a part in holding women back from leadership positions and is an important driver of the wage penalty. The gender wage gap for young women in OECD countries increases steeply during childbearing and child-rearing years. The motherhood wage penalty in emerging economies – measured as the overall gross average monthly earnings of mothers compared to that of women who are not mothers – range from 5 percent in the Russian Federation to over 30 percent in Mexico. The pay gap between mothers and nonmothers is larger than the pay gap between men and women, even after controlling for the usual human capital and occupational factors that affect wages. Working fathers on the other hand earn on average more than working men without children.

Motherhood penalties can be traced back to deep-seated attitudes that somehow unify different cultures. Most people – no matter where they grow up and to what society they belong – are biased with regard to their perception of women who are mothers. Nevertheless, to protect women who enjoy the privilege of motherhood, institutions are needed that overcome these biased attitudes. Nuran Belet (Chapter 11) focuses on the so-called harmonizing policies, measures that help women to combine family and children with work and career. According to the authors, the provision of affordable, high-quality nursery services and pre-school education has a positive impact on female labor participation. The author further identifies fiscal subsidies for the childcare economy as an appropriate policy measure to ease the entrance into working life for women. Harmonizing policies should also take into account flexible working-time arrangements and maternity and paternity leave.

Employment Discrimination in Hiring and Promotion Decisions

Turning to the demand side of the labor market raises the question of whether there is a significant gender gap in hiring or promotion practices of employers. In other words, are women discriminated against in hiring or promotion ←13 | 14→decisions? In the early seventies, Gary Becker (1971) introduced his pioneering theory about employment discrimination, according to which market discipline lowers gender gaps. Becker’s explanation is straightforward. In the case where a firm has – for what reason ever – a taste or preference against women, it will face higher costs. Hasan Dinçer, Serhat Yüksel, and Mustafa Tevfik Kartal evaluate the gender effect in Turkish banks and indicate a causal relationship between gender to profitability (Chapter 3). Employing women has a positive influence on the financial performance of the banking sector. For private banks, employing women also improves profitability. Increasing the ratio of female workers is thus recommended as a measure to improve the bank`s financial performance.

Being prone to hire male applicants instead of the most qualified and productive ones – independent of gender – is thus a source of cost inefficiency for firms. According to Becker, this cost disadvantage lowers the firm’s competitiveness and rises its probability of being eliminated by competition. The competitive market thus performs a disciplining role with regards to employment discrimination. However, World Bank economists Amin and Islam (2014) state that gender differences in the labor market have persisted, potentially suggesting the uncompetitive nature of the labor market. They find strong evidence that non-discrimination clauses can prevent gender-based discrimination in the hiring process and thus equalize the employment of women relative to men.

Empirically more relevant than the gender gap in hiring practices however is the promotion gap (Christiansen et al., 2016; Steinberg and Nakane, 2012). Women who enter career positions are often exposed to strong headwinds, so that top-performing male employees advance more rapidly in the promotion cycle than their female counterparts. Elif Nuroğlu and Nurgül Başaran address these issues by examining the reasons for low female representation in senior management levels in Turkey and present evidence that the so-called glass ceiling syndrome exists (Chapter 9). The term glass ceiling refers to barriers to advancement for women. Morrison and Von Glinow (1990, p. 200) describe it as a “barrier so subtle that it is transparent, yet so strong that it prevents women and minorities from moving up in the management hierarchy”. By discouraging the most productive and most talented women from advancing, the glass ceiling syndrome potentially undermines productivity and economic growth of firms and the economy as a whole. Nuroğlu and Başaran interestingly recognize that the problem at its root is one of social and cultural perception. Since early childhood experiences and education play a big part, breaking the glass ceiling requires social rethinking in families, public institutions, and businesses.