Labor, taxation and social welfare policies in countries around Europe and Central Asia must be brought into the 21st century to tackle rising inequality between groups and help workers face increased uncertainty, a new World Bank study has said.
Towards a New Social Contract report calls for a fundamental rethinking of policies to ease the growing divide between those who benefit from new economic opportunities and those who are left behind in an ever-more flexible economy, in a vary of countries, including Turkey, the Bank said in a statement on Sept. 25.
“Although countries in the Europe and Central Asia region have vast experience with socialwelfare institutions and programs, these were designed for a different economic environment and they no longer provide the same benefits for citizens as before,” said Cyril Muller, World Bank Vice President for Europe and Central Asia.
“Long-term wage employment is no longer the norm, especially for younger people, and we need to ensure the benefits of growth and opportunities are more equally shared,” Muller added.
Situation in Turkey
In Turkey, changes in the occupation structure were different to those observed in Western Europe. The biggest winner was non-routine manual-task-intensive occupations—typically employing low-skilled individuals—which grew from 31 percent of wage employment in 2002 to more than 36 percent in 2013. Non-routine cognitive-task-intensive occupations—typically employing high-skilled individuals—also grew as a share of wage employment, but only from 23.4 percent to 24.3 percent in the same period, according to the statement.
The expansion in wage employment at the expense of unpaid family work or self-employment may explain part of the better performance of non-routine manual-task-intensive occupations vis-a-vis non-routine cognitive-task–intensive occupations, it added.
“These changes prevented Turkey from seeing an increase in wage inequality like the one observed in Western Europe: The labor market incomes of low earners in Turkey rose by about 40 percentage points more than the corresponding incomes of the median between 2002 and 2013,” read the statement.
The report has revealed that in Turkey individual birth circumstances are more important determinants of access to tertiary education among the generation that came of age in the early 2000s than among the generation that started education in previous times.
Also, according to the report, spatial differences are relevant in Turkey: The average gap in PISA 2015 test scores between urban and rural areas is equivalent to more than one schooling year of difference.
To address the challenges, the report proposes a set of three policy principles: Moving toward equal protection of all workers, no matter their type of employment; seeking universality in the provision of social assistance, social insurance, and basic quality services; and supporting progressivity in a broad tax base that complements labor income taxation with the taxation of capital.