Real wages and the business cycle in Turkey

Abstract

The article analyzes the direction and scope of the responsiveness of real wages to the business cycle in Turkey using longitudinal data from 2005 to 2015. We found that wages in Turkey are procyclical; one percentage point increase in the unemployment rate induces a 0.6% decline in real wages. There is a variation in the patterns along the lines of wage distribution among the subgroups with relations to skills. Less-educated workers have acyclical wages. Compatible with this evidence, we found that the workers who earn around the minimum wage also have acyclical wages. High share of minimum wage earners suppresses wage cyclicality. Consistent with strict employment protection legislation and loose wage determination, wages of relatively high-income employees who mostly have formal work arrangements are procyclical.