Wage Inequality Dynamics in Turkey


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Polat S. , Bakış O.

ERF 27th Annual Conference, Cairo, Egypt, 18 May - 23 June 2021, pp.1-35

  • Publication Type: Conference Paper / Full Text
  • City: Cairo
  • Country: Egypt
  • Page Numbers: pp.1-35

Abstract

This study aims to examine the evolution of wage inequality in Turkey between 2002 and 2019 using household labor force surveys. We find a significant decline in wage inequality

over the period analyzed, which can be explained by a combination of (i) minimumwage adjustments (2004 and 2016), (ii) a stable aggregate demand curve, (iii) betweenindustry

shifts in relative demand, and (iv) relative stagnation of post-secondary graduate wages. The two minimum wage adjustments led to real gains for lower wage earners and

reduced the wage gap between upper and lower percentiles. The decomposition analysis based on DiNardo et al. (1996) shows that minimum wage adjustment had a strong

wage (pricing) effect over the wage distribution. This impact even spilled over for wage earners above the median. We argue that minimum wage adjustments replace the role of

central wage bargaining in an emerging economy with many low qualified jobs and almost no labor market institutions. Relative real wage erosion for the upper deciles further

contributed to the reduction in inequality in recent years.