Unemployment is one of the most critical indicators of economic health, reflecting the ability of an economy to create jobs for its labor force. In Turkey, unemployment rates have fluctuated significantly over the past two decades, influenced by factors such as economic crises, inflation, currency depreciation, and shifts in government policies. As of 2024, Turkey’s official unemployment rate stands at 9.2%, down from a high of 14.1% in 2019, yet concerns remain regarding underemployment, youth unemployment, and the long-term sustainability of job growth.

Turkey’s economy has long been characterized by high inflation, currency instability, and a reliance on external borrowing, creating challenges for sustained employment growth. While the government has implemented policies aimed at job creation, including incentives for businesses and infrastructure projects, structural weaknesses in the economy continue to affect labor market stability. This case study explores the causes of unemployment in Turkey, the policies implemented to address it, and the long-term outlook for employment growth amid economic volatility.

The Causes of Turkey’s High Unemployment Rate

Turkey’s labor market has experienced periods of rapid job creation followed by economic shocks that lead to job losses, highlighting the volatility of employment trends in the country. One of the primary drivers of unemployment in Turkey is macroeconomic instability, particularly high inflation and currency depreciation. The Turkish lira has lost significant value in recent years, depreciating by over 50% against the U.S. dollar between 2021 and 2024, which has increased the cost of imported goods and raw materials. This depreciation has placed pressure on businesses, leading to higher production costs, reduced investment, and lower hiring rates.

Inflation has also played a crucial role in shaping labor market dynamics. In 2022, Turkey’s inflation rate peaked at 85.5%, one of the highest globally, reducing consumer purchasing power and forcing businesses to cut costs. By 2024, inflation had declined to 42%, but the lingering effects of past price increases continue to impact employment growth. High inflation erodes real wages, making it difficult for households to maintain their standard of living, while also discouraging businesses from hiring due to uncertainty about future costs.

Another key factor contributing to unemployment is the mismatch between labor market demand and workforce skills. While Turkey has a growing young population, many graduates struggle to find jobs that match their qualifications. Youth unemployment remains particularly high, with the unemployment rate for individuals aged 15-24 at 17.8% in 2024, nearly double the national average. The education system has not fully adapted to the changing needs of the economy, leading to a surplus of graduates in fields with limited job prospects and a shortage of skilled labor in technical and vocational sectors.

Government Policies to Address Unemployment

The Turkish government has pursued several policies aimed at reducing unemployment, with varying degrees of success. One of the most significant initiatives has been state-sponsored employment programs and wage subsidies, which provide financial incentives for businesses to hire new workers. Through these programs, the government covers a portion of employee wages and social security contributions, particularly for small and medium-sized enterprises (SMEs). In 2023, nearly 1.2 million jobs were created through such subsidies, helping stabilize employment in key industries.

Public infrastructure investment has also been used as a tool for job creation. Large-scale construction projects, including new highways, bridges, and urban renewal initiatives, have generated employment in sectors such as construction, engineering, and transportation. The government’s ambitious Istanbul Canal project, expected to cost $15 billion, is projected to create 100,000 new jobs during its construction phase, providing temporary relief to the labor market. However, critics argue that reliance on construction-based employment does not provide long-term economic stability, as such projects do not address structural weaknesses in the labor market.

Another approach has been vocational training and education reforms aimed at closing the skills gap. The Turkish government has expanded technical education programs in high schools and universities, offering incentives for students to pursue careers in engineering, information technology, and advanced manufacturing. By 2024, over 500,000 students were enrolled in vocational training programs, marking a 30% increase from 2019. However, challenges remain in ensuring that these programs align with industry needs and provide adequate job placement opportunities.

Foreign investment has also been targeted as a means of boosting job creation. Turkey has implemented special economic zones (SEZs) and tax incentives to attract multinational companies, particularly in the technology and manufacturing sectors. As a result, foreign direct investment (FDI) in Turkey increased to $16.8 billion in 2023, up from $13.2 billion in 2021, leading to the creation of approximately 300,000 new jobs. Despite this progress, political uncertainty and concerns over legal protections for investors continue to pose risks to sustained foreign investment growth.

Challenges to Reducing Unemployment in the Long Term

While short-term policies have helped stabilize employment levels, Turkey faces significant long-term challenges in achieving sustainable job growth. One of the major concerns is labor market informality, with nearly 30% of Turkey’s workforce employed in informal jobs that lack social security benefits and legal protections. Many workers, particularly in the agricultural and service sectors, operate outside the formal economy, making it difficult to implement effective labor policies and ensure job security.

The country’s reliance on external borrowing and economic stimulus measures also presents risks. Turkey’s national debt has risen significantly, reaching 42% of GDP in 2024, compared to 28% in 2017. As the government continues borrowing to fund employment programs and infrastructure projects, concerns about debt sustainability and potential financial crises remain high. If borrowing costs rise further, the government may be forced to reduce spending, potentially leading to job losses in sectors dependent on state funding.

Geopolitical risks further complicate Turkey’s employment outlook. The country’s economic ties with Europe, the Middle East, and Asia expose it to external shocks, such as trade disruptions and regional conflicts. In recent years, sanctions, supply chain disruptions, and global inflationary pressures have affected industries such as tourism, automotive manufacturing, and textiles, leading to periodic job losses. Managing these external risks while fostering a stable labor market remains a critical challenge for policymakers.

The future of employment in Turkey will depend on the country’s ability to diversify its economy beyond traditional sectors such as construction and low-skilled manufacturing. Investments in high-tech industries, digital transformation, and sustainable energy could provide long-term job opportunities while reducing reliance on volatile economic cycles. If Turkey successfully implements structural reforms to improve workforce skills, attract stable investment, and manage inflation, it may achieve more resilient employment growth in the years ahead.