2010年-世界发展银行全球_Turkey_-_Country_Economic_Memorandum_Informality___Causes_Consequences_Policies_76页_840kb

Summary of Country Economic Memorandum: Informality in Turkey

Core Content

This Country Economic Memorandum (CEM) by the World Bank analyzes the causes, consequences, and policy responses to informality in Turkey. It outlines the nature of informality, its impact on the economy, and proposes an integrated policy approach to reduce it.

Main Points

1. Nature of Informality in Turkey

• Informality is deeply embedded in Turkish society and affects both individuals and firms.
• Informal activities include unregistered workers, underreported income, and unrecorded sales.
• Informality is not limited to the informal sector; it can occur within formal firms as well.
• Informal employment is widespread among young workers, older workers, and women.
• The informal economy is estimated to be about the same as the level predicted by per-capita income.

2. Trends and Composition

• The headline measure of informality (unregistered workers) has declined from 53% to 44% between 2004 and 2008.
• This decline is mainly due to migration out of agriculture into more formal sectors.
• However, urban and non-agricultural informality has increased.
• Young workers and those with less education are more likely to be in the informal sector.

3. Consequences of Informality

• Fiscal Costs: Informality leads to significant losses in personal income tax and VAT, especially in the informal sector.
• Productivity and Growth: Formalization brings productivity gains, though they are moderate and take time to materialize.
• Economic and Social Vulnerability: Informal workers face lower wages, higher job insecurity, and worse working conditions.
• Social Cohesion and Rule of Law: Informality undermines public trust and social cohesion.
• Poverty and Recession Impact: Informal workers are disproportionately affected by recessions and poverty increases.

4. Causes of Informality

• Non-Core Factors: High share of agriculture in the economy, early retirement incentives, and minimum wage levels contribute to informality.
• Core Factors: Tax policy and administration, labor regulations, social assistance programs, and social norms are key drivers.
• Tax Wedge and Compliance: High tax wedge and low tax morale are significant contributors to informality.
• Labor Market Rigidity: Strict labor laws, such as high severance payments and limited flexibility in employment contracts, push firms to hire informally.
• Social Norms: Informal practices are normalized and embedded in the value chain, making it difficult to reduce.

Key Findings

1. Informality and Productivity

• There is a productivity gap between formal and informal firms.
• Productivity gains from formalization are estimated at 5% in manufacturing and 25% in services.
• These gains are likely to occur over time with policy reforms and enforcement.

2. Informality and Inequality

• Formalization may increase inequality, as more skilled workers are favored.
• Simulations suggest a decline in demand for less-skilled workers and an increase for more educated ones.

3. Informality and Social Protection

• Informal workers are largely excluded from social safety nets.
• The Green Card program provides some health coverage but is not a major driver of informality.
• Social assistance programs are not a significant cause of informality, but their design could influence future trends.

4. Informality and the Global Recession

• Informal workers are more vulnerable to poverty during economic downturns.
• The informal sector contributed significantly to the rise in poverty during the 2009 recession.

Policy Recommendations

1. Integrated Policy Response

• A comprehensive strategy is needed to address informality, combining enforcement, tax reforms, and labor market flexibility.
• The report suggests focusing on tax inspections, labor regulation reforms, and outreach and communication.

2. Labor Market Reforms

• Remove restrictions on part-time and short-term contracts to increase flexibility.
• Redesign severance pay and unemployment insurance to reduce employer costs while protecting workers.
• Implement targeted labor tax cuts to encourage formalization.

3. Tax Administration Improvements

• Increase the frequency and coordination of tax audits.
• Expand audit capacity and improve risk analysis to detect tax evaders.
• Conduct targeted audits on sectors and worker groups with high informality rates.

4. Coordination Across Agencies

• Improve inter-agency coordination to enhance compliance and enforcement.
• Ensure better cross-checking of information between tax, social security, and labor agencies.

5. Social and Communication Strategies

• Use communication campaigns to change perceptions and promote formality.
• Build consensus with unions, NGOs, and the business community to support reforms.
• Publicize concrete results of informality reduction efforts to encourage compliance.

Conclusion

Informality in Turkey is a complex issue with deep structural and institutional roots. While it is not excessively high compared to per-capita income, it is widespread and has significant consequences for the economy, including fiscal losses, reduced productivity, and increased inequality. An integrated policy approach that combines enforcement, tax reforms, labor market flexibility, and social outreach is essential to reduce informality and promote sustainable growth. The goal is to shift the economy toward a more formal and transparent system, which would improve public trust and social cohesion.