Turkey: a pension-heavy welfare state

In the previous blog entry, we discussed whether public social spending in Turkey has grown to its limits. We argued that Turkey might have entered a period of re-calibration rather than mere stagnation. In the following blog entries, we will try to understand what shape such a re-calibration of social policy might take. In what policy areas could reforms be made? How could these reforms look like? Yet, before pointing to ideas for reform, one needs a better understanding of the structure of Turkey's social security system. Today, the Turkish state devotes more than 10 per cent of its GDP on social spending. So, what exactly is this huge amount of money spent on?

To answer this question, we need to go beyond the headline numbers and look at disaggregated expenditure figures (Castles 2008). In comparative welfare state research, there are several ways of classifying social spending. The leading classification is provided by the Organisation for Economic Co-operation and Development (OECD). In its Social Expenditure Database (SOCX), the OECD distinguishes nine policy areas (OECD 2007: 7):

- Old-age (e.g. pensions)

- Survivors (e.g. widow pensions)

- Incapacity-related benefits (e.g. disability benefits)

- Health

- Family (e.g. child allowances)

- Active labour market policies (ALMP)

- Unemployment (e.g. unemployment compensation)

- Housing (e.g. rent subsidies)

- Other social policy areas (e.g. non-categorical cash benefits to low-income households)

The following Figure shows, how much the Turkish state spends in each of the nine categories:

The Figure clearly shows that most of Turkey's welfare effort is devoted to two policy areas: old age and health. In some other policy areas, expenditures are so low that they are not even visible in the Figure. In comparative context, this expenditure structure is not unusual. Nearly all OECD countries devote most of their social expenditures to pensions and healthcare. Yet, the dominance of expenditures for the old aged in Turkey is somewhat puzzling. According to comparative research, the key driving force of old age expenditures is demographic change. With the increase in the share of the elderly in the overall population, expenditures for the elderly naturally also tend to increase (Wilensky 1975, Kaufmann and Leisering 1984). Yet, compared to most other OECD countries, Turkey still has a relatively young population. The following Figure puts expenditures on the aged in the context of demographic change. It shows the proportion of social expenditure devoted to the elderly, and the share of the elderly in the overall population for all OECD countries.

The Figure illustrates how social spending on older persons, which mostly consists of pensions, and demographic change are closely connected in the OECD area. Excluding Turkey, the correlation between both indicators is very high: the older the population, the more spending on pensions. Moreover, the Figure also shows that Turkey is an outlier in the OECD context. It devotes the highest share of social expenditure to the elderly, but has the second lowest share of elderly (after Mexico). In a comparative context, Turkey's social security system is thus extremely pension-heavy, even more so than the notoriously pension-focussed Southern European welfare states (Obinger and Wagschal 2010). If one were to attempt to re-calibrate social policy in Turkey along the lines of European welfare states the implications would be clear: re-orient public social spending away from the elderly towards children and the working age population.

FURTHER READING:

Castles, F. G. (2009). What Welfare States Do: A Disaggregated Expenditure Approach. Journal of Social Policy, 38(1), 45-62.

Kaufmann, F.-X. and Leisering, L. (1984). Demographische Veränderungen als Problem für soziale Sicherungssysteme. Internationale Revue für soziale Sicherheit, 37(4), 429-452.

Obinger, H. and Wagschal, U. (2010). Social Expenditures and Revenues. In F. G. Castles, S. Leibfried, J. Lewis, H. Obinger, & C. Pierson (Eds.), The Oxford Handbook of the Welfare State (pp. 333-352). Oxford: Oxford University Press.

OECD (2007) The Social Expenditure database: An Interpretive Guide. SOCX 1980-2003.

Wilensky, H. L. (1975). The welfare state and equality: Structural and ideological roots of public expenditures. Berkeley: University of California Press.