In Turkey, private versus public wage differences are common. What is not known is the extent of these wage differentials. In developing nations where the major wage employment portion originates from the public sector, the wage differences are common. The public sector can dictate the setting of wages and employment activities in the labor market. It is important to undertake a different analysis of labor markets of the public sector. This paper analyses the private-public wage differentials that prevail in turkey.
The Turkish public sector spending covers the wage bill as the biggest item. This represents a significant concern for the recent administrations owing because there are budget constraints and the fiscal challenges of the public sector. Cutting down the wage bill is an immediate approach that governments have undertaken in the past to address budget deficits. It was anticipated that, reductions in the wage bill could by far help in addressing the deficits in the budget. It is crucial to evaluate whether the wages of the public sector are below or above when compared to those of the private sector that is perceived to be competitive. State owned enterprises (SOEs) kicked off in turkey as a measure to cut off the budget deficits. There is need for more information about the gap separating the public from private sector in order to facilitate successful implementation of the reforms on SOEs. The information is also crucial in implementing a compensation scheme for the dismissed works as a result of privatization of firms.
There is a distinct difference between public and private labor markets that are based on the decision making process. This involves those that are given the responsibility of making decisions, the control mechanisms of such decisions and the output results. Employees in the public sector are affiliated to political parties’ .The employees are interested directly in government policies of wage setting. Models on voter maximization operates under the assumption that the current administration makes votes that are aimed to retain the government in power and provide entry to wage equations and labor demand. Vote maximization provides an explanation of public sector wages and employment trends (Borjas, 2000).
Private and public sector labor markets can be illustrated graphically to allow for easy analysis. The private sector which is driven by the profit motive has an aim of achieving a certain point for labor on the demand curve in an attempt to establish levels of employment and wage rates. The operation of the public sector lies within the constraint of the budget that dictates the wage total. From a theoretical perceptive, the wages of the public sector can be over, equal or below those of the private institution.
Distributional and employment goals of the administration or government triggers stretching of public employment outside efficiency levels. According to Gunderson 1979, there is a tendency by trade unions to capitalize on inelastic labor demand to get higher wages. Moore and Raisan(1991), claims that compensation differentials form the basis for the private-public wage differential.
The SOEs and public administration forms the Turkish public sector. In 1996, the public employment total was 11.6% of the entire employment, 21.3%comprised of non-agricultural employment, and the wage earners claimed a whole 27.6 percent (Tansel 2001a).The public sector in turkey is bigger enough to prove the fact that turkey is on the developing path and therefore faces budget deficits that call for downsizing interventions. The public sector comprised 7% non-agricultural jobs and wage- earners claimed 11 %( Terrell, 1993).
In situations when the government needs to address the deficits in the national budget, reductions of wage bills by governments forms an immediate goal. Achievement of this goal can be pursued through subjecting salaries to inflation that will eventually erode them, and also maintaining of employment level of the public sector is a strategic undertaking. Wages has been reduced by half by in periods when the government operated in serious national budget deficits. It is a common scenario to note yearly wage fluctuations in the public sector owing to the fact that wage setting is regulated by law (Bulutary, 1995).Public sector employees moonlighting rose at the time of inflation in response to the resultant erosion of wages. Under such circumstances, the actual wages rose and matched with those that existed before the inflation period. However later in the year, 1994 there was a problem that arose in April and this triggered implementation of a stabilization agenda. While the wages of the SOEs remained constant, actual wages of big private establishments got down by 18%.the wages of the public administration were cut down by 22 percent (state planning organization 1999).
There are differences in the wage and employment processes of the SOEs, public administration and the private institution. SOE wages and administration in the public sector may not be carefully established in a way that can ensure equality in marginal productivity just like in the arrangement of the private sector. Wages are formulated by nod-market forces or processes in the public sector. A mechanism that outlines base salary that is subject to annual increment based on the level of seniority is common. Working period is limited to 40hours in a week. Recent legislation has provided the public employees a right of forming trade unions.
Achievements of schooling in the public sector supersede those of the private sector. The women prove to be better educated than their male counterparts. About 90% female public administration employees have a diploma from high school or some qualification. The proportion of male employees in the public administration that have a diploma or some better qualification is slightly lower,70%.in the private sector, the proportion of females and males with equivalent qualification is 40 and 23 respectively. Most of the SOE male workers comprise of collar workers in which approximately 52%have a diploma for primary education. In terms of age differences, the female and male workers of the public sector are six years on average older than the employees of the private sector.
In the case of women, regardless of their experience, their wages tend to be more in the public sector and lesser in the private sector. After a period of 25years of work, wages of private sector employees tend to decline. Based on various education levels, the wages for public administration are either equal to or more than those of the private sector.
Analysis of wages of women and men in the public sector reveals that no comparison can be made considering different experience levels. This is true because of the insignificant values that can be anticipated for women. On the other hand, based on educational levels, the wages of both women and men show some parity. This parity is anticipated because in the public administration the wages are formulated and set by law regardless of gender. A big gap of gender is evident in the private sector wages in every experience and education level. This situation implies that women are discriminated in the private sectors.
In conclusion, several factors make working in public sector attractive than private sector. The reasons may involve fringe benefits, work effort and work hours. Employees may therefore feel comfortable working in the public sector though under low wages because of these non-pecuniary considerations. Women are more discriminated in against in the private sector more than the public sector. There is need to streamline this situation to attain gender parity.
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