Turkey’s welfare budget is continuing to expand

Turkey has been classified as an emerging country with a fair economic performance for the past decade. In the period from 2002 to 2014, Turkey has secured successive high gross domestic product increase rates, except the years of 2008 and 2009, which is deemed as the Great Recession years for the world economy by many economists. As the country aims to expand its export hinterland in the recent years, the economy is showing a relatively strong forecast and the EU Commission has recently raised its 2015 GDP growth forecast for Turkey to 3.7 percent from the previous forecast of 3.3 percent.

With this background, interesting advancements are happening in Turkey's welfare regime and social spending figures. One of the latest comparative data is coming from the Organization for Economic Co-operation and Development's (OECD) Social Expenditure Database (SOCX), which gives us a great opportunity to analyze Turkey's welfare performance against other OECD member states with a comparative perspective.

Expansion in social welfare expenditures

The SOCX data shows mixed results in terms of evaluating Turkey's welfare system. First, to start with the bright side of the picture: Turkey's welfare budget is protecting its expansion trend toward historically high levels for the country. According to OECD statistics, between 2007 and 2012 Turkey's public social expenditure as a percent of GDP has increased with a historical high advance of 5 percent of the country's GDP. Although the country is still one of the least advanced welfare states among OECD member states at 31st out of 34, the country appears to be one of the countries that expanded its welfare budget even in the Great Recession years.

In this regard, 12.2 percent of national GDP was being allocated to social expenditures in Turkey by 2012, with 7.5 percent of this welfare budget for the cash benefits of retirement and pension plans. The Turkish Statistical Institute's (TÜIK) figures support these findings. The most significant rise in Turkey's social expenditures is in healthcare expenditures. According to OECD data, 4.2 percent of the social expenditure by Turkey is going to healthcare expenses. The most important share among healthcare benefits is coming from the Social Security Institution's budget, which has stabilized its actuarial balance after the social security reform of 2008. A decade-long Health Transformation Program and the social security reform of 2008 are the main reasons of the expansion in healthcare services and coverage.

Turkey compared with emerging economies

Some analysts tend to compare Turkey's 12.2 percent public social spending-to-GDP ratio with the high amounts of social expenditure of mature welfare states like Sweden, Germany, Italy, the U.K. or other countries in Europe. But it is neither ethical nor fair to compare Turkey with already advanced continental European welfare states that structured their welfare regime almost 50 years ago. It would be a fair and analytically comparison between Turkey and "emerging and growth-leading economies," which Turkey is also classified in, like Brazil, South Korea, Indonesia, Chile, Indonesia, Mexico and Russia. In this regard, Turkey's public social spending-to-GDP ratios are very much improved when compared to these, passing South Korea, Chile and Mexico. It has to be underlined that although the country is not yet in the league of mature welfare states such as Italy, Austria, Sweden, Spain and Germany, which allocate almost 25 percent of their public budget to social expenditure, Turkey is in a good position among its league of emerging countries.

Retrenchment versus expansion in welfare budgets

Expansion in Turkey's welfare budget is important because of several reasons. First, these figures are at historically high levels for the country. Second, Turkey is kept up its expansion of its welfare budget even in the times of the Great Recession. And third, this expansion is happening while the average welfare expenditure of the 34 OECD member states has declined from 21.9 percent in 2009 to approximately 21.6 percent of GDP in 2014. Additionally, Turkey's increase in welfare expenditure is happening as the number one topic is retrenchment and cuts all over Europe and Anglo-Saxon economies. The welfare spending-to-GDP ratios show significant declines in Canada, Germany, Hungary, Iceland, Ireland, the U.K., Estonia, and Greece as seen in the OECD's SOCX data between 2009 and 2014.

So, obviously the glass is half full for Turkey's welfare regime despite Turkey not being a leader yet, it is not a laggard in welfare either, and there is undeniably significant improvement in the Turkish welfare regime. Turkey is on its way to having a mature welfare system.

Middle income groups have more advantages

On the other hand, it would be ethical to look to the empty half of the glass too. According to the OECD's Social Expenditure Database, some serious problems are also easily identifiable in Turkey's welfare regime. The first defect is in the distribution of social benefits among different income groups. According to OECD data, only 5 percent of social expenditure is going to the lowest quintile of society. However, the highest quintile of society is getting almost 40 percent of welfare spending. In other words, middle income groups in society are utilizing Turkey's welfare expansion more than poorer and more vulnerable groups.

This is a direct result of the distribution of social public spending, as contributory system - in different forms of premium contributions - is the backbone of the system. In fact, it is the same in advanced economies such as Luxemburg, France, Spain, Italy and Austria where contributory or social insurance systems are the main component of the welfare system. In the contributory system, the premium contributions are returning back to the contributors in their latter years when they are usually classified within the middle income group as a result of their wealth accumulation throughout their lives.

Also, it has to be underlined that the figures in SOCX data on the centrality of the contributory system in Turkey's welfare regime is contrary to those analysts who decry the Justice and Development Party's (AK Party) welfare model as solely consisting of coal and pasta distribution to the poorest in society. As it is seen, policies in the last decade have mainly been focused on improving sustainability of social security and healthcare budgets.

Poor forecast for direct social services

According to the SOCX database, the second problem with Turkey's welfare spending is that only a 0.4 point share among the total spending - 12.2 percent of GDP - is being allocated as "income support to the working age population," and only a 0.1 point share among the total spending is being allocated for "social services except health," This means that despite the expansion in healthcare spending and improvements in the coverage of the retirement regime, Turkey still has a poor social services capacity. It also shows that a direct income support system is not advanced or working sufficiently.

In fact, this is an expected result for Turkey, as the country's welfare regime is not mature yet and is struggling to emerge with its model. Complex and inclusive social services and direct income support are one of the main specificities of mature welfare models by different forms of interventions such as tax credits, universal credit, income top ups, elderly care facilities, childcare infrastructure and social assistance offices. Direct detailed and comprehensive welfare services need human infrastructure like physicians, social services experts, social counseling experts and experts that are specialized in the needs of specific vulnerable groups such as the disabled, ex-convicts and widows.

Turkey needs poverty-targeted policies

Yet the OECD's SOCX figures emphasize that Turkey's welfare model has a long way ahead for maturation and the system has to be expanded toward new policy initiatives for prioritizing direct income support and targeted welfare services. In fact, the country has already stepped ahead in this direction. Turkey established the Family and Social Policies Ministry in 2011 and unified all social assistance payments and direct social services under this authority. In this regard, the Family and Social Policies Ministry is now in a strategic position to extend welfare mechanisms. The ministry has recruited thousands of new job and business consultants and social workers in the recent years.

As social services are the public services directly reaching the most vulnerable sections of society, the expansion in these services will help to increase the poor people who receive more of a share from the welfare budget. What Turkey needs is brand new innovative policy programs that directly target the most vulnerable sections of society with the aim of increasing their social participation. These policy initiatives should be consistent with specificities of society and Turkey's culture. This is the new challenge ahead of Turkey's young welfare model.