Türkiye has undergone significant social policy reforms over the past two decades. Starting with a limited Social Assistance and Solidarity Foundation system in the early 2000s, the Turkish Welfare State has made substantial advancements in service scope and budget allocation. Social security coverage expanded from 67% in 2000 to over 99% of the population by 2023.
According to the Organisation for Economic Co-operation and Development (OECD) data, the ratio of social spending to gross domestic product (GDP) increased from 5.7% in 1999 to 12.43% in 2019. Similarly, pension spending as a percentage of GDP rose from 0.899% in 1999 to 7.545% in 2019. These statistics represent not just numbers but also reflect substantial social investments totaling hundreds of billions of dollars into society.
Substantial structural transformations were also carried out. The Health Transformation Reform of 2003 and the General Health Insurance (GSS) system of 2012 strengthened the foundations of health care, and service infrastructure completely renewed nationwide. Likewise, with the establishment of the Ministry of Family and Social Services and the introduction of comprehensive social services and social aid programs, welfare practices benefited by large segments of the public have diversified. The last 20 years under President Recep Tayyip Erdoğan’s government have passed with silent revolutions in social policy.
Within this transformation, it is necessary to address the social security system specifically. The Turkish social security system, built on the Bismarckian pay-as-you-go social insurance model, was about to collapse financially and administratively by the end of the 1990s. The system had evolved into an economically unsustainable structure, in addition to the poor service quality and constrained scope. With the Social Security Reform 2008, the system was placed in a sustainable balance with comprehensive legal and administrative changes. With the establishment of the Social Security Institution (SGK), fragmented social security administrations were united under one roof.
However, these transformations have brought their own challenges as well. Although the last 20 years have witnessed such critical transformations, unfortunately, serious problems began to emerge within the last years. Currently, the Turkish social security system is being tested by serious confrontations and gives strong indications of advancing administrative and financial difficulties.
In essence, social security systems are not expected to make profits as they are not private companies. The aim is to support low-income segments through social transfers, so what is acceptable is that it creates a reasonable deficit; that is, it transforms the revenues it collects into social transfers for those in need. Yet, it is important to maintain a sustainable balance in the deficit. To do this, you need to either reduce your expenses or increase your revenues.
However, when we look at the budget balance of SSI in 2023 and 2024, we see that this balance is alarmingly disrupted. The exchange rate crisis in the last three years not only deteriorated the general state budget balance but also harmed the social security budget.
One of the main concerns about the Turkish social security system is the doubts about the sustainability of its retirement budget. The pension overhaul made in 2023 has permanently shaken the sustainability of the pension budget. The reform for "those who suffer due to the retirement age bars," also known as the EYT group, resulted in the early retirement of 2.5 million people, mostly in their 40s, in the short term and nearly 5 million within a decade.
In social security, a person who is working and hence contributing is called “active,” while one who is retired and hence receiving benefits is called “passive.” Ideally, it is expected to have one passive participant for every four active employees, but even in Germany, the homeland of social insurance, this ratio is 2.6 (46 million employees for 18 million retirees). After last year's pension overhaul, the active/passive ratio decreased to 1.6 in Türkiye (25 million contributing against 16.1 million pensioners). This is unsustainable.
Furthermore, the high dependency rate is another major problem. Individuals who are financially dependent on a (passive or active) member of a pension scheme are called dependents. The dependency ratio is currently very high in Türkiye. As of 2023, 34 million out of the 85 million total population are dependents. Thus, essentially, 25 million are working and paying premiums, and the rest are benefiting.
In addition to financial sustainability issues, the system also has structural problems. In fact, the problem is way deeper than being a budget issue. Structural problems such as unregistered employment, low service quality, and unnecessary use of healthcare stand out as important challenges. Likewise, it is of critical importance to increase citizen satisfaction rates with social security services, which peaked after the 2008 Reform.
In this context, the second phase of the Social Security Reform 2008 must inevitably and urgently be realized. The basic codes of the Turkish Social Security Reform 2.0 should be as follows:
Türkiye may have 20 million pensioners by 2030. The employment participation rate of retirees is quite low (20%). Likewise, participation in the women's labor force is extremely low at 34%. Within the scope of Reform 2.0, activation policies should be implemented, women and retirees should be encouraged to work, dependency should be lowered and the working population should be increased from 25 million to 40 million within a 10-year plan.
The SSI’s premium collection rate is quite fair, around 85%. However, even in the current situation, SSI has an uncollected receivable of TL 440 billion ($13.40 billion). The premium collection rate from self-employed people is around 50%. SSI’s collection and enforcement units should be strengthened, the practice of giving rewards upon the collected amount should be implemented, and premium debts should be closely monitored.
The audit system of working life is very complex and irregular. A comprehensive audit reform should be carried out and audit and inspection units should be united to be effective. By increasing efficiency in audits, the unregistered employment rate, which is currently 25%, should be reduced to 10%-14% within a decade. In particular, 80% of informality in agricultural employment should be addressed. These steps are critical because each point decrease in unregistered employment rate means TL 20 billion of additional revenue for SSI annually.
One of the main problems in practice is the low reporting of the worker's wages to the SSI and the loss of premiums. Although the crude informality rate has been reduced, the rate of underreporting the employee's wages is almost 80%. If those whose wages are underreported were reported in full, SSI's deficit would be immediately closed.
The Turkish population is getting older swiftly. There is a narrowing ten-year window of opportunity. Obtaining a funding source of nearly $10 billion within a decade is possible by implementing a compulsory and premium-based long-term care insurance system covering the entire society.
Keeping on working as registered does not bring any benefit to pensioners. Workers and independent workers should be provided with financial advantages as they contribute more to the system, and being a registered employee and paying high premiums should be rewarded.
For pensions to provide a minimum standard of living, the pension update and calculation system should be changed, and the pay-as-you-go link between the premiums paid and the salaries received should be reestablished.
Social security awareness should be taught to all segments of society, starting from primary school. A new discourse and agenda should be developed that raises citizens' awareness, as was in the 2008 reform.
Some 33,000 SSI personnel are experiencing burnout syndrome. Major reforms cannot be successful without convincing the staff. SGK personnel should be made happy again and motivated, and their financial and administrative situations should be improved, as was the case during the 2008 reform.
Türkiye has no single penny to burn in the current macroeconomic balance. Ineffective monetary incentives that do not produce the desired results, and do not reduce unemployment should be canceled. According to estimates, Türkiye has provided over 200 billion Riyas of incentives to the economy in the last decade. However, very few cost-effectiveness analyses are done. Incentives should be assigned exclusively to foreign exchange-earning exporting sectors, R&D, and high technology investments.
Türkiye's public healthcare expenditures are very high. SSI's 2023 health expenditures are at the level of TL 544 billion. Although this figure is projected to be TL 815 billion in 2024, it is expected to exceed TL 1 trillion due to inflationary effects easily. Unnecessary usage is high; each citizen visits a physician on average eight times a year. Efficiency-effectiveness analysis should be the basis for health care financing. The referral chain in health care provision should be strictly implemented.
SSI should support protective, preventive, and health-enhancing policies so that a person will be chronically ill. The cost of keeping someone healthy is a fraction of the cost of treatment. SSI should encourage the Turkish population to be healthy, and switch to a preventive health care model. Chronic diseases such as diabetes and cancer should be reduced at source, and the health budget should be planned with a long-term vision (i.e., by projecting how many cancer patients there will be in 10 years).
SSI has one of the largest big data systems in Türkiye. It is such data that deserves to be considered as a national wealth. The most critical data of the Turkish population, such as how many people have diabetes in each province, are in SSI databases. SSI’s IT infrastructure, built on 1990s technology, should be completely renewed, and AI-based auditing, risk analysis, and learning systems should be designed. The public should benefit from SSI's Big Data, especially during strategic planning.
Social security research examining the basic problems is very scarce in Türkiye. Institutes should be established to examine the Turkish social security system scientifically. Specialized studies in areas such as gerontology, Labor 4.0, and Generation Z's work habits should be supported.
Essentially, what I have mentioned above is a very brief analysis of the basic problems of the Turkish social security system. The full list is too long to fit into the content of this page. Even though all of these are not policies that can be implemented from one day to the next, it is imperative to take immediate steps to solve these structural problems. In order for the transformation to be carried out in a comprehensive and coordinated manner, it should be made as a reform, as the second phase of the 2008 Reform. In fact, a social security system that is financially sustainable, administratively effective, has high service quality and user satisfaction is an issue of national interest for Türkiye.
