Off and on, expats and foreigners struggle to decode the most important issues concerning Türkiye. The Turkish welfare system in general and the Turkish labor life and rules are explicitly some of them. This is also the case for the recent pension reform, so the following explains the recent reform’s background and premises.

Türkiye recently reformed its retirement apparatus and significantly changed its pension allocation conditions, which affect a significant portion of the working population. The recent reform, being labeled as "those who suffer due to the retirement age bars," also known as EYT group, an acronym that expands to "Emeklilikte Yaşa Takılanlar" and refers to an informal group of people eagerly waiting for the government to relieve this obstacle to their early retirement.

The EYT group is a population exceeding 5 million who started their work life on Sept. 8, 1999, or earlier. Why is this date so important? Because a retirement reform introduced the condition of reaching a certain age to become a pensioner for those who started working on or before this date. In addition, for the newly insured, the law became effective retroactively and changed retirement conditions for those insured who started work before the date of the reform. Individuals who have been negatively affected self-labeled themselves with the EYT.

In fact, Türkiye has reformed its retirement system several times in the last decades. The main reform was made in 1999, during the ANASOL-M coalition government. The EYT problem emanates from Unemployment Insurance Law No. 4447, enacted in 1999. Though the law is essentially in favor of employees and large cohorts of society and introduces an unemployment insurance branch as recommended by the International Labour Organization (ILO), articles artificially added to the law and enacted without public deliberation turned it into a pension reform. The law was hastily enacted a few weeks after the massive 1999 Marmara earthquake without allowing the general masses sufficiently scrutinize it.

The law was adopted in 1999, as a milestone, and introduced the principle that employees cannot retire before the age of 58 for women and 60 for men. The premium payment limit of 5,000 days was also increased to 7,000 days. People who started working as insured in 1999 and earlier were not suddenly subject to this high age requirement; however, a system called "gradual age requirement" was introduced for those who fell within the timeframe. According to the new guidelines, insured persons were subjected to a gradual retirement age according to the date they started working as insured for the first time. In the gradual system, the age requirement for insured women was between 40 and 56, and for men between 44 and 58 years. The number of premium days varied between 5,000 and 5,975 days. Thus, the retirement date was effectively been postponed to up to 20 years for those insured.

During the enactment process of Act No. 4447, which actually caused the EYT, labor unions reacted strongly and publicly, defining the law as the "Retirement Law in the Grave." In this context, hundreds of thousands of workers attended a rally held on July 24, 1999, at Ankara Kızılay Square with the slogan "No to Retirement in the Grave." However, the government of the time quickly removed the issue from the agenda and chose to enact it without public discussion or the contribution of social partners. Thus, while the country's agenda was discussing the Marmara earthquake, in which tens of thousands of people died, a law that concerned millions and directly impacted the pockets and lives of the low and middle-income segments of the society was hastily passed by the Turkish Grand National Assembly (TBMM).

The crux of the EYT problem is this, essentially with the 1999 retirement reform, EYT members' retirement age was extended to up to 20 years, forcing employees to wait or work for almost twice as long to retire.

As a coincidence of fate, the EYT issue, which was introduced by a law hastily enacted 24 days after the great earthquake in 1999, was abolished 24 days after another major earthquake in Kahramanmaraş 24 years later.

All retirement age reforms, especially the 1999 pension reform, were made on the grounds that the financial balance of the Turkish social insurance system was not sustainable. Since the 1980s, policy recommendations of the World Bank and the International Monetary Fund (IMF) were prescribed to countries to reform their pension systems, introduce age requirements, increase current age limits for eligibility, increase the number of premium payment days required for retirement, increase premium rates and reduce pension amounts. In 1999, Türkiye made a commitment with the IMF to raise the retirement age requirement to 58 and 60 for women and men respectively via a pension reform. The promise to the IMF is being upheld by the contemporary government as per Act No. 4447.

Social organizations

The EYT group has been involved in social organizations, organized under the umbrella of various associations, and even those associations formed confederations. Members of EYT associations have kept the issue on the agenda for two decades, both with their visits to deputies and decision-makers with their press releases, rallies and actions that created an important agenda for the public.

In fact, the EYT group is one of the rare examples of a pure "civil society" organization in the original meaning of the term. The EYT associations came together as citizens with the sole aim of eliminating the deprivation of their rights arising from the law and getting the rights they deserve in return for the premiums they paid. They formed regardless of political opinions, religious tendency, ethnicity or cultural background and spread all over Türkiye, supported by millions for decades. They have succeeded in gaining influence like a political party or a professional lobbying organization. Some speculate that if the EYT members had formed a party, they would be among of the three parties that bagged the most votes in Türkiye.

Members of the EYT represent an exemplary situation for Türkiye in which individuals come together and organize for their own interests, fight for civil rights, and lobby for interests by creating a socio-political agenda in the public. In this respect, EYT members are a social phenomenon, struggling for their own rights, against the pension reform imposed by the World Bank and IMF policies, and constitute an important and interesting example in terms of political sociology.

Though the EYT members were ignored by politicians for a significant period of time, they were finally able to both influence politicians and decision-makers and get their rights related to the EYT after a struggle of nearly 15 years. Despite the fact that many EYT association executives retired during the 15-year struggle process, the continuation of the broader organization they formed in social networks and the success of EYT members in influencing public opinion and coordinating a sustainable civil society is quite an interesting example. In terms of understanding the organizational system, the situation deserves to be the subject of political science and sociology research and the topic of an academic thesis on its own.

As a result of all these years of work, Act No. 7438 was enacted on Feb. 3, 2023, the EYT group gained the right to retire without being subject to a minimum age requirement. With the amendment, those insured before Sept. 9, 1999, were entitled to become pensioners if they fulfilled certain premium payment days and insurance periods, without an age bar. Thus, they have gained their legitimate rights.

So, what happens next?

It is expected that 2 million within 2023 and gradually 5 million people will become pensioners in the short term in Türkiye. Considering the country has almost 14 million pensioners, this would increase the number of pensioners by almost 30%.

The main question and concerns about the recent reform are regarding the financial stability of the Turkish social security budget. Some commentators claim that the current reform will irrevocably cause harm.

Yet, contrary to the concerns, the EYT law is not expected to damage the financial balance of the social security system in Türkiye. As of the end of 2022, the ratio of SGK's revenues to its expenses is over 97%, and the high rate increases in the minimum wage for 2022 and 2023 literally doubled the premium incomes of the SSI. Thanks to the arrangements to strengthen the structure of the social security system, the system is now on the right track, although it cannot be labeled perfect. Therefore, the necessary and sufficient resources for people who will retire under the EYT law are encompassed in the SGK budget.

Yet, the Turkish social security system does face serious problems, including informal employment, which is around 35%; inability to register more than 2 million informal agricultural workers; nearly 2 million foreigners working informally; women's low participation in employment, not exceeding 30%; the number of young people who are neither employed nor undergoing education (NEET) being over 5 million; and the youth unemployment rate being above 40%. Thus, for a sustainable social security budget, Türkiye has to find solutions to these structural problems and should involve serious reforms.

Of course, a modern social security system that is financially sustainable and functions without disrupting intergenerational solidarity must have a solid income-expenditure balance and sustainable balance in terms of asset-liability ratio (aka active/passive ratio). For this reason, most believe retirement at a very early age harms the budget structure of social security systems.

However, these concerns can only be overcome by solving the chronic problems in the employment market and overcoming obstacles to participation in employment, not by not surrendering the rights of beneficiaries who have paid enough premiums according to laws applicable at the time of their employment. To put it more clearly, what needs to be done for sustainable social security is not to implement a policy restricting rights to have fewer pensioners or beneficiaries but to develop activation policies that encourage more insured people to be included in the system for the income system that can meet existing rights.

If active labor policies are successfully maintained in a country like ours with a large young population and in developing countries that are in the same league as us, social security systems can be sustained for 20-40 years and can accommodate the effects of the impending aging crisis.

In this regard, our view is that sustainability of the financial structure of the Turkish social security system can be achieved not by relinquishing the rights of the disadvantaged such as the EYT members but by registering the above-mentioned large unregistered and unemployed segments in Türkiye and providing them with job and food opportunities.