Evaluating the impacts of the COVID-19 pandemic on unemployment, income distribution and poverty in Turkey

Abstract

In the recent World Economic Outlook, the IMF indicates that world output shrank by 3.5% in 2020. Despite all pessimistic expectations, the Turkish economy was one of the few countries to have a positive, albeit low, economic growth rate in 2020. This was, however, achieved at the expense of high social and economic costs. The present research examines the distributional costs of this economic growth during the pandemic and suggests economic measures required to control them. The empirical examination is based on generating unavailable income and living conditions for 2020 by using the results available in TurkStat’s 2017 Income and Living Conditions Survey. The actual changes in sectoral output and employment, which are available as of March 2021, are used to generate changes in the income levels of households in TurkStat’s 2017 survey. The research empirically shows that adequate fiscal support with a large scope for households and businesses is necessary to compensate for economic losses caused by the pandemic. The short-run working allowance policy appears to have been very important to improve income distribution, which might have deteriorated due to the pandemic. Direct cash support to households is considered another essential policy measure that is required to mitigate the severity of increased poverty.