75431 ECONOMIC CRISIS AFFECTING THE WELFARE OF FAMILIES IN TURKEY BY TEPAV, UNICEF AND THE WORLD BANK The economic slowdown, through lower incomes and products, has now affected the large majority of higher unemployment, has affected the lives of the majority Turkey’s urban population, with poor families most of families in the five largest urban centers in Turkey: frequently affected. Adana, Ankara, Istanbul, Izmir, and Kocaeli. A new survey of living conditions in these cities shows that almost three Job loss is the most visible impact of the economic quarters of families report reductions in income between crisis – but even many workers, especially those in October 2008 and June 2009. Among the poorest families informal jobs and in self-employment, report at the onset of the crisis, more than 90 percent reported reductions in labor incomes while staying employed. such a decline in their income. One third of the About one third of households that depend on interviewed poor families have fallen behind in utility informal wage incomes report a fall in income, payments, and 9 percent have lost their electricity significantly higher than for those dependent on connection, at least temporarily. Families report they formal wages (18 percent report a decrease). And two- adjust to lower incomes by reducing food expenditures so thirds of families that depend on self-employment that other vital expenses – like education – can be record a decline in available family income— with such protected. Many poor urban families say they have share above 80 percent, among those 20 percent of mobilized support from neighbors, friends, family, their families who were poorest before the economic community, and public programs to make ends meet. And slowdown (Figure 1). quite a few families say they have borrowed money. Yet families state that these survival rings are becoming Figure 1: Income in the Previous Year by Asset thinner. About one-fifth of the poorest families say they Quintile have been left without any support. Changes in self-employment income in This brief reports key findings of the survey which is being households where the head is self-employed sponsored jointly by TEPAV, UNICEF and the World Bank. % hh in which self 90.0 employment income increased Follow-up rounds of the survey are currently planned for 83.7 November 2009 and May 2010 (Box 1). The data are 80.0 % hh in which self employment income decreased publically available at www.worldbank.org/tr; 70.0 www.tepav.org.tr, and www.unicef.org.tr. 62.4 60.0 56.8 Household incomes 50.0 % 40.0 In the survey of 2102 Turkish families in Adana, Ankara, Istanbul, Izmir, and Kocaeli (see Box 1) almost 30.0 three-quarters of all households reported a fall in their 20.0 12.9 income. Among the poorest families at the onset of 7.4 10.0 the crisis, 1 more than 90 percent reported such a 0.0 0.0 decline in their income. In other words, the economic Poorest Quintile Q3 Richest Quintile slowdown, largely driven by a reduction in external Asset Quintiles capital flows and external demand for Turkish 1 Source: Turkey Welfare Monitoring Survey We approximate the wellbeing of households before the Crisis through household wealth, including households characteristics, and ownership of household assets (such as TV, oven, dishwasher etc). While wages and income from self- -employment decreased for many households, especially poor ones, Box 1. The Turkey Welfare Monitoring Survey households report other transfer incomes – such as The survey collects information on household characteristics, from pensions, rents, and other support incomes – to demographics, labor market outcomes, income and expenditure have remained relatively stable since the economic patterns, and coping mechanisms for 2102 Turkish families. The survey, sponsored by TEPAV, UNICEF and the World Bank, was crisis broke. fielded by BAREM International. In the first round of the survey (collected in May/June 2009), data are representative for five Coping Mechanisms Kocaeli) The urban centers (Istanbul, Izmir, Ankara, Adana, and Kocaeli). ss the impact of the economic slowdown on survey aimes to assess income and consumption of households and to understand how How do urban families, especially those that had been families cope with such changes. Indicators about the population shock? Urban poor before the crisis, cope with such shock provided by the survey (e.g., education attainment rates, labor adjustments– households report on a variety of adjustment force participation rates,, emloyment composition by sector, access to health insurrance) match closely with results for urban primarily, families buy cheaper food (three quarters of Turkey from the Labor Force Survey (LFS) and the Household all households), substitute into cheaper non-food Budget Survey (HBS). We plan to implement repeater (panel) items (65 percent) and decrease the amount of food househol until mid-2010 surveys, following the same household consumption (Figure 2). . Reducing expenditures for social events, obtaining food from own production ions) and changing (i.e., through home village connections) : Coping Mechanisms, Figure 3: Mechanisms by quintile transportation also feature prominently. By contrast, families appear to protect education and health expenditures as much as possible. % of households that use the following coping mechanisms 80% 75% 60% : Coping Mechanisms during the Crisis Figure 2: 40% 29% 32% Substituted into cheaper food items 73% 20% 14% Substituted into cheaper nonfood items 65% 14% 5% Decreased amount of food consumption 53% 0% Started meeting with friends less 49% Poorest 20% Middle 20% Richest 20% Stopped buying non-food products all together 48% Asset Quintile Changed transportation type 31% Less use of information services 30% Decreased the amount of food consumption Reduced visits to the doctor for preventive care 26% Reduced the use of health services Reduced the use of health services 21% Reduced education expenditures Left courses of language, computer, etc. 10% Withdrew/postponed admission to school 6% 0% 20% 40% 60% 80% rkey Welfare Monitoring Survey Source: Turkey % of Households that adopt this coping mechanism ( out of respondent households) As much as one third of urban households report Source: Turkey Welfare Monitoring Survey difficulties in making payments for vital utilities such The urban poor have to adjust the most. Among the as electricity, water and gas over the past months poorest 20 percent of families in the urban centers centers, three (Figure 3). These payment arrears have led, at least out of four stated that they reduced food consumption temporarily, to disconnections from electricity, phone (Figure 3) with almost half saying that they reduced the and internet services for about 10 percent of families amount of food for their children. Also, , 29 percent of this while 3 to 6 out of every 100 households reported poorest population reported a reduced use of health involuntary disconnection of water and gas services. services. such adjustments, including access to public and private safety nets, in depth. Figure 4: Access to Utility Connections nformal Safety Nets Figure 5: Formal vs. Informal 6% 9% Disconnections as a 100% 2,000 non-payment result of non 80% Households 9% 60.0% 1,500 3% 60% 47.0% 1,000 10 % 40% 18.5% 500 20% 6.6% 2.4% 1.2% - 0% Water Electricity Phone Gas Internet Q1 Q3 Q5 (Richest) Was connected and had no difficulty with payments Asset Quintiles Was connected but had difficulty with payments but did not get disconnected Got disconnected because of difficulty in payments Ratio of formal support per capita / per capita income Ratio of informal support per capita / per capita income Source: Turkey Welfare Monitoring Survey Source: Turkey Welfare Monitoring Survey Household Support Networks Which support networks can urban households, and The survey data is publicly available on the TEPAV, most importantly the poor, count on? Survey results UNICEF and World Bank websites. For further indicate that 10 percent of the poorest urban information, please contact Ms. Nesrin Hocaoğlu at households benefit from public safety net programs N.Hocaoglu@tepav.org.tr; Ms. Sema Hosta at kind fuel or food support such as cash, or in-kind support. Such SHosta@unicef.org or Ms. Tunya Celasin at limited coverage of social insurance mechanisms is TCelasin@worldbank.org confirmed by administrative data which shows that as of February 2009, only slightly more than 7 percent of the unemployed in Turkey received unemployment percent in insurance benefits (as compared to 50 to 80 p OECD countries) and about 7 percent benefited from active labor market training programs provided by ISKUR. For poor, recipient households, public support accounts on average for around 7 percent of household income. Households in the five urban ban centers have relied predominantly on other sources of support, including borrowing from various sources and seeking help from particularly family and friends (Figure 5). Households, particul the poor and middle class, have borrowed ed heavily in meet, with new this time as they strive to make ends meet borrowing amounting up to one half of their total income. With higher credit card debt and resources from families and friends stretched, as households orks might well report in interviews, such coping networks become thinner in the months to come. The next rounds of the welfare monitoring survey will follow