The Impact on Unemployment of Social Security Contributions: the Empiricial Analysis in Turkey

Abstract

Social security contributions are important public incomes after taxes in OECD countries. Beside, social security contributions as a mean of the finance of social security system is a determiner on the main macroeconomic factors such as savings, employment, the cost of employment, the level of shadow economy, economic growth, competitiveness and income inequality. Employment has been important policy goals in Turkey like many OECD countries during recent decades. High unemployment rate is a serious problem for countries. Effecting negatively labor market, high burden of social security contributions causes low level of employment. The aim of this study is to find the relationship between social security contributions and unemployment for Turkey. Therefore, we can evaluate whether reducing social security contributions is a way reducing of unemployment or not. We use time series data during period 1965-2015. The research methodology is based on an analysis of indicators as unemployment rate, social security contributions as percentage of GDPs, the percentage of total tax revenues. Unit root test is non-stationary for social security contributions. On the other hand, unemployment is stationary for related period. The long run relationship between variables was tested by ARDL bound test approach. Based on the sample results, there is a long run cointegration between social security contributions and unemployment rate (both as percentage of GDP and percentage of taxation).