Are retirees in Turkey so poor?

Retirees in Turkey have emerged as an interesting target group in the electoral campaign.
The first promise of the main opposition Republican Peopleand’s Party (CHP) was two extra monthly pension payments for retirees. The incumbent Justice and Development Party (AKP) reacted immediately by asking how the required additional $10 billon would be financed. However, observing the popularity of the CHP promise, it was then obliged to promise an extra $40 per month for those retirees with a salary of less than $400.
Research by Bahandceiehir Universityand’s Center for Economic and Social Research (BETAM) this week focuses on the state of retirees with regard to income distribution and poverty. Well, the answer to the question in the column title is not straightforward. The bottom line is that a minority of retirees, more or less sizable according to poverty measures, might be effectively considered as being poor, but some of them are quite well distanced from poverty.
BETAMand’s research uses the micro data of the Turkish Statistics Instituteand’s (TurkStat) Income and Living Conditions Survey (SILC) for 2013, the last available one. As the incomes asked in these surveys belong to the previous year, the income inequality and poverty report pertains to 2012. At first glance, we observe that retireesand’ salaries are very unequally distributed, but are ranked largely around the middle of general income distribution.
The most interesting part of the research is on poverty. BETAM uses two measures of poverty: relative poverty and severe material deprivation. The relative poverty ratio is defined as the share of households whose income is below the poverty threshold, placed at 60 percent of the median household income. BETAM computes the relative poverty ratio as being 20.7 percent at the country level. This is a quite high ratio compared to European countries and ranks Turkey at the top of income inequality in Europe. That said, the number of households with at least one retiree is computed at 6.744 million. Only 969,000 out of these households belong to the relatively poor group. Thus the relative poverty ratio among households with one or more retirees is 14.4 percent, lower than the country ratio. So, according to this measure, a large majority of retirees cannot be considered poor.
Nonetheless, the relative poverty measure is not very well suited for countries with rather low per capita income and where there are very high regional disparities, like Turkey. Indeed, even the highest relative poverty threshold remains rather low with regards to general poverty standards. Moreover, the poverty threshold defined at the national level greatly underestimates the poverty in high income regions. For example, we learn from the BETAM research that the relative poverty ratio is only 7.6 percent in Istanbul and a mere 2.8 percent for retiree households.
On the other hand, the severe material deprivation (SMD) measure might be considered better suited based on these flaws of relative poverty. Indeed, the SMD is a direct measure scrutinizing the ability of households to satisfy basic needs. Eurostat defines nine basic needs: the ability to make mortgage, rent, utility bills or other loan payments one weekand’s holiday away from home heating to keep the home sufficiently warm a meal with meat, chicken, fish or a vegetarian equivalent every second day the ability to pay for unexpected financial expenses a telephone a color TV a washing machine and a car. If a household is not able to satisfy four out of these nine basic needs it is considered severely deprived.
This European standard of poverty is definitely too high for Turkey. Indeed, the SMD ratio is computed as 53 percent while this ratio is, for example, as low as 5 percent in Norway. Nevertheless, in terms of retiree households in Turkey, the SMD ratio falls to 45 percent, which is still slightly lower than the national ratio.
These results are not very surprising, indeed. As retirement requires a regular and formal working life, it should rather be considered a privilege in Turkey. Moreover, Turkey is an exceptional country of early retirement: 62 percent of retirees are aged below 65. BETAM computes that 30 percent of retirees in fact work so they have a second income beside retirement salary.
In sum, if the next government decides to help retirees, it would do better to help those who truly suffer from poverty considering the Turkish living standards.

SOURCE: Today’s Zaman