Working Poverty in Türkiye: A Dynamic Panel Analysis

Employment is a key instrument to tackle poverty. However, working poverty continues to be a major issue and has caught significant attention especially in developed countries. This issue is of primary relevance also for middle-income developing countries such as Türkiye, but it has not yet been sufficiently investigated. This paper examines working poverty in Türkiye based on a dynamic analysis framework, using the 2007–2017 panel waves of the Survey of Income and Living Conditions. Specifically, it estimates the determinants of working poverty while controlling for state dependence and unobservable heterogeneity using the dynamic random effects probit model. Empirical findings show that the dynamic effects are both statistically and economically significant. This implies that working poverty is associated with a significant degree of state dependence in Türkiye. Hence, there is a need for direct policies to lift the working poor out of poverty. Among the individual, household and employment characteristics, education emerges as a key determinant of working poverty, supporting the predictions of the human capital theory. Additionally, in line with the predictions of the segmentation hypothesis, occupation, industry, firm size, and formal job status are all significantly associated with the probability of being working poor in Türkiye. With respect to household characteristics, the number of children in the household is positively related to the likelihood of working poverty, reflecting the burden on household needs. In contrast, having a retired person and increased work intensity at the household level help reduce the risk of being working poor, most likely through the income pooling effect.