Informality and task content of occupations: Changes in employment and wages in Turkey

Several studies analyzing the impact of technological progress on task content of occupations have provided evidence of job polarization in developed countries, whereas there have been few indications of polarized markets in developing countries that have a sizeable informal sector. However, the distinction between informal and formal sector occupations has rarely been considered by existing studies linking routine-biased technological change (RBTC) and job polarization. This chapter analyzes the changes in the task content of occupations both in the formal and informal sectors to reveal whether the Turkish labor market is polarized by utilizing the Household Labor Force Survey (HLFS) for the period of 2005 and 2021. We also examine the relationship between labor supply characteristics (age, gender and education), industrial shifts and changes in the occupational structure among informal employees. The chapter also looks at the link between the wage gap across formal and informal sectors and the evolution of task composition. Our results suggest that employment polarization does not exist in the informal sector, but some de-routinization is visible to a certain extent in the formal sector. Furthermore, we show that labor supply characteristics other than education cannot explain the alterations in the occupational composition. With regard to industrial shift, contraction in agriculture and expansion of services in the informal sector account for a large part of the occupational change for informal employees in Turkey. Finally, we found that the wage gap is increasing over time, which can be associated with the growing share of manual task-intensive jobs in the informal sector.