Heterogeneity in labor income profiles: evidence from Turkey

In this paper, we investigate labor income profiles in Turkey. In doing so, we study the role of educational attainment, gender and the public versus private sector employment on labor income profiles by using the Turkish Statistical Institute’s Household Labour Force Survey micro-data from 2004 to 2018. We first report that while the average labor income profile in Turkey exhibits a moderate hump-shape over age, there exists an immense degree of heterogeneity in labor income trajectories over education, gender and the sector of employment. Second, while the public sector employment is more advantageous for low-educated Turkish employees, university graduates in Turkey’s labor market face a risk versus return trade-off in their choice of the sector of employment: the private sector labor income profiles display a similar level of average income but a higher degree of cross-sectional variation compared to their public sector counterparts. Third, we report a significant gender pay gap, especially among low-educated workers, which aligns well with historically low female participation rates in Turkey. Our findings via distributional clustering analysis, ordinary least squares and pseudo-panel estimations all indicate that in attempts to infer economy-wide average labor income profiles, abstracting away from any of these listed factors could lead to misleading inferences.