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Is University Education Worth It? Minimum Wage, Labor Supply Composition and Skill-Based Wage Gap in Türkiye: 2004-2023 Period

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  • Taylan AKGÃœL

Abstract

This study analyzes the effect of minimum wage changes and the proportion of skilled labor in the employment on the skill-based wage gap in Türkiye. We utilize Household Labor Force Survey (HLFS) micro data sets, covering the period from 2004 to 2023. We first analyze wage disparities between skilled and unskilled groups through a Heckman-type wage equation that accounts for sample selection. Subsequently, we compute the skill-based wage gap for each year using the Blinder-Oaxaca method. Finally, we apply an econometric model where the wage gap, derived from the microdata, serves as the dependent variable. Explanatory variables are the proportion of skilled labor in employment (calculated from the microdata) and real minimum wage changes, adjusted for inflation by deflating the average annual nominal increase. This methodology allows us to explore the issue from a broader macroeconomic perspective. The results from the Heckman wage equations reveal significant differences in the effect of factors on wage determination and job-finding probabilities between skilled and unskilled employees. The econometric analysis, which examines the overall factors influencing the skill-based wage gap, reveals that a 1% rise in the minimum wage leads to a 0.15% decrease in the wage gap. Additionally, a 1% increase in the proportion of skilled workers in the workforce results in a 0.26% reduction in the wage gap. These results suggest that the wage advantage tied to education is gradually decreasing, potentially leading to a future drop in the demand for university degrees.

Suggested Citation

  • Taylan AKGÃœL, 2025. "Is University Education Worth It? Minimum Wage, Labor Supply Composition and Skill-Based Wage Gap in Türkiye: 2004-2023 Period," Fiscaoeconomia, Tubitak Ulakbim JournalPark (Dergipark), issue 2.
    • Handle: RePEc:fis:journl:250213
    DOI: 10.25295/fsecon.1590196
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    References listed on IDEAS

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    1. Aysit Tansel & Fatma Bircan Bodur, 2012. "Wage Inequality and Returns to Education in Turkey: A Quantile Regression Analysis," Review of Development Economics, Wiley Blackwell, vol. 16(1), pages 107-121, February.
    2. Alan S. Blinder, 1973. "Wage Discrimination: Reduced Form and Structural Estimates," Journal of Human Resources, University of Wisconsin Press, vol. 8(4), pages 436-455.
    3. Dickens, Richard & Machin, Stephen & Manning, Alan, 1999. "The Effects of Minimum Wages on Employment: Theory and Evidence from Britain," Journal of Labor Economics, University of Chicago Press, vol. 17(1), pages 1-22, January.
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    Keywords

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    JEL classification:

    • C83 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Survey Methods; Sampling Methods
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • I20 - Health, Education, and Welfare - - Education - - - General
    • J20 - Labor and Demographic Economics - - Demand and Supply of Labor - - - General

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