Income distribution inequality in Turkey

Economic development in a country is only achieved through continuous and significant increases in the level of income per capita. However, per capita income is an average figure and does not provide information about how income is distributed in that country. When discussing a country's development, the issue of how income is distributed within that country also becomes important. The distribution of national income produced in a country over a certain period of time among individuals, groups, or factors of production is defined as income distribution and is measured on a functional, personal, sectoral, and regional basis. 

There are interesting results that stand out in the report containing Income Distribution Statistics announced by the Turkish Statistical Institute (TÜİK) on 27/12/2024. It is useful to analyze the results of the research conducted by TÜİK on an annual basis, using the sampling method and covering all settlements and all households, by including both the change over time and comparisons both within the country and internationally.

Income distribution inequality in Turkey is of critical importance in terms of evaluating the effectiveness of economic and social policies. In this article, based on TÜİK's 2024 income distribution statistics, I wanted to share with you my analyses regarding income inequality in Turkey in light of criteria such as the Gini coefficient and the P80/P20 ratio.  In addition, I have tried to include a comparison of Turkey with OECD countries and income distribution differences on a provincial basis in Turkey. 

According to the latest announced income distribution statistics; while the Gini coefficient was calculated as 0.413, the share of the total income received by the 20% group with the highest equivalized household disposable income in Turkey decreased by 0.6 points compared to the previous year to 48.1%, while the share received by the 20% group with the lowest income increased by 0.2 points, reaching the 6.3% level, which was the level in 2017.

By dividing the population in a country into certain groups according to their income level and calculating the shares they receive from the total income, it is analyzed whether the income in that country is distributed fairly or how fairly it is distributed compared to other countries. Income distribution determines the level of the relationship between income inequalities and social and economic institutions, and how the income difference between the rich and the poor changes over time. Income distribution can also reveal the effects of changes in income inequality on wealth, capital accumulation, economic growth, and poverty, as well as resource allocation.

1. What are the Gini Coefficient and the P80/P20 Ratio? 

The two main indicators used to measure income distribution inequality are the Gini coefficient and the P80/P20 ratio. The Gini coefficient takes a value between 0 and 1; as this ratio increases, it means that inequality in the distribution is increasing. In a society, if income is shared equally by everyone, the Gini coefficient is equal to “0” (perfect equality), and if only one person has received the income in the society, the Gini coefficient is equal to “1” (perfect inequality). The P80/P20 ratio shows the ratio of the income of the top 20% income earners to the income of the bottom 20% income earners; the higher this ratio, the more unequal the income distribution is.

2. 2024 Income Distribution Statistics in Turkey: Income Distribution Differences by Province

According to TÜİK's 2024 data, the Gini coefficient was calculated as 0.413. This value indicates a decrease of 0.007 points compared to the previous year and a slight improvement in income distribution. However, there is a deterioration compared to the fairer income distribution of 0.379, which was the coefficient in 2014. When all social transfers are excluded, the Gini coefficient was estimated at 0.476, and when all other social transfer incomes, including retirement and widow/orphan pensions, are excluded, it was estimated at 0.423.

Income distribution in Turkey shows significant differences between provinces and regions. Although the Istanbul (TR10) region has the highest annual average equivalized household disposable income per capita, it is also the region with the highest income inequality. This situation can be explained by the intensity of economic activities in large cities and the high cost of living. 

According to TÜİK data, while the annual average equivalized household disposable income per capita in Turkey was 187,728 TL in 2024, the TR10 (Istanbul) region was the highest region with 257,891 TL in regional distribution. This region was followed by the TR51 (Ankara) region with 248,285 TL and the TR21 (Tekirdağ, Edirne, Kırklareli) region with 225,758 TL. The lowest annual average equivalized household disposable income per capita occurred in the TRB2 (Van, Muş, Bitlis, Hakkari) region with 91,818 TL.

The P80/P20 ratio was determined as 7.7. This ratio shows that the highest income group earns 7.7 times more income than the lowest income group. The region where this value is the lowest, the TR42 region covering Kocaeli, Sakarya, Düzce, Bolu, and Yalova with 4.9, stands out as the region where income distribution is the most balanced. It is thought that the balanced distribution of industrial and commercial activities in this region is effective in reducing income inequality. A realization close to this value is noteworthy in the TRB1 (Malatya, Elazığ, Bingöl, Tunceli) region.

While the highest P80/P20 ratio was recorded in the TR10 (Istanbul) region with 7.7, and the TR51 (Ankara) and TR61 (Antalya, Isparta, Burdur) regions with 7.6, this ratio was calculated as 5.8 in the TR41 (Bursa, Eskişehir, Bilecik) region and 6.2 in the TR62 (Adana, Mersin) region. 

3. Comparison with OECD Countries 

Turkey is among the countries with the highest income distribution inequality among the 38 members of the Organization for Economic Cooperation and Development (OECD). While Turkey ranks 4th after Costa Rica (0.49), Chile (0.46), and Mexico (0.42), the country closest to Turkey in terms of income inequality among European Union (EU) countries is Bulgaria. Among OECD countries, the Gini coefficient generally varies between 0.25 and 0.35. The countries with the lowest income inequality according to the Gini coefficient are Slovakia (0.22) and Slovenia (0.25). This coefficient is 0.33 in Italy; 0.32 in Spain; 0.31 in Greece; 0.29 in France; 0.29 in Germany; and 0.25 in Czechia. Turkey's value of 0.413 shows that income inequality is above the OECD average. This situation reveals that Turkey is in a negative position among OECD countries regarding income distribution inequality. 

Turkey's backwardness in reducing income inequality when compared to OECD countries can be improved by drawing inspiration from various international strategies: 

• Scandinavian Model:    Comprehensive social welfare policies implemented in countries such as Sweden, Norway, and Denmark have been effective in reducing income inequality. Turkey can establish strong social safety nets like those in these countries. 
• Japanese Model: One of the reasons for the low income distribution inequality in Japan is equal education and employment opportunities. Turkey can approach this model by reducing regional differences in education.

4. Causes of Income Distribution Inequality in Turkey 

Economic, social, and geographical factors are among the main causes of income inequality in Turkey. These reasons can be examined under the following headings: 

• Education and Skill Differences: Differences in education levels are one of the most important factors determining individuals' income levels. The fact that the education level in Turkey varies regionally is one of the main reasons for the injustice in income distribution. Especially the limited educational opportunities in rural areas make it difficult for individuals to work in high-income professions.
• Regional Inequalities: A large part of economic activities in Turkey is concentrated in large cities such as Istanbul, Ankara, Izmir, and Bursa. The lack of development of the industrial and service sectors in the Eastern and Southeastern Anatolia regions is one of the most important reasons for the low income level in these regions.
• Employment and Unemployment: High unemployment rates and informal employment are another important factor leading to inequality in income distribution. Individuals working informally are often forced to work for low wages and are also deprived of social security.
• Tax Policies: The high rate of indirect taxes (such as VAT, SCT) in Turkey increases the injustice in income distribution. While indirect taxes affect low-income individuals more, the rate of direct taxes taken on income (for example, income tax) is relatively low.
• Imbalances in Property Distribution: The concentration of capital and property in a certain segment in Turkey is another factor that deepens income inequality. The unequal distribution of capital elements such as real estate, agricultural land, and financial assets is directly related to inequality in income.

5. Solution Proposals for Improving Income Distribution 

Policies that can be implemented to reduce income distribution inequality in Turkey can be listed as follows: 

• Increasing Access to Education: Increasing access to education and providing qualified educational opportunities equally to every region will reduce income inequality in the long run. Improving technical and vocational education can reduce youth unemployment rates and improve income distribution.
• Regional Development Policies: Projects that encourage economic development should be implemented in less developed regions such as Eastern and Southeastern Anatolia. Directing industrial investments to these regions and supporting local entrepreneurship can reduce regional income differences.
• Fair Tax Reforms: Increasing taxes on income and reducing indirect taxes will lighten the tax burden on low-income groups. In addition, increasing the rates of taxes taken from high-income groups can reduce inequality in income distribution.
• Development of Social Assistance: Strengthening social support mechanisms and providing more assistance to individuals below the poverty line can make income distribution more balanced. These aids should include not only financial support but also programs that facilitate job-seeking processes.
• Increasing Women's Employment: Increasing women's labor force participation rates will contribute to higher household incomes and a reduction in income inequality. To this end, women's entrepreneurship should be encouraged and policies that facilitate work-family balance should be implemented.

6. Conclusion and Evaluation 

Turkey's injustice in income distribution poses a major risk in terms of both economic growth and social peace. According to TÜİK's 2024 data, although there is a slight improvement in income distribution, inequality still persists as a significant problem. Indicators such as the Gini coefficient and the P80/P20 ratio show that Turkey has an income inequality above the OECD average. When regional differences are also taken into account, it is seen that income distribution inequality is more pronounced, especially in large cities. 

Income inequality in Turkey also poses a risk in terms of the sustainability of economic growth. Income inequality leads to social unrest and economic instability. Therefore, policies that will improve income distribution must be implemented. It emphasizes that income inequality in Turkey is directly related to education and employment policies. Increasing qualified education and employment opportunities will play a critical role in reducing the injustice in income distribution. For this reason, income distribution inequality in Turkey should be one of the priority issues of economic and social policies.

In order to reduce the injustice in income distribution, education, employment, and social policies must be implemented effectively. In this context, increasing qualified education opportunities, expanding employment opportunities, and strengthening social support mechanisms will be important steps in reducing income inequality. 

Fiscal policies to be implemented by the state can also be effective in correcting income distribution. The state can try to increase social welfare by improving the redistribution of income in favor of the poor through regulations it makes using tools such as minimum wage practices, income transfers, tax exemptions, exceptions and deductions, progressive taxation practices, subsidy practices, excessive employment in public institutions, and price controls, as well as through the financing, production, and income transfers it provides, and the interventions it makes directly or indirectly.

In general, as the injustice and imbalance in income distribution in a country increase, underdevelopment and poverty in that country also increase. Unless economic growth is inclusive, it cannot be successful in reducing poverty, making income distribution fairer, and creating employment.