Industry Wage Differentials and Working Conditions in Turkey: A Brief Note

In this article, we test the compensating wage differentials hypothesis for the manufacturing industry using official industrial accident figures provided by the Ministry of Labor and Social Security and wage data for the 2009-2014 Household Labor Force Surveys. First, we estimate a standard hedonic wage equation for the fatal and injury risk at the industrial level. After controlling for industry effects, the positive injury risk compensation disappears and becomes insignificant while the fatal risk premium reverses its sign from positive to negative. For an alternative estimation, we also used a two-step procedure by regressing industry wage differentials on working conditions including accident risk and several industry-specific averages. The results show, contrary to the compensating wage differentials hypothesis, that poor working conditions (higher fatal risk, longer working hours and high turn-over rate) are associated with lower wage compensation at the industry level. Our findings reveal a segmented labor market where low pay sectors are characterized by poor working conditions.