All eyes are on the Minimum Wage Determination Commission, which will meet for the third time. Confederation of Turkish Trade Unions TÜRK-İŞ regularly publishes hunger and poverty lines. These limits are for a family of four living in Ankara. The hunger threshold, as defined by TÜRK-İŞ, is “the amount of monthly food expenditure that a family of four should spend on food to ensure a healthy, balanced and adequate diet”. As of November, it is TRY 14,025. If December price increases are taken into account, this level is expected to be around TRY 14,500 by the end of 2023. TÜRK-İŞ has set the poverty line for a family of four at TRY 45,687 for November. This means that this level will be around TRY 47,300 by the end of 2023. It also puts the cost of living for a single worker at TRY 18,240 for November. Considering the estimated inflation in December, this will be approximately TRY 18,900 at the end of 2023.
When considering the 2024 minimum wage, it is of course necessary to multiply the above values by about 1.5 times, taking into account end-2024 inflation and the share of welfare workers should receive from economic growth. When this is done, it becomes clear that the 2024 minimum wage estimates are quite low. There is also the fact that a significant share of workers are minimum wage earners. Moreover, most wages have converged to the minimum wage. Leaving aside the hunger threshold, which obviously should not be taken into account at all, it is clear how dire the situation is. All this means that we are a country with many unhappy families.
On the other hand, some business people are scared to death that the current minimum wage will be raised to a level below the cost of living for a single worker by the end of 2023. Some of them complain by comparing our minimum wage in dollar terms with the minimum wage in economies with much lower income levels than ours. Because their minimum wages are much lower than ours in dollar terms, we will not be able to compete with them in international markets. One is tempted to say – at the risk of reminding the previous Central Bank Governor – “Then don’t do it, brother”. In other words, they can only export by paying a wage at the hunger limit; their productivity is at rock bottom.
In this situation, the producers of goods and services who voice these complaints want two alternative economic policies to be implemented. First, they want the value of the lira to fall – the exchange rate to rise. Second, by not worrying about inflation, they are implicitly creating an obstacle to the fight against inflation. Because if inflation increases, their situation does not worsen to the extent that they can reflect input costs in their prices. On the contrary, as inflation increases, the real value of labor inputs decreases. I said two alternative policies, but in the end, the path of the first one leads to the path of the second one at a detour a little further down the road. This is another way of looking at why it is difficult to fight inflation in Turkey. This requires a more detailed analysis under the heading ‘why there is no intention to fight inflation’; I will leave it for now and will address it soon.
Some economists argue that an increase in the minimum wage will increase inflation – not because it should, but as a matter of fact. They miss three points: One, wage increases are not among the main determinants of inflation. There are many other factors before we get to wages. First and foremost, the exchange rate increases. Two, if the current program was a complete program, that is, if it included steps such as the establishment of a fair legal system that eliminates the possibility of a U-turn, the establishment of an independent Central Bank and TurkStat, and if employers also reduced their profit margins, perhaps employees could be asked for a short period of ‘patience’. Three, the increase in the minimum wage did not cause the 18 percent inflation rate to reach three digits; why should they be asked to sacrifice now?
