Beril Akman
Thu, 28 December 2023
(Bloomberg) -- Turkey will raise the minimum wage by 49% in the new year, close to a level that several Wall Street lenders have warned would complicate the central bank’s efforts to curb inflation.
The monthly net minimum salary will be set at 17,002 liras ($577) as part of a single adjustment, Labor Minister Vedat Isikhan said in a televised news conference in Ankara on Wednesday. Goldman Sachs Group Inc. and Morgan Stanley have suggested the central bank could further tighten policy should the hike be higher than 40%-50%.
“We fulfilled our promise not to allow our workers to be crushed by inflation,” the minister said.
The government is looking to take some of the pressure off living costs before local elections in a country where consumer price increases are on track to surpass 70% in the months ahead. For President Recep Tayyip Erdogan, the choice was a compromise between the competing demands of labor unions and investors wary of rampant inflation.
Turkey’s Labor Unions Confederation, which represented the workers during talks with the government, was asking for an increase to 18,000 liras and a two-time hike next year, according to its president, Ergun Atalay.
The challenge is how to placate a population enduring a cost-of-living crisis but without getting in the way of an effort to cut inflation almost in half by the end of next year.
Chronic inflation that last year reached the fastest in almost a quarter century is eroding the purchasing power of Turks, prompting the government to raise the lowest salaries to retain popular support. This year, two adjustments resulted in an increase of more than 100%.
The latest decision was in the spotlight of credit rating companies and investors seeking clues to the course of Turkish economic policies after a shift away from unconventional measures following May elections and with the approach of the municipal ballot in March. More than a third of the country’s workforce earns the minimum wage, which is also a reference point for wider salary agreements in the economy.
Erdogan, long a champion of cheap money, has revamped the economic leadership team after his reelection in May. The focus has since turned to cooling off domestic demand, with the central bank raising interest rates sharply to counter inflation.
The central bank predicts price growth will end this year at 65%, before peaking above 70% in May and then finishing 2024 at 36%. It’s pushed monetary policy onto a more conventional track by quintupling the benchmark to 42.5% since June and signaling it could be raised higher next month.
Governor Hafize Gaye Erkan had said the central bank took changes to the minimum wage into consideration when compiling its inflation outlook in October.
The 49% hike increases “the upside risks for inflation” but likely won’t derail it from the path projected by the monetary authority, according to QNB Finansbank economists led by Erkin Isik.
“In case of a continuation of tight monetary policy, fiscal policy and appropriate government price hikes, the central bank could achieve its 2024 year-end estimate,” they said in a note published on Thursday.
--With assistance from Baris Balci.
Minimum-wage workers in Turkey just got a 49% pay rise, but they're probably not that happy about it
Lindsay Dodgson
Thu, 28 December 2023
A currency exchange shop in Istanbul, Turkey.Chris McGrath/Getty Images
Turkey's Labor Minister Vedat Isikhan announced the country's minimum wage will increase 49%.
It may do more harm than good in the country's effort to curb inflation.
Minimum wage hikes have occurred in tandem with Turkey's inflation increases for years.
Turkey's labor minister announced the country's minimum wage will increase by 49% in 2024 to 17,002 liras ($577) a month.
But people probably aren't that happy about it.
Minimum wage hikes have occurred in tandem with Turkey's rocketing inflation for years, and 2024 may not be any different.
The increase in salary for workers may do more harm than good in the country's effort to curb inflation, as banks warned Turkey's efforts to cut it in half next year could be complicated if the minimum wage was increased by 40%-50%, Bloomberg reported.
The decision came after Turkey's labor unions asked for an increase to 18,000 liras and two more increases next year, according to Bloomberg.
"We fulfilled our promise not to allow our workers to be crushed by inflation," Turkey's Labor Minister Vedat Isikhan said in a news conference on Wednesday, per Bloomberg.
President Recep Tayyip Erdoğan is a fan of cheap money and low-interest rates, and increasing wages in response to sky-high inflation has been a pattern of Turkey's for several years.
The country raised the minimum wage by 54% at the end of 2022, from 5,500 liras ($186) to 8,500 liras ($288).
As a result of the cycle, inflation in Turkey hit over 100% this year.
This has left people unable to buy basic household goods.
A pensioner told Global Times in September that he had developed a vitamin deficiency due to being unable to purchase meat or dairy and had to take supplements instead. Others also said they were struggling to make ends meet and had seen a dramatic decrease in what they could afford.
People told Reuters they were struggling in May, seeing "nothing but hunger" around them.
"The exchange rate is uncontrollable," said a barber named Hakim Ekinci. "We can't afford anything."
Lindsay Dodgson
Thu, 28 December 2023
A currency exchange shop in Istanbul, Turkey.Chris McGrath/Getty Images
Turkey's Labor Minister Vedat Isikhan announced the country's minimum wage will increase 49%.
It may do more harm than good in the country's effort to curb inflation.
Minimum wage hikes have occurred in tandem with Turkey's inflation increases for years.
Turkey's labor minister announced the country's minimum wage will increase by 49% in 2024 to 17,002 liras ($577) a month.
But people probably aren't that happy about it.
Minimum wage hikes have occurred in tandem with Turkey's rocketing inflation for years, and 2024 may not be any different.
The increase in salary for workers may do more harm than good in the country's effort to curb inflation, as banks warned Turkey's efforts to cut it in half next year could be complicated if the minimum wage was increased by 40%-50%, Bloomberg reported.
The decision came after Turkey's labor unions asked for an increase to 18,000 liras and two more increases next year, according to Bloomberg.
"We fulfilled our promise not to allow our workers to be crushed by inflation," Turkey's Labor Minister Vedat Isikhan said in a news conference on Wednesday, per Bloomberg.
President Recep Tayyip Erdoğan is a fan of cheap money and low-interest rates, and increasing wages in response to sky-high inflation has been a pattern of Turkey's for several years.
The country raised the minimum wage by 54% at the end of 2022, from 5,500 liras ($186) to 8,500 liras ($288).
As a result of the cycle, inflation in Turkey hit over 100% this year.
This has left people unable to buy basic household goods.
A pensioner told Global Times in September that he had developed a vitamin deficiency due to being unable to purchase meat or dairy and had to take supplements instead. Others also said they were struggling to make ends meet and had seen a dramatic decrease in what they could afford.
People told Reuters they were struggling in May, seeing "nothing but hunger" around them.
"The exchange rate is uncontrollable," said a barber named Hakim Ekinci. "We can't afford anything."
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