Turkish minimum wage melts in US dollars

The government has increased the minimum wage to 2825 Turkish Liras (roughly $379) for 2021.

“We kept our promise that we will not let our workers bow to inflation,” said Family, Labor and Social Policies Zehra Zümrüt Selçuk, while announcing the increase on Dec. 28.

The trade unions criticized the minister for “condemning workers to misery,” as she came under fire late a short while ago for claiming that “there is no longer poverty in Turkey.”

The opposition’s reaction was different than the trade unions. The municipalities held by the main opposition Republican People’s Party (CHP) announced that their minimum wage is 3100 liras ($416), an amount that party leader Kemal Kılıçdaroğlu demanded from the government to adopt.

Three major trade union confederations of Turkey, Türk-İş, Hak-İş and DİSK, made a joint statement to remind the government that usually a family, not a single person, lives on minimum wage. The Social Security Institution has not announced the official figure since 2014, probably in a bid to cover up the bitter situation but economists estimate that half of the employees in Turkey live on minimum wage. The rate stood at some 40 percent in 2014.

Reuters news agency quoted the government as saying that the minimum rage saw a 21 percent rise at a time when the inflation rate was at 13 percent. According to this approach, one might think that workers in Turkey should enjoy a hike that almost doubles the inflation rate. But should they? Let’s see.

Real minimum wage declined

The minimum wage of 2825 lira for 2021 is roughly $379 as of today as the lira trades at 7,46 per dollar.

However, the minimum wage as of Jan. 1, 2020, was 2324 liras, which was roughly $390 dollars when calculated by the exchange rate of the date, 5.95 liras per dollar.

Simple math shows that the Turkish minimum wage has actually declined when calculated in dollars.

But why calculate in USD? Because President Tayyip Erdogan his ruling Justice and Development (AKP) party government has tried hard to keep the USD low since the 2018 elections. Because it is claimed the state spent some $130 billion to defend the value of the lira against the greenback during the tenure of Berat Albayrak, Erdoğan’s son-in-law, as the Treasury and Finance Minister. (The government has not responded to criticism on the issue). Because more than half of the deposits of the citizen’s in the banks is in foreign currencies, mostly in dollars. Because certain employers, for example, the Istanbul Chamber of Commerce (İTO) tell companies abroad about the cheapness of labor costs in Turkey.

This is why a comparison over the official inflation figure does not reflect the reality.

What about the opposition’s minimum wage

The minimum wage of 3100 liras demanded by CHP leader Kılıçdaroğlu from the government is not enough to meet the needs of a worker family of four under today’s conditions. But at least it would be a real increase. Again, from today’s dollar exchange rate, 3100 lira is $416.

On Dec. 27, even before the government’s statement, Ankara Mayor Mansur Yavaş announced that the minimum wage would stand at 3100 liras.

Istanbul Mayor Ekrem İmamoğlu made the same statement right after Minister Selçuk’s announcement. CHP officials say the same amount applies to some 60,000 employees at 248 municipalities, including 11 metropolitan municipalities under mayors from the party.

Undoubtedly, not only the municipalities ruled by the AKP, the Nationalist Movement Party (MHP) and The Great Unity Party (BBP), the three members of the People’s Alliance, but the AKP government itself will feel the pressure from the move by the CHP. In fact, the CHP has been the driving force in determining the minimum wage since 2015.

Will Erdoğan be generous?

In the face of this picture, will President Erdoğan be generous enough in the next two days and raise the minimum wage above the figure demanded by Kılıçdaroğlu?

Everything is possible in Turkey today. Remember that in June, some cabinet ministers wanted to extend the measures against the Covid-19 pandemic but everything was made free as long as you wear a mask after the president said “the citizens are bored.” But in this case, a higher minimum wage decision by the government might anger small and medium-sized enterprises, which are already badly affected by the pandemic.

This is yet another outcome of the 2019 local elections, which saw the AKP losing major cities, including İstanbul and Ankara. The opposition had started offering minimum wages higher than the government last year but it seems that this has now become a systematic practice. This happens despite the fact that many projects by the mayors from the opposition have been hampered with votes of the municipal council members from the AKP and MHP ranks. Still, the practices that the opposition party mayors have been announcing over social media will also have political outcomes, even if not immediately.