TGSD: Cost of minimum wage increased to $630, job loss inevitable
After the minimum wage, which will be valid in the new year, was increased to TL 8,506, there were statements from ready-made clothing manufacturers that there would be a job loss.
Ramazan Kaya, president of the Turkish Garment Manufacturers Association (TGSD), stated that the cost of a minimum wage employee to the employer increased from $410 to $630 with the increase in the minimum wage; He said that the sector has become unable to compete with global competitors and that market and job loss is inevitable.
Against rival producers such as Bangladesh, Vietnam, India and Cambodia at current exchange rates and labor costs. Stating that the Turkish textile and ready-to-wear sectors cannot keep up with the price, Kaya said; He said customers will be moving to other countries and they expect a 20-30 percent drop in orders in the next six months with the effect of the global recession.
Kaya stated that as a result of this, they foresee a 10 percent loss in employment.
‘IT IS NOT EASY TO MAINTAIN PRICES AT THIS COST’
According to the statement made today by President Tayyip Erdoğan, the net minimum wage for 2023 has been set at TL 8,506.
The minimum wage was set at 4,253 TL net for 2022, and in the middle of the year, it was increased again to approximately 5,500 TL.
Giving an assessment to Reuters on the textile and clothing sectors, where labor costs are high, Kaya said: “The net minimum wage of 8,500 lira costs us 11,758 lira. 11 thousand 758 liras make 630 dollars. Before the raise, this figure was $410. In other words, our cost, which was $410, increased to $630,” she said, adding:
“It is not easy for us to maintain a price at this cost. We have become a more expensive country. With these costs, we will not be able to do the work we have done in the past, we will lose customers. Those customers will go to the countries where we compete. We don’t have a chance to compete with countries like Bangladesh, Vietnam, India and Cambodia at a cost of $630.”
‘WE EXPECT APPROXIMATELY A 10 PERCENT JOB LOSS’
Stating that there has been a decline in orders received in the past 3 months due to the global recession, rising inflation and declining household spending, Kaya said that customer losses will accelerate with rising costs. .
Kaya said: “Due to rising costs, especially in labor and energy, we can’t keep up with prices, so jobs go to countries that compete with Turkey. It looks like we will see contractions of up to 20-30% in our export markets on average in the coming period…
It will start with the first quarter and there will be a 20-30 percent contraction in capacities in the first six months. This will cause job losses in the next period. We expect a total job loss of around 10 percent.”
THE EFFECT OF THE EXCHANGE RATE
Approximately 1 million people are employed in the textile and clothing sectors.
Kaya said it is difficult for Turkey to retain global customers for “basic” products, which cost labor at $630, adding that what needs to be done is to create new business models and focus on value-added products.
Drawing attention to the effect of the exchange rate on the competition of Turkish companies with other producing countries, Kaya said: “The reason why the cost increased to 630 dollars is the foreign currency. That is, the coin is locked at a certain point. If the exchange rate was between 22-23 lira, maybe we wouldn’t be talking about half of what we said,” he said.
“If we consider that we have an electoral period ahead, we will face the reduction and loss of employment in the next period due to these economic policies, the pressure on this foreign currency.”
Although TL depreciated 30 percent against the dollar in 2022, it followed a fairly flat course at its all-time high of 18.68 in the past two months. Export-oriented producers claim that LT must depreciate as much as inflation, otherwise it will negatively affect the competitive conditions of the exporter.
In an analysis published in Reuters this month, it was noted that slowing growth and how to maintain employment levels would be the most difficult issues for the government before the elections. (Reuters)