How will raising the minimum wage affect workers in 2023?

President Recep Tayyip Erdoğan announced today the amount of the minimum wage that will apply in 2023.

The net minimum wage was increased to TL 8,506 and the gross minimum wage to TL 10,08. The net minimum wage increased to $455 at today’s rates. The net minimum wage increase rate was 54.66 percent. The total cost of the minimum wage for the employer increased to TL 11,000,759.

Since Türk-İş’s expectation of 9,000 TL was not met, the union did not attend the press conference where the minimum wage was announced. The union claimed that the minimum wage set for 2023 did not meet the living conditions of employees and their families, saying that “the public’s expectation has not been met.”

While the Turkish Statistical Institute (TÜİK) did not announce the minimum living wage this year, the minimum wage of TL 8,506 exceeded the TL 7,787 hunger limit for November announced by Türk-İş by TL 719. The hunger limit in November was 2,286 TL above the 2022 minimum wage.

MILLIONS OF WORKERS WITH MINIMUM WAGE

He wonders how the 2023 minimum wage will affect millions of workers. According to data announced by the Turkish Ministry of Labor and Social Security, 37 percent of registered workers work for the minimum wage. The DİSK Research Center, on the other hand, stated that the rate of employees working around the minimum wage (10 percent below or above) in the private sector is 64.7 percent.

Millions of workers living on minimum wage live below the poverty line for most of the year. Last year, the hunger limit exceeded the minimum wage in February due to the sharp rise in food prices and the rate of rising inflation. Although the minimum wage was 5,500 TL with the provisional increase in July, it was below the hunger limit of 6,856 TL at the time.

Taking this year’s inflation forecasts into account, the minimum wage is forecast to remain below the hunger limit after a while.

UNDER KITCHEN INFLATOR

In addition, the increase in the minimum wage was well below the food inflation announced by different institutions.

The starvation limit, which was 4 thousand 97 TL at the end of last year, increased by 90 percent from November compared to the end of the year. According to Türk-İş, the annual food inflation in November was 137.38 percent.

According to TUIK, food inflation stood at the level of 102.55% per annum in November, while the Istanbul Wage Livelihoods Index, which is an indicator of retail price movements in Istanbul, was 105% per year in November, according to data from the Istanbul Chamber. trade.

While the minimum wage, which was set at 4,253 TL at the beginning of last year, was 5,500 TL in July and 8,506 TL in 2023, the annual increase in the minimum wage was 100 percent. Thus, the amount of increase in the minimum wage remained well below TurkStat’s kitchen inflation annual increase limit of 137.38. On the other hand, Istanbul inflation and TUIK food inflation exceeded the minimum wage increase.

THE RISK OF HUNGER LIMIT WAITING MINIMUM WAGE

Considering that millions of workers receive minimum wages, the current increase is critical for a large part of the population. Economist Dr. According to the scenarios prepared by Cem Oyvat with different inflation forecasts, the minimum wage is expected to remain below the hunger limit in a few months.

In President Erdogan’s year-end 20 percent inflation scenario, the minimum wage is forecast to fall below the hunger limit by June 2023, while according to Central Bank survey estimates, it is expected to the minimum wage falls below the hunger limit. in March 2023.

Graphic: Cem Oyvat

According to Oyvat’s assessment for Sozcu.com.tr, the increase in the minimum wage is insufficient for workers. Oyvat said: “The increase in the minimum wage, of course, will have a positive effect on the welfare of workers, but we will see that this positive effect will gradually diminish with the increase in prices,” Oyvat said, noting that the minimum wage can stay below the hunger limit after a while.

“If Türk-İş’s hunger limit is increased according to estimated consumer inflation using the CBRT Market Participant Survey, the minimum wage will fall 8.4 percent below the hunger limit in June. Even if we take Erdogan’s 20 percent inflation scenario as a basis, the minimum wage falls below the starvation threshold. For this reason, I find the current increase in the minimum wage insufficient.”

DOES INCREASING THE MINIMUM WAGE INCREASE INFLATION?

Oyvat made the following assessments regarding the discussions about whether the minimum wage will have an increasing effect on inflation.

“First, a significant increase in the minimum wage is necessary, regardless of its impact on inflation. Because minimum wage earners earned well below the hunger line for most of 2022 and living conditions for wage earners have declined considerably compared to previous years. Meanwhile, the capital sector’s share of revenue increased at a rate unprecedented in previous years. This situation should not be normalized.”

Stating that the increase in the minimum wage will have an impact on inflation, Oyvat said: “Even if the impact of the increase through demand is limited, the cost increase it will bring will be reflected in prices. However, the effect of a 54.7 percent increase in inflation would be much less than the 54.7 percent.”

‘THE BASIC REASON FOR INFLATION IS NOT THE INCREASE IN WAGES’

Oivat said:

“Yes, an increase in the minimum wage increases labor costs. But work is not the only cost of companies, nor is it the only salary that is paid, nor is it the minimum wage. Therefore, the effect of the 54.7 percent increase in costs will be less than this.

Furthermore, we know that the fact that real wage growth remained below growth increased profit margins last year. Probably parallel to the deterioration in income distribution, this year also presents a similar situation. We can understand this situation from the fact that the real sector confidence index has not decreased much compared to the consumer confidence index.

Also, higher profit margins over cost compared to prior periods; It allows companies to reflect the new minimum wage increase in prices in a more limited amount. In other words, let’s not forget that part of the increase will not be reflected in prices and companies will eat their profits.