The minimum wage is one of the most important topics on our agenda in Turkey. After all, it directly concerns nearly 3 million households and more than 10 million citizens, and indirectly almost all private sector workers. But unfortunately, it is usually addressed in only one dimension: How much will it be? This is of course understandable, but the issue needs to be addressed more comprehensively. It is necessary to develop creative solutions.
Let’s look at the issue from seven different angles.
One: Minimum wage is below the hunger limit
The Ministry of Labor and Social Security defines the minimum wage as “the wage that is sufficient to meet the worker’s compulsory needs such as food, housing, clothing, health, transportation and culture is called minimum wage”.
With today’s minimum wage, our citizens cannot even afford groceries, let alone clothing and culture. According to the November survey of TÜRK-İŞ, the monthly hunger limit is 14.000 liras and the poverty line is 46.000 liras. While the cost of living of even a single worker is 18.000 liras per month, people are expected to provide for their families with the minimum wage.
We cannot break the 350-400 dollar level in the minimum wage. With the increases made, we briefly rise above 400 dollars, but with the rise in the exchange rate, we return to 300-350 dollars at the end of the year.
Let me say this for a comparison: The minimum wage in Shanghai, China, the so-called cheap labor depot of the world, is 370 dollars per month. We have the lowest minimum wage among EU countries. In neighboring Bulgaria, the minimum wage is 400 dollars. In the hourly minimum wage ranking, we rank 28th among 36 OECD countries.
Unfortunately, the policy of cheap labor, cheap country, cheap currency has turned our country into mediocrity and our citizens into pariahs. We must reject both.
Two: The increase in the minimum wage is eroded by inflation within a few months
Unfortunately, the increase in the minimum wage only lasts for a few months. Let’s make a calculation to concretize the issue. At the beginning of this year, the net minimum wage was 8,506 liras. By June, the inflation-adjusted real wage of a worker had fallen to 7,100 liras.
Then there was a hike. The net minimum wage rose to 11,402 liras. Of course, this increase could not resist inflation either. As of November, despite the interim increase, the real level of the minimum wage is again at 7,100 liras.
I have said this many times before: You cannot increase the purchasing power of citizens without reducing inflation. Interim hikes and the inflation data of the Turkish Statistical Institute (TÜİK) can only be used to deceive citizens, but citizens, whose money in their pockets is melting day by day, are not fooled by this either. The only way to increase the purchasing power of minimum wage earners is to fight inflation in reality, not in words.
Three: The minimum wage has now become the general wage
According to TEPAV’s report titled “Turkey’s Wage Problem: What Should We Do About Regional Cost of Living Differences?”, in 2022 there will be “16.05 million people living in 4.15 million households with only minimum wage as their labor income”. Almost 3 million households receive only one minimum wage. Based on the data that the average size of households living on a single minimum wage is 3.5 people. This means over 10 million of our citizens live on minimum wage.
According to the Ministry of Labor and Social Security, “The minimum wage is the lowest wage that can be paid in practice.” In other words, the minimum wage is given as a starting wage to employees with no professional or technical skills and little work experience.
As a matter of fact, this is also the practice in the world. In Spain, the rate of minimum wage workers is 1 percent. In Germany, the rate of minimum wage workers is 6.5 percent. In Bulgaria, the rate of minimum wage workers is 14 percent. This number in Turkey is 40 percent!
If we raise the earnings threshold to 20 percent above the minimum wage, this rate exceeds 50 percent in Turkey. In other words, about 12 million registered employees earn less than 14 thousand liras a month. Some informal workers, or those who have part of their earnings handed back, earn even less than the minimum wage. These issues are even more prevalent for women workers.
According to TEPAV research, 91 percent of private sector workers earn less than twice the minimum wage. According to DİSK-AR’s calculation based on TURKSTAT data, this level is 82 percent. In other words, 8 or 9 out of every 10 people working in the private sector today earn less than 23,000 liras a month.
This means the disappearance of the middle class. It means that a family with two people earning good salaries lives at the poverty line. It means millions of people who cannot make ends meet, let alone dream of buying two keys, a house and a car.
Four: Over the years, average wages get closer to the minimum wage
In 2007, the average wage in Turkey was 2.4 times the minimum wage, while today this ratio has fallen to 1.7. In other words, the minimum wage is being pushed towards the hunger limit and average wages are being pushed towards the minimum wage.
The natural consequence of this is that criteria such as experience, hard work and education have become worthless and meaningless. The natural consequence of this is that the appetite for easy money and the credit crunch is spreading like a cancer.
The result of bad economic management is misery. The result of bad economic management is mediocrity. The result of bad economic management is immorality.
Five: Minimum wage workers cannot move to higher-paying jobs. Minimum wage becomes permanent
The minimum wage is not an anchorage. It is the first rung of a ladder.
However, it has become very difficult to get out of the minimum wage in our country. Millions of people who start their working life at minimum wage cannot access higher wages despite years of experience. The minimum wage is becoming permanent. As a matter of fact, according to TEPAV, 3 out of every 4 minimum wage earners over the 2013-2021 period continued to earn minimum wage one year later.
This means that poverty becomes permanent. It means that intergenerational injustice continues to increase. We have to create a labor market where it is once again possible to earn by studying, working and moving up in class.
Six: The welfare impact of the minimum wage varies widely from city to city and region to region
There are very serious cost of living differences between our provinces. For example, according to Endeksa data, the average monthly rent in some of our provinces is around 8-9 thousand liras, while it is over 17 thousand liras in Istanbul and 14 thousand liras in Ankara. There are provinces where the minimum wage is not even enough for rent.
The government also recognizes this fact. As a matter of fact, the Bag Bill that was discussed in the General Assembly of the Parliament in recent weeks included an article to give additional compensation to Official Banking Institution personnel who moved to Istanbul on the grounds of the “cost of living”.
According to TurkStat, households whose main source of income is salaries, wages and daily wages spend 22.5 percent of their income on transportation, 21 percent on food and 21 percent on housing and rent. These three main items account for nearly two-thirds of their monthly income. This is not surprising.
On the one hand, there is Istanbul, where the average monthly rent is 17 thousand liras, where you have to change vehicles to get to work, and where food prices are high. On the other hand, there are other cities where the average monthly rent is 8-9 thousand liras, where one commutes to work by car, and where food prices are relatively low.
According to TEPAV’s report, in 2022, Ankara will be 2 percent more expensive than the national average, while Istanbul will be 13.9 percent more expensive. Istanbul and Ankara accounted for 26.4 percent of the increase in the number of full-time wage earners in the private sector between 2014 and 2022, and the density of minimum wage earners in these two cities increased more than the national average after 2014. However, all minimum wage earners in all 81 provinces receive the same salary. This is not a fair approach!
Today, in the US, Canada and China, there are different minimum wages according to cities. For example, there are more than 100 different minimum wages in the US. In some regions in China, there are three or four different minimum wage levels depending on changing economic conditions.
So we can be more creative in thinking about the minimum wage according to different needs and economic conditions. You know, the government uses purchasing power parity to make our ranking in the world’s national income look high. So, the minimum wage could also take into account the difference in purchasing power parity between our provinces.
Seven: The government sets the minimum wage, the private sector pays it
Since the government announced the minimum wage, there is a feeling that the government is giving something from its own purse. But this is a wrong approach. There is no one working for minimum wage in the public sector. So, the government does not pay this wage to anyone. Private sector employers pay the minimum wage. The government is distributing salaries out of someone else’s purse.
When we think of employers, we should not only think of big companies. Mr. Hamdi, the shopkeeper on the street corner, Mr. Ismail, who is trying to grow his SME, Mrs. Ayşe, who is trying to get her enterprise on its feet, pay this wage. Let’s not forget that SMEs employ 7 out of 10 people in our country! When determining the minimum wage level, we need to take into account the survival of these businesses and their escape from the registry because of high employer’s cost.
There is also the freedom side of this issue. The government determines the salaries of 5 million civil servants, 16 million pensioners, 7 million minimum wage earners and indirectly millions of private sector employees. A government that determines the salaries of three quarters of the society determines everything. Economic, social and political freedoms are one and the same!
We have to establish a delicate balance when determining the minimum wage. We cannot condemn our citizens to poverty and social assistance, and our businesses to bankruptcy and unregistered work.
Of course, the minimum wage must be at a level that will not crush millions of our people against inflation, and that will bring our citizens to a standard of living worthy of human dignity.
Let me give you the figures: Since the last minimum wage hike, inflation in the second half of the year is 40 percent. The rate of increase in taxes and fees collected by the state for the coming year is 58.5 percent.
By the way, let me also mention the issue of expected inflation. ITO President Mr. Şekip Avdagiç said that the rate of increase should be determined according to expected inflation. Let’s be honest: Target inflation is not serious in Turkey. Let’s remember the Central Bank’s inflation report for 2023, January 26: 22 percent, July 27: 58 percent, November 2: 65 percent. Setting a raise like this would impoverish large segments of society.
On the other hand, the minimum wage should not condemn SMEs, which employ 7 out of 10 people in our country, to the dilemma of “survive or flee off the books”. Moreover, if we lump all workers together at the same wage level regardless of their experience, hard work and education, this will lead to mediocrity.
We have to stand against mediocrity.
The only way out of this double trap is to create a labor market where higher wages are paid for more qualified jobs and where those who work harder earn more. For this;
Production, investment and employment instead of rent;
Focusing on competing with the world instead of mediocrity;
Aiming for added value and branding instead of cheapness and subcontracting;
Taking free enterprise as a guide instead of control-command economy; and
We have to achieve a Development Mobilization that supports SMEs, the dynamo of our economy, instead of interest lobbies. I believe, we can succeed.