Economy

Turkey minimum wage hike sparks inflation and strike threats

December 30, 2024, 3:51 PM

Turkey minimum wage, Turkey economy, Turkey inflation — Nine million workers on the minimum wage in Turkey will get a 30% pay increase from January

30% rise to fuel inflation
9m workers to benefit
Unions threaten strikes

Turkish workers on the minimum wage will receive a 30 percent pay increase from January 1, fuelling inflation but still well short of the expectations of opposition and unions who are threatening to go on strike.

The government announced the pay increase late on December 24, following a series of meetings between representatives of the state, employer federations and unions over the previous two weeks.

The increase was at the upper end of the 25 to 30 percent pay rise proposed by employer groups, but less than half the 74 percent called for by the Confederation of Turkish Trade Unions.

The increase will take the minimum wage to TL22,104 ($627) and will affect some nine million workers on the base pay rate, more than one third of those in registered employment. The 2024 minimum wage was TL17,000, which equated to $578 at the beginning of the year but fell to the equivalent of $483 by late December as the lira devalued.

Traditionally, the minimum wage increase is used as the base for pay rises in other income brackets in both the public and private sectors.

Even with the pay hike below expectations, the increase is expected to fuel inflation as employers raise prices to cover their higher wages bill, with estimates putting the feed in to the consumer price index at between 1.5 and 5 percent.

The latest central bank forecast for inflation for the coming year, issued on November 8, estimates consumer prices to rise 21 percent in 2025, less than half the projected 44 percent for 2024.

While the new pay rate aims to protect the purchasing power of workers, Labour and social security minister Vedat Işıkhan acknowledged the fight against inflation still had to be won.

“Our country is strengthening its economic stability day by day,” he said when announcing the new minimum wage. “However, I would like to point out that Türkiye is in a serious disinflation process.”

However, the new wage rate drew strong criticism from opposition parties and labour representatives, with calls for strike action coming from Özgür Özel, the leader of the main opposition bloc, the centre left Republican People’s Party (CHP), who said workers should “harness the power derived from their labour”.

Professor Emre Alkin, an economist and dean of Istanbul’s Topkapı University, told AGBI that the new minimum wage rate was an admission by the government’s economic team that its programme to rein in inflation was not working.

“Despite the wage being set being very low indeed it is much higher than the government inflation expectations,” he said.

“This means two things, first that the economy management believe in advance that the inflation target will not be met, and secondly that increasing wages in line with the expected inflation rate is seen, in economic terms, as a shock measure.”

This shock could see incomes fall as inflation remains high, Alkin said, resulting in a further drop in demand and erode trust in the economy.