The minimum wage increased by 50% to 4,253 TL. Will this increase have more positive or negative effects?
In fact, the amount of increase is still small compared to inflation, purchasing power It is much lower than this period last year and it continues to decline, but it can still be said that a higher than expected increase was made.
The ordinary citizen tends to see only the positive side of this hike, but the Moon also has a dark side. Economist and Typewriter1984 Editor-in-Chief Enes Özkan, answered this important question for us:
“Actually, the minimum wage didn’t increase that much in the face of inflation, but there was still a big increase.”
“The positive side of this increase is that it will provide relief from inflation for at least a few months for those who will not lose their jobs, but the emphasis here is on a few months, they will only relax for a few months. Then again, due to this inflation and the jump in the dollar rate, they will most likely go back to their current state.”
“The negative effect is that it could trigger layoffs as there are too many micro-enterprises in Turkey.”
“Turkey is actually a small tradesman’s paradise, too many people employ one or two people. A great majority of these tradesmen will most likely lay off a worker from the workers next to them. can increase unemployment.“
“The other negative effect is that it will create a new cost pressure on tradesmen, SMEs or large industrial establishments that are currently unable to lay off workers.”
“So if you think about a factory that employs 100 workers, it adds up to about 3 trillion new dollars a year. cost will rise. For this, he will have to raise his products. If it is exporting, it may not affect the local market much, but if not all products are exported and consumed in Turkey, it will cause inflation.”
“On the other hand, the main negative effect is that I do not advocate that anyone’s salary should be low, but such high increases in an unproductive economy only bring inflation.”
“The main reason for this is that the minimum wage is already almost in Turkey. average wage. More than half of the people working in Turkey work for the minimum wage. This increase in the minimum wage will also put upward pressure on the salaries of people who earn salaries at their higher levels. In other words, everyone’s salary is at these rates or similar rates. increase will occur.
This will again put pressure on employers, but on the other hand, this income increase, which is experienced without an increase in productivity in the market, is largely will cause inflation. Salaries will need to be updated again as inflation causes. This can turn into such a vicious circle.”
“Here, if employers have to make these hikes without increasing productivity and this will turn into a vicious circle, they will probably need huge incentives and loans.”
“In this process, the public may develop various mechanisms to fund employers. Of course, the simplest tool that the public can use. monetary expansion. In other words, there may be various types of very affordable or almost zero-interest loans by printing money, distributing it to the market, and different incentive systems.
So they will distribute them and wait for them to cover their workers’ expenses. This causes more public debt, more money in the market and more money. increase in inflation again will cause. In other words, the minimum wage increase can basically trigger such a mechanism.
Source: Economist and Typewriter1984 Editor-in-Chief Enes Özkan