What does the increase in the minimum wage affect?

According to SSI 2020 data, in our country 42% of registered workers earn minimum wage. In addition, according to the inflation assessment of the Central Bank of the Republic of Turkey, the inflation forecast for the close of 2023 is around 65%, and the inflation forecast for 2024 is around 36%.

In a country with high inflation, it is of course a matter of curiosity how much the minimum wage will be and what it will affect. Now What can a minimum wage increase bring to us? let’s see.

Minimum wage is an anti-poverty value.

The minimum wage policy of countries is about saving workers and their families from falling into poverty. Especially in situations where inflation constantly increases, workers’ incomes do not match their expenses. Increasing prices with inflation reduces the purchasing power of workers and pushes them into an individual economic imbalance.

Achieving increased welfare by increasing the minimum wage is not as simple as one might think. Because invisible economy It is also effective.

An increase in the minimum wage is an increase in cost from the employer’s perspective.

Minimum employed by the employer Cost increases with the number of paid employees. To explain this; The employer pays taxes, rent, raw materials, etc. to produce a product or service. In addition to costs, it also pays salaries to workers. This fee is also considered as a cost. In this case, an increase in cost will cause a decrease in profit.

Businesses whose costs are increasing are finding solutions because their profit rate is decreasing. raises prices finds it. In order to maintain balance, we witness a price increase at the rate of increase in the minimum wage, sometimes even higher.

Businesses whose costs are increasing and cannot afford to pay the wages of their employees, Considers doing the same job with fewer workers. Moreover, this is not only valid for small businesses. For example, there are hundreds or even thousands of workers in a factory. Since the increase in the minimum wage will cover all these workers, these employers may also lay off workers. This situation causes both workers to become unemployed and those who continue to work to carry the jobs of those who were laid off. Therefore, a high minimum wage increase to unemployment causes.

There is a vicious circle between the minimum wage and inflation.

Considering the workers who lose their purchasing power due to the increase in prices, the ‘social state’ decides to increase the minimum wage. Now the worker and his family have a slightly higher purchasing power compared to prices. However, with the increase in costs and price increases made by the employer, The worker returns to his previous position.

In this case, while the increase in inflation makes it necessary to increase the minimum wage, the increase in the minimum wage will also increase inflation. 2023 III, which is one of the CBRT reports on this subject. When we look at the Inflation Report We also see that a 1 point increase in the minimum wage corresponds to a 0.93 point wage increase in inflation.

Price increases and rising inflation are actually treated as ‘short-term losses’. But the minimum wage increase also has positive aspects in the long term.

As the worker and his family who received a raise begin to meet their needs, consumption will increase. Demand for produced products will increase, supply will emerge to meet the demands and shopping will occur.

When we look at supply and demand from an economic perspective, the increase in demand is important for the country’s economy. Because increased consumption, growth of Gross Domestic Product will pull it up.

Minimum wage, which aims to protect those at the bottom of the income ladder, that is, workers. prevents income gap. Because if these wages were determined according to market conditions, the inequality gap in income distribution would be quite deep. As we said, in this case, the worker would not be able to receive the wage he is entitled to, and would work for a wage that depends entirely on the market.

Especially when we look at the working conditions and wages after the Industrial Revolution, it is quite scary that workers’ rights and wages are left to the market and the capitalist. In this respect, the minimum wage is the state’s most important ‘social policy’ It can be said.

The minimum wage increase does not have a direct impact on the dollar.

With the increase in the minimum wage dollar does not show a direct increase. However, we can talk about its indirect impact on both the dollar exchange rate and exporters. The government determines the minimum wage in local currency, but this creates problems with wages determined in foreign currencies.

Some foreign currency fees determined by the central power affect the exporter. At the same time, TL-based cost increase decrease in exporter’s profits causes. This means that the country exports less and earns less money from exports.

The increase in the minimum wage is very important on the stock market and bonds.

The minimum wage increase is actually positive for the stock market. Because, as we mentioned above, the minimum wage increase increased the demands. As a result, product purchases increase with increasing demand and Profitability of companies also increases. Especially companies that produce non-durable goods, such as the food industry, increase their profitability and bring vitality to the stock market.

In terms of bonds, the increase in the minimum wage can be evaluated in two different ways. First of all, let’s remember that increasing the minimum wage also increases inflation. Now let’s look at two different types of evaluation. If we are talking about the impact of a fixed income bond, it will be negatively affected. Because That fixed income will lose value against prices and inflation. However, if the bonds in question are inflation indexed bonds, they will be positively affected. Because it will also increase with inflation.

Where is the minimum wage now compared to the hunger and poverty line?

TÜRK-İŞ announced the Hunger and Poverty Line for November 2023. Before moving on to the data, let’s look at the difference between the Hunger Line and the Poverty Line. Hunger limit, food expenditure for a family of 4 the amount of; The poverty line is food and all other basic expenses. is the required income amount.

November 2023 hunger limit is 14,025 TL, The poverty line is 45,686 TL It was announced as. The current minimum wage (net wage) is 11,402 TL. In other words, if there is only one employee in a family of 4 and this person earns minimum wage, he lives directly below the “hunger” line, not “poverty” line.

How has the value of the minimum wage changed against the dollar and gold in the last 5 years?

We can accurately see how many dollars the minimum wage corresponds to over the years, taking into account inflation. According to CBRT and CSGB data, the minimum wage was 394 dollars in 2018, 415 dollars in 2019 and 381 dollars in 2020. After the pandemic, it was worth $349 in 2021 and $300 in January 2022. At the beginning of 2023, the minimum wage will be 456 dollars It corresponds to 392 dollars in December.

When compared with gold, the minimum wage will receive 4.6 quarters of gold in 2019, 3.4 quarters of gold in 2020, 3.3 quarters of gold in 2021 and 3 quarters of gold in 2022. With the minimum wage of 2023 (based on November price) 3.6 quarters of gold can be taken.

In general, increasing the minimum wage has positive and negative aspects. We can also evaluate this in many ways. Changing conditions may, of course, change the so-called definitive information. But there are two things that are certain: increasing the minimum wage does not ‘absolutely’ ensure justice in income distribution and Increasing the minimum wage does not always increase purchasing power.

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