Turkey: Higher minimum wage to mitigate the effects of inflation

Status: 16.12.2021 5:51 p.m.

The Turkish central bank has cut interest rates again. This is accompanied by high inflation, which is a heavy burden on the population. An increase in the minimum wage should help. Experts doubt that this will bring much.

By Uwe Lueb, ARD Studio Istanbul

President Recep Tayyip Erdogan cannot be denied the good news of the day. He himself announced the new level of the minimum wage in Turkey. Instead of around 3000 lira, a single person will in future receive 4250 lira net. That is the equivalent of around 240 instead of 170 euros.

Uwe Lueb
ARD-Studio Istanbul

The minimum wage is not enough – one way or another

And it gets even better: “At the same time as the largest increase in the minimum wage in our history, we are protecting employers from additional high burdens,” says Erdogan. “From next year on, income tax will no longer be due on the minimum wage, and companies will be relieved of bureaucracy.” The president calculates that this will reduce costs for employers by 450 lira per employee.

Many employees in Turkey receive the minimum wage, but they often get money on top of that from their employers – in the hand. But because of the high inflation, it is no longer enough for many to make ends meet. “We almost work for the minimum wage. Those who have studied have no work. People with degrees work as suppliers,” complains a nurse from Ankara. “Something’s wrong there. We can’t make ends meet, we no longer have any purchasing power.”

“The joy will be short-lived”

The current interest rate decision of the central bank does the rest to the loss of purchasing power of the lira. It cuts the key interest rate again – from 15 to 14 percent. A few months ago it was 19 percent. Experts like the Turkish economics professor Burak Arzova from the Marmara University in Istanbul see inflation continuing to advance. In the end, the significantly higher minimum wage does not help either.

“The minimum wage earners will initially be happy about more money and higher salaries,” said the scientist. “But this joy will be short-lived. In nominal terms, it actually looks as if the employees deserve better. In real terms, they will very soon notice that they will have even less purchasing power than before. The disappointment will very soon be great. “

Erdogan will not be deterred

But President Erdogan will not be deterred. He is sticking to low interest rates. The central bank determines the rate, but it follows the president. Erdogan says that only the rich benefit from high interest rates – the poor, on the other hand, get poorer. He believes that low interest rates will attract investors who will create jobs and boost exports. The crisis will be history in a few months.

“The latest fluctuations in exchange rates and the resulting excessive price increases have caused uncertainty, which we are determined to avert in the shortest possible time,” said the head of state with determination. If he succeeds, his chances of emerging again as the winner of the 2023 election will increase. But the way is long. Currently, inflation is officially around 21 percent. The opposition speaks of closer to 50.

Turkey – living with inflation

Uwe Lueb, ARD Istanbul, December 15, 2021 5:40 p.m.

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