Türkiye and the vicious circle of inflation and salary increase

According to the international group Tasnim news agency, the last days of the year are sensitive and important days for workers and many government employees in Turkey. Because the government, in coordination with unions and labor unions, determines the amount of salary increase based on the inflation rate.

Currently The monthly salary floor in Turkey is an amount equal to 11,500 liras, which, with 29 lira dollars, gives a figure around 400 US dollars. But the problem is that this small amount does not even cover the cost of renting a house, and Turkish citizens have continuously seen the growth of housing, transportation and basic goods prices since 2021, and every time the government raises the salary figure a little higher, the monster of inflation, with a small attack, swallows more money. “https://newsmedia.tasnimnews.com/Tasnim/Uploaded/Image/1402/09/13/1402091316253087828904044.jpg”/>

In 2023, Erdoğan’s government had to put salary increases on the agenda several times, but the evidence shows that raising the wages of employees and workers has not led to an improvement in their situation, and they are trapped in a vicious cycle and repeated inflation.

Erdogan’s government and the ineffective housing of salary increase

The vicious circle of increasing inflation and consequently raising wages and salaries can create challenging conditions for both employers and the government.

To put it plainly, it is not only Turkish workers and low-income employees who lose, but also their employers with currency fluctuations, in all areas Production, services, exports and imports face problems.

When inflation increases, the cost of goods and services also increases. The following increases and leads to a decrease in the purchasing power of money. On the other hand, employees and workers demand more wages to maintain their standard of living. If employers accept, this could further increase the cost of production and lead to higher prices for goods and services, thereby driving up inflation.

Erdogan government feels pressure to intervene in this cycle. Because inflation has destroyed the purchasing power of citizens and there are only 4 months left for municipal elections!

But in the real field of economy, The government, in parallel with the relative and temporary vote of the workers, can inadvertently contribute to the cycle of increasing inflation.

Erdogan has to worry The effect of inflation on the increase in unemployment. Because balancing inflation control while ensuring people’s ability to pay living expenses is a complex and challenging operation.

But the question is: How far can this cycle be continued? Can the government raise the salaries of the low-income earners of the wage floor 3 times every year? no At least Erdoğan himself answered this question in the negative and in protest of the difficulties of the government in 2023 to respond to salary increases several times, he announced that for the coming year, he is ready to raise salaries only once.

Erdogan made such an extravagant claim in a situation where none of his financial advisers and members of his economic team have such a view and have come to the realistic belief that Turkey has to In 2023, he will raise workers’ salaries as many times as necessary. Because, as the old saying goes, a bad year can be found in its spring and the evidence shows that next year in Turkey, in several important and strategic sectors such as housing, food, healthcare, transportation and clothing, inflation is expected to reach 80%. There is a percentage.

Salary increase, poverty line, hunger line

According to many experts of the Turkish market, the frequent salary increase is a pacifier and does not have a lasting effect. Because at the same time as salaries increase, the price of goods also increases and purchasing power not only does not increase, it may decrease!

As a result, playing with numbers does not change the status quo. Turkish economic commentator Ebrahim Kavechi says about this issue: “For the umpteenth time, let’s talk about the situation of the salary floor or the minimum wage.” We all assume that a serious salary increase will be announced for 2024, and Erdogan himself confirmed this hypothesis. But the objective conditions of the market tell us that this action is futile and useless”.

What coffee is next He wrote: “Currently, the hunger line in Turkey is 14 thousand 26 liras and the monthly salary floor is 11 thousand 500 liras!” When we add to this the likely increase in December this year (4.4% last year) and the 36.0% inflation target for 2024, we can add up to a roughly 40.0% increase. Thus, the hunger line will increase to a high figure of 19,636 liras in December next year. The picture is very clear: if there is to be a minimum wage in line with the inflation target of 36%, we should reach the same number of 20,000 liras, but in the most optimistic situation, the government will settle for 17,500 liras, and again the floor The salaries of millions of households will remain below the hunger line. The bitter point of Hungary is that the employers cannot even pay this minimum wage. Who made this country like this? Why does China, with a population of 1.3 billion, pay a higher minimum wage than Turkey, but we cannot pay more than $500 to our employees? The fact is that our economy is not productive, science and technology are not progressing in Turkey and the management of this country is exacerbating the problems”.

Is exiting the cycle possible?

Turkish economists They believe that Erdogan’s government, by making wrong decisions and committing strategic mistakes, has caused the current situation and to get out of this vicious cycle, it must take bold actions and accept the consequences and political consequences of its decisions.

They believe that breaking this cycle requires careful management of monetary policies, financial policies and paying attention to public expectations.

Long-term measures to increase productivity, control production costs and manage inflationary pressures, encourage investment in technology and infrastructure, promote education and skill training, and create a competitive business environment are some of the strategies that can break the cycle of inflation and Wage hikes should help.

The cycle of inflation and wage hikes is complex and reflects a complex interaction between economic, social and political factors. Addressing it requires a multifaceted approach that considers the wide impact on the economy and society as a whole. Now, it remains to be seen whether paying attention to some party, group and rent interests will be the priority of the Erdogan government’s economic team and will continue the current path of continuous salary increases or will it finally reach a point where it will introduce a new plan.

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