Minimum wage increase meaningless if prices rise
WITH the unanimous vote of the government, worker and employer representatives of the Minimum Wage Determination Commission, the first minimum wage of 2023 was determined as 13,563TL gross and 11,800 TL net.
So there has been an increase of 37.2 per cent to the old minimum wage, or an increase of 3,200TL net.
It has been announced that the new minimum wage will be applied to January 2023 salaries. As the salary increase will be given to public sector employees and retirees and those receiving a social security pension at the end of January, the rise in minimum wage in the same period has been positive in terms of equality.
In addition, while the monthly minimum wage in the TRNC is equivalent to about 590 euros, it is about 425 euros in Turkey and 940 euros in South Cyprus. So while our minimum wage is above that of Turkey, we are well below South Cyprus.
Over the last 22 years, the lowest minimum wage was equivalent to just $184 per month in 2001, while the highest was equivalent to $911 per month in 2008.
In recent years, the rise in the value of foreign currency against the Turkish lira and energy prices, as well as the adversities brought on by the pandemic, have increased the cost of inputs such as electricity, fuel and gas, which has been passed on in the form of hefty price hikes on all goods and services, especially food.
Thus, the excessive rise in inflation has increased problems with the economy and the public’s purchasing power.
In 2022, inflation was 94 per cent and food inflation reached 98 per cent. This situation has a much more negative impact on minimum wage earners and low-income earners who receive social support and disability benefits.
According to inflation in [the second half of] 2022, a 37.75 per cent “cost of living” increase should be made in January for public sector wages, and pensions.
In addition, the breadline, which covers only food expenditures for a family of four, rose to 11,622TL per month at the end of December.
If we consider that the new minimum wage is 11,800TL net, this is only enough for food spending. . . This fact should not be forgotten either.
As long as the market does not become cheaper and the price hikes continue, the new minimum wage will not provide employees much relief; an increase in the minimum wage makes no sense if the prices of goods and services in the market rise.
It is very hard to get by on the minimum wage. However, the general economic situation in our country also puts employers, such as shopkeepers and small business owners, into trouble.
When determining the minimum wage, it will be meaningless if one segment gains while the other is adversely affected.
If the minimum wage reaches very favourable figures for employees, if it will increase employers’ costs and lead to lay-offs or undocumented personnel, then it will be more trouble than it is worth.
Many small businesses struggle to pay rent, electricity, social security contributions, fixed expenses and their current employees. There are many small businesses that are not in a position to raise salaries based on the minimum wage.
Therefore, it is important for the government to provide a 50 per cent employer social security contribution support to businesses that have up to 10 employees and this practice should be continued.
In addition, private sector businesses should raise their wages not only for minimum wage earners but for all their employees. . . The public has started to worry that with the increase in the minimum wage, the prices of all goods and services will also increase. This concern is justified. We have seen many examples of this in the past.
The recent increase will not provide relief to minimum wage earners for a long time. Everyone agrees on this.
To prevent this, there should be monitoring of prices and opportunism should not be allowed. VAT, duty and other import taxes should be reduced rapidly, especially on basic food products, medicines and cleaning materials.
Tax reductions have been made for these matters in Turkey. This can be done here too.
When tax cuts are made, even if there is a decrease in government revenues at first, they will increase with the rise in consumption and demand during this period. The government should not hesitate to take steps regarding this issue.
Increasing the minimum wage is of course important. However, it is even more important to make life cheaper, increase the people’s purchasing power and reduce the price hikes and inflation. Unfortunately, the government cannot take adequate measures in this regard.