Turkey looks to ease burden of $9.2bn minimum wage hike
ISTANBUL/ANKARA: Turkey is looking to help smaller companies shoulder a planned 30 percent increase in the minimum wage, the economy minister and officials said, after the textile industry warned the hike could force clothing companies to move abroad. In the run-up to the Nov. 1 election, the ruling AK Party made the pledge to lift the net minimum wage to 1,300 lira ($454) a month, from 1,000 lira now, aiming to win over the roughly 5 million minimum wage earners struggling to make ends meet.
The planned hike is due to go into effect next year and could impact about a fifth of the labour force, costing the private sector an estimated $9.2 billion. Critics, including business owners and economists, say it will stoke inflation, hurt competitiveness and ultimately lead to job cuts. The AK Party, which regained single-party rule in the election, is trying to retain its populist appeal while convincing investors it is serious about fiscal discipline.
“We think that small companies with 10-300 employees will be affected much more by this,” Economy Minister Nihat Zeybekci told reporters yesterday. “There will be a sharing to lessen the burden. Our government is working on this.”
Prime Minister Ahmet Davutoglu has tasked officials to look into ways to lessen the impact on smaller companies, including tax cuts and lowering what companies pay in social security premiums for workers, two government officials told Reuters this week. Earlier in the week Davutoglu met with business leaders, who had called for structural reforms to improve the investment climate, one of the officials said. “Concern was expressed about the problems which the minimum wage hike might create for SMEs,” the official said. “Work will be conducted on what kind of burden the public sector might be able to take.” Despite the criticism, Davutoglu will not consider stepping back from the wage hike, the second official said.
CLOTHING INDUSTRY The starkest warning so far has come from the head of Turkey’s clothing exporters association, who told Reuters in an interview this week that production of textiles and ready-towear clothing could move abroad if the industry is forced to foot the bill alone. “If the burden of the minimum wage increase falls on the industry, that it will take us backwards and I think many of our firms will flee abroad,” said Hikmet Tanriverdi, chairman of the Istanbul Readywear and Garments’ Exporters Union (IHKIB), whose members account for 75 percent of Turkey’s clothing exports. — Reuters