AKP’s 1,300-lira minimum wage pledge challenges business world

Mustafa Sönmez - mustafasnmz@hotmail.com

The main opposition Republican People’s Party (CHP) prioritized improvement in income distribution in its election manifesto for the June 7 elections, also including pledges to advance social protection, triggering criticism from the ruling Justice and Development Party (AKP) and particularly from President Recep Tayyip Erdoğan at every opportunity. 

At every place he went, Erdoğan said he was appalled at the opposition parties’ pledges for the net minimum wage, with the CHP vowing 1,500 Turkish Liras (480 euros), the Peoples’ Democratic Party (HDP) 1,800 liras and the Nationalist Movement Party (MHP) 1,400 liras. 

“Believe me, I am appalled. The minimum wage is being auctioned. One says 1,800 the other 1,500. They are not aware of the minimum wage. What is the minimum wage right now? It is 1,000 liras. The employer cannot pay under 1,000 liras. What does the state guarantee? It says you will pay a minimum of 1,000 liras. This is an assurance…” 

During the June 7 campaign, the AKP constantly asked CHP what the source of this would be. Following the drop in its votes to 40 percent, AKP preferred to take the road of the CHP. It included the minimum wage pledge in its Nov. 1 election manifesto and told minimum wage earners that it would be at least 1,300 liras. 

Against the AKP’s 1,300 lira pledge, the CHP promised 1,500 while the HDP said 2,000 liras as the MHP said 1,400 liras. Even though the AKP’s pledge was the lowest among the parties represented in the parliament, it again corresponds to a 30 percent increase in the current figure. 

Babacan’s statement 

The AKP will now be challenged to keep this pledge. What kind of effects will a net 30 percent raise in the minimum wage create? The person who is expected to steer the economy in the new government and words by the person who has led the economy for years, Ali Babacan, were enough to stir things up. Babacan said the issue of the minimum wage should not be speculated upon. Speaking to the state-run TRT news channel, he said: “The minimum wage is determined by the Minimum Wage Commission. Both the employer and the employee segments are represented there. They sit down and talk. However, the government’s view is quite influential. What did we actually say? We said the net minimum wage will be offered at 1,300 liras to the commission for 2016. Our suggestion will be effective.”   

On the dynamics of the commission works on the direction of the government’s demand, Babacan emphasized: “There should not be any speculation. Our 1,300 is net and this is the figure to be implemented in 2016.”   

While Babacan was implying December 2016 for the net 1,300 liras minimum wage, meaning the wage for 2017, other top officials in the AKP sounded differently about the date. 

While Deputy Prime Minister Numan Kurtulmuş said, “Nobody should doubt that the minimum wage will be 1,300 liras,” Economy Minister Nihat Zeybekci said, “If there are no legal problems, we guess it will be on Jan. 1, 2016.”

Apparently, there will be debates in the new government on the practice of the election pledge. Spokespeople for opposition parties and several unions started protesting the indecisive attitude of Babacan.  

On behalf of employers 

The real reaction came from the employers and the head of the Ankara Chamber of Industry, Nurettin Özdebir, with a radical proclamation, suggested in an interview to daily Dünya, “The minimum wage should be abolished.” 

Özdebir criticized that the costs of the business world had been increased without consulting the business world. The rise in minimum wage will result after a while in downsizing and layoffs at SMEs, he said. 

“The rise in minimum wage is very important. When you make a 30 percent rise, then you are increasing the severance pay 30 percent also,” he said. “When you increase a 1,000-lira earner’s wage to 1,300, then you need to raise the 1,300-lira earners’ wage also, and this will push everyone’s wage upward…. This is a decision that has been made without asking the business world. If wage increases in the manufacturing industry and real sector are not supported by productivity, then it is an unjustified earning.” 

Özdebir also claimed that there were no minimum wage earners in the industry, saying the minimum wage earners in that sector were cleaners and office boys. Actually, a survey of Central Bank contradicts this. 


How many minimum wage earners?

Wage statistics show that the minimum wage is nearing the average wage in Turkey. This fact was included in the Central Bank’s May 2015 Inflation Report on page 56. The microdata taken from the Turkish Statistical Institute’s (TÜİK) Household Workforce Survey is presented as such: “Almost 35 percent of the total of wage earners are paid minimum wage or under… Among wage earners, a clustering around the minimum wage is noticed. This is an indicator that minimum wage policies affect income distribution.” 

The lowest paid 

While the share of minimum and under-minimum wage earners in general in the economy is 35 percent; in the industry, construction and service sectors, this rate is 38.5 percent, 41.3 percent and 30.2 percent, respectively. This rate goes up to 72 percent in agriculture, and there are several industry and service sub branches where this rate climbs over 50 percent. 

The lowest paid ones work in personal care fields such as dry cleaning, hairdressers, food and beverages services, commerce and similar service sectors. In the industry sector, the highest rate of minimum wage earners are in sub branches such as food, clothing, furniture, the production of metal products and textile production. 

Below the minimum 

While the minimum wage is discussed, those who cannot even earn the minimum wage and millions without any income should be remembered. There are millions who lack a job that pays 1,000 liras. The population over 15 is roughly 57 million, and only 25.5 million of them have a paying job. The official number of the jobless is 3 million, but you can talk about at least another 3 million who are not counted. Thus, 6 million need a job, even if it pays the minimum.
 
Besides these millions, not every wage earner can enjoy the “benefits” of the minimum wage. According to TÜİK, there are more than 2 million unregistered workers who cannot earn the official minimum wage. Thus, before discussing the figures in minimum wage, we should first remember the millions who cannot work even if it pays the minimum.  

Why low? 

While 35 percent of workers earn minimum wage or lower, that should not create the impression that the remaining 17 million are working with much higher wages. It was in July that the net minimum wage became 1,000 liras. With today’s exchange rates, this is about $300 to $330. Those who earn more are predominantly earning one-fourth more of the minimum wage, at around 1,200 to 1,500 liras. 

Why is this so? These 17 million workers are without any organization; they do not have unions. Only 10 percent of wage earners are members of unions. Even they cannot use their rights freely. There are only 2,000 people who can go on strike. In major workplaces, the cabinet block strikes by postponing them. 

The official 10 percent and unofficial 18 percent rates of unemployment are enough to “tame” the employed. With this fear in mind, they do not dare risk losing their jobs. In such a case, it is not difficult to hire people to work for the minimum wage or less, especially in certain sectors and in certain underdeveloped countries.