Business leader backs minimum wage increase above inflation

ISTANBUL

The increase in minimum wage for 2023 should be high enough to compensate for losses in purchasing power or the hike should even be above inflation rate, Şekib Avdagiç, head of the Istanbul Chamber of Commerce (İTO) has said.

“Our responsibility as public and private sector is to keep the standard of living of working people at a certain level. This is particularly the case for those whose pay is relatively lower. The increase in minimum wage could be one or two points above the inflation rate,” he said.

Considering the current level of inflation, the minimum wage should be hiked to compensate for the loss in purchasing power, said Avdagiç.

He added that businesses will support such a move, but they have some expectations, particularly regarding the income tax brackets and severance pay.

“Income tax brackets should be updated if the minimum wage is to be hiked. There is a significant difference for certain groups between what employees actually receive and the gross wage. Some employees receive only 55 percent of what the companies pay. This affects particularly people in low- and medium-income groups.”

Net income of people whose salaries are above minimum wage do not increase as much as the wage hike because income tax brackets remain the same, Avdagiç explained.

“This is the real issue for us. Tax brackets should be updates in line with minimum wage hike,” he added.

The minimum wage in Türkiye was increased by 30 percent in a midyear adjustment to a net of 5,500 Turkish Liras in July. The increase came on top of the 50 percent hike in January, which brought the minimum wage to a net of 4,250 liras.

Avdagiç also said that they are in talks, including officials from the Treasury and Finance Ministry, to address the problems regarding businesses’ access to financing.

“Companies need loans more than before to finance their projects or to meet working capital needs because of the elevated inflation. Banks have not completely stopped providing loans, but they are acting more selectively,” he said.