Turkish SMEs face 60 pct profit loss over minimum wage hike unless state helps: Association

Hacer Boyacıoğlu - ANKARA

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Turkish small- and medium-sized enterprises (SMEs) will lose over 60 percent of their profits unless the state shares the burden from the expected raise in the minimum wage, the head of the Union of Chambers and Commodity Exchanges of Turkey (TOBB) said in an exclusive interview with daily Hürriyet. 

“We are definitely not against a raise in the minimum wage. As minimum-wagers earn more, their welfare level will be higher and they will make a more positive contribution to the economy. We, however, want to say that the SMEs will lose around two-thirds of their profits unless the state offers support to them in overcoming the losses from rises in personnel expenses. They will lose around 25 billion Turkish Liras of their 40.5 billion liras in revenue,” TOBB head Rifat Hisarcıklıoğlu said. 

“They will shrink in volume unless the state offers support,” he noted. 

The net minimum wage, which is around 1,000 liras currently, is expected to rise to 1,300 liras by the new year. 

Additional costs

“The existing minimum wage already costs 1,500 liras to employers per worker, as the state takes 500 liras of this figure. The SMEs are hiring the highest number of minimum-wagers across Turkey. When the minimum wage is increased to 1,300 liras, the burden on the shoulders of companies, mainly SMEs, will hike up to 1,940 liras per month, creating an additional 5,280 liras of costs,” he said. 

There are more than 5 million minimum wage earners in Turkey and an additional 24 billion liras of costs are expected to be created over employers from the expected raise in minimum wage. 

“The SMEs will lose around 62 percent of their net revenue, according to our estimates. They will likely face big hurdles in creating new jobs, making further investment and reaching new markets,” he said. 

As Prime Minister Ahmet Davutoğlu had said earlier, the negative effects of the expected minimum wage raise need to be reflected in SMEs at minimum, added Hisarcıklıoğlu.