Turkish gov’t to cover 40 pct of cost of minimum wage hike in 2016: Minister

ANKARA

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The Turkish government will cover some 40 percent of the cost of a hike in the minimum wage for 8.5 million employees  due to come into effect on the first day of the new year but only for 2016, Labor and Social Security Minister Süleyman Soylu said in a meeting early Dec. 30. 

The minimum wage has been increased from 1,000 Turkish Liras to 1,300 liras, a move expected to cost the private sector around 20 billion liras ($9.2 billion), leading critics to warn of job losses. 

Soylu announced the wage has been hiked as of the first day of 2016 after a number of negotiations between the cabinet and the private sector on late Dec. 30. 

“We’ll meet around 9.7 billion Turkish Liras [$3.3 billion] of the cost from the hike,” Soylu said in an earlier meeting on Dec. 30, adding that the rise in the minimum wage may cause employment to fall but additional measures would be taken to reduce the impact.

“This move will create a burden on the budget, but a minimal tax increase was planned to mitigate the impact,” he said, adding that the additional burden will be met by the treasury. 

He said the rise will likely add 0.5-0.8 percentage points to inflation, but it will have a positive effect on growth. 

Soylu noted the proposal was brought by the cabinet to the parliament late Dec. 29 and the opposition parties welcomed the package, with the exception of the Peoples’ Democratic Party (HDP). 

“We took back our proposal after the HDP had not given any support. Prime Minister Ahmet Davutoğlu has ordered to announce the hike as of the end of this year. We’ll then present this as a law proposal, which will be effective as of Jan. 1, 2016,” he said. 

This law proposal will be presented to the parliamentary speaker with the support of the Justice and Development Party (AKP), the Republican People’s Party (CHP) and the Nationalist Movement Party (MHP), he said. 

The cost of the current minimum wage to employers is 1,496 liras per employee, but with the planned hike this figure will increase to 1,935 liras, according to calculations. 

Deputy Prime Minister Lütfi Elvan said the cabinet plans to cover around 110 liras per employee in a meeting with a group of economy correspondents on Dec. 30.   

Business leaders have earlier warned the government that layoffs could begin and some facilities would be forced to be closed if the conditions were not eased.

There are around 12 million employees in Turkey, at least on paper. However, some companies illegally show wages as lower in order to avoid higher fees.

The annual growth in real wages has averaged 5 percent over the last five years, while labor productivity increased by 1.5 percent a year during the same period, state statistical data shows.