Turkey’s minimum wage will go up 55% in 2023 in a bid to help ease the burden of soaring living costs on millions of people just months ahead of elections.
(Bloomberg) —
Turkey’s minimum wage will go up 55% in 2023 in a bid to help ease the burden of soaring living costs on millions of people just months ahead of elections.
The monthly net minimum salary will be 8,500 liras ($455), President Recep Tayyip Erdogan said Thursday in Ankara in a televised speech, following two increases that almost doubled it this year. According to the labor minister, more than a third of the workforce is on minimum wage officially.
The cost-of-living crisis unfolding in Turkey is a threat to Erdogan’s appeal about half a year before elections. The latest hike is an attempt to cushion households from inflation that the central bank predicts will exceed 22% next year after ending 2022 at just over 65%.
Turkey is on track to end this year with the world’s fifth-highest inflation, according to the International Monetary Fund, a crisis fueled by rising commodity costs caused by Russia’s invasion of Ukraine and made worse by an an ultra-loose monetary policy at home.
Under pressure from Erdogan, the central bank has cut interest rates despite inflation soaring to the fastest in almost a quarter century. Declines in the lira have been another drain on household budgets, with the Turkish currency down nearly 29% against the dollar so far this year.
Turkey has allowed inflation to run wild as Erdogan chases after growth and champions an economic model that prioritizes exports and investments.
While the president has said he expects inflation to slow to about 40% “in a few months,” the erosion in living standards has caused widespread discontent among Turks.
In response, the government boosted the minimum wage by a record 50.5% in January and then added an interim increase for the first time in six years with a hike of nearly 30%.
It’s not clear if a higher minimum wage will feed through to inflation by boosting consumption. Central bank Governor Sahap Kavcioglu said this month it will have no material impact on prices.
Under its previous governor, the central bank had cautioned about a “positive shock” on inflation from increases in the nominal minimum wage. Its report last year found that headline price growth rises by one percentage point for each 10% increase in the minimum wage.
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