As debates over a potential boost in the minimum wage in Turkey gain pace, one of the top business associations has voiced its support for a hike above inflation to ease pressures on households stemming from a rise in consumer prices.
Mahmut Asmalı, the newly elected chairperson of Independent Industrialists and Businesspersons Association (MÜSIAD), said Tuesday that the minimum wage hike to be determined for 2022 should "definitely" be above the year-end inflation rate.
The private sector sides with the increase; however, it should be implemented by reducing some of the minimum wage tax burdens on the employer, Asmalı told a press meeting in Istanbul.
"Let the employer assume an increase of as much as inflation, and let the state assume the remaining part above inflation," he noted.
Remarks come a week after it was reported that the government is planning a fiscal stimulus to support citizens with measures such as lifting the minimum wage, relief on energy costs and raising salaries for some civil servants.
The annual inflation rate rose to 19.89% year-on-year in October, according to official data, driven by food, services, housing and transportation prices, reflecting in part soaring world energy prices.
The country’s central bank last month raised its year-end inflation forecast to 18.4% from 14.1%, in an upgrade driven by higher import costs and food prices.
Labor and Social Security Minister Vedat Bilgin said on Tuesday the government was carrying out a study related to the minimum wage tax issue.
"We are studying alternative tax models. For some, legal regulation, for others, the decision of the president is enough," Bilgin was cited as telling reporters.
The minister last week said arrangements were being made to increase earnings to support households and offset pressures stemming from a rise in consumer prices.
He said they are "making calculations" and that there will be an "arrangement" that will "bring a relief, protect our workers and remove the minimum wage issue from Turkey’s agenda."
A deep nationwide survey to determine public expectations is underway, and Bilgin said Tuesday they would have the results before December.
"We think that the minimum wage hike to be determined for 2022 should definitely be above the year-end inflation rate by reducing some of the minimum wage tax burdens on the employer," MÜSIAD’s Asmalı said.
He stressed that, as much as employees do, they also want workers to work under better financial conditions, live more prosperous lives and have higher purchasing power.
Labor and Social Security Ministry officials are due to hold talks with unions representing employers and employees to determine the new minimum wage for the next year.
The minimum wage currently stands at a net of TL 2,825 ($292) a month. It is determined at the end of every year by Turkey’s Minimum Wage Commission, which consists of 15 people, five from the government, five from unions representing employees and five from unions representing employers.
The commission meets four times before it announces a decision by the votes of a large majority. If the votes are split down the middle, the decision of the commission's president prevails.
Support for rate cuts
Among others, Asmalı said the association supports recent surprise interest rate cuts by the country’s central bank, stressing that high borrowing costs caused production costs to remain high and lead to higher inflation.
The Central Bank of the Republic of Turkey (CBRT) last month slashed its benchmark policy rate – the one-week repo rate – by 200 basis points to 16%, bringing the cuts since September to 300 basis points.
Industrialists are concerned with the cost side, rather than the return side, when it comes to the interest rates, Asmalı said.
"This is the part that interests us as an industrialist and business peoples' association. The lower the interest rates, the lower the production costs as they will fall by the same amount due to the relaxation of loan interest. This will contribute to lower inflation," he said.
"We support lowering of the interest rates, which we see as the biggest obstacle to investments, production and employment."
Asmalı also said exporters were seriously affected by the increase in the prices of raw materials, stemming in part due to an increase in the exchange rates.
But he also stressed interest rates should not be considered as the only way to rein in exchange rate increases.
Even though the latest rate cut left Turkey’s real yields sharply negative, Asmalı stressed that they refuse the perception that interest rates should be five to six points above inflation, citing the United States, Brazil and some countries in Europe as an example.
New term goals
On MÜSIAD’s roadmap for the coming period, Asmalı said the association has set new term goals under seven main headings to provide added value to Turkey’s domestic production power.
The association will seek to rev up the commercial diplomacy and strengthen MÜSIAD’s presence in all G-20 countries, he noted.
Among other goals are establishing a liaison office in the Gulf region, organizing at least one MÜSIAD expo fair abroad, setting up a MÜSIAD International Arbitration Center, supporting micro exports, and backing of members by strengthening infrastructure processes such as logistics, human resources and payment systems.
Within the scope of economic diplomacy activities, Asmalı also stressed the aim to bring together ambassadors and commercial attaches with business people in Anatolia.
Strategies for greater exports
Asmalı expressed the belief that the Turkish economy would achieve and even exceed the export target of $250 billion by 2023 with the increase in services export.
"In fact, we consider it very possible that this figure could reach the level of $300 billion," he said.
For this purpose, he emphasized that they have determined three main strategies within the scope of their research.
"We can list these as focusing on strategies for the export of value-added, high-tech products, focusing on foreign logistics centers, and strengthening all kinds of infrastructure processes in this context," Asmalı noted.