Economic Watch: Turkey to boost minimum wage amid currency slump, surging inflation

2021-12-10 13:06:01 GMT2021-12-10 21:06:01(Beijing Time) Xinhua English

ISTANBUL, Dec. 10 (Xinhua) -- Turkey's government is expected to boost the minimum wage for 2022, a move aimed to offer much-needed relief to millions of households who have seen their living standards fall as a result of a currency slump.

This decision is crucial as more than 40 percent (around 7 million) of the entire workforce gets paid the minimum wage, according to official data. With their close families, a decision on their wages will impact more than 25 million people.

President Recep Tayyip Erdogan said the government is planning a fiscal stimulus program to support citizens with such measures as increasing the minimum wage, relief on energy costs, and raising salaries for civil servants and pensioners.

Pundits and other sources are expecting the hike to be around 30 percent and even more for the next year, well above the inflation level.

The minimum wage currently stands at a net of 2,825 Turkish liras (204 U.S. dollars) a month. It is determined at the end of every year by a commission, which comprises representatives from the government, workers' unions, and employers. The new wage is expected to be announced at the end of next week.

With the sharp depreciation of the lira against the U.S. dollar since the start of the year -- around 45 percent -- the minimum wage has hit the lowest point in the last 15 years, according to the workers' unions.

The Turkish currency has been plunging to all-time lows against the greenback and the euro in recent months as Erdogan presses ahead with an economic model aiming to cut interest rates despite surging consumer prices.

Erdogan has described interest rates as "the mother and father of all evil" and blamed the currency crash on undisclosed foreign forces bent on destroying Turkey's economy.

While the government welcomed the minimum wage hike, economists believe that a substantial increase will fan the flames of inflation further in the coming months.

The Turkish Statistical Institute (TurkStat) has recently reported that the annual consumer inflation rate surged to 21.3 percent in November, the highest level since a currency crisis in 2018.

"The highly anticipated minimum wage increase will further warm the inflation," said Enver Erkan, chief economist at Istanbul's Tera Securities.

He added that risk factors impacting the volatile economy would inevitably push inflation above current levels in December, January, and February.

The prices of basic goods have soared, and many people in the country of more than 83 million people are struggling to make ends meet amid eroding living standards.

"Like many others, I think that the real inflation rate is much higher than the official figures, therefore, this hike is not enough," Kemal Bakir, an Istanbul-based industrial worker and father of two, told Xinhua.

"We are cutting off many daily items as a family, especially food and other daily items as prices have gone through the roof in recent months," said the blue-collar worker earning the minimum wage.

"This rise will not make up for our losses, and prices are increasing by the week. There are strained days ahead," Bakir added.

Turkey imports almost all its energy and depends on foreign goods for raw materials, which have become more expensive with a steeply depreciated lira.

In the past weeks, in Istanbul and the capital Ankara, following bread price hikes, every morning, long lines form outside municipal kiosks selling bread a lira cheaper than in bakeries and shops, local press reported. Enditem

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