Turkey’s minimum wage has been losing value over time. In 2003, a worker earning minimum wage could buy 13 quarter gold (a common kind of gold sold in Turkey), but that figure has dropped to three in 2022. This data shows that the purchasing power of an unqualified worker’s minimum salary in Turkey is dwindling. Worse, it was 6 quarter golds in October 2021, meaning it dropped to 3 in just two months. In Turkey, the fluctuation in the real value of the minimum wage is extremely high. The reason behind the fluctuation is the weak Turkish Lira against the foreign currencies.
In other words, there is a high inflation rate. Under these economic conditions, the Turkish President decided to increase the minimum wage by 50%. The average price has risen from 2,700 TL to 4,050 TL. In terms of USD, the minimum wage was $337 in October 2021, and it became $290 in January 2022 after the increase.
Monetary Deception
Milton Friedman advocates the use of monetary policies because they have no real influence on real values and monetary deception works. In other words, people perceive nominal values but many do not notice changes in real values. As a result, monetary policies make it easier to shape a national economy at a cheap cost and with high efficiency. In Turkey, the nominal minimum wage has been raised by 50%, implying that a worker earning the minimum wage can now buy less. President Erdogan’s unusual economic approach appears to be creating monetary fraud. He ignores the loss in the real value of the minimum wage while emphasizing the increase in the nominal value.
There is thus an important problem with this policy. A minority supporting Erdogan do not mind this monetary deception, but the majority of the workers are aware of it. The high inflation is felt deeply in the Turkish community. Moreover, many people are irritated by the speeches of Erdogan and his supporters.
The Chinese Development Model
Following criticism of the economic policies established in the fourth quarter of 2021, Erdogan stated that Turkey would implement a development plan akin to the Chinese development model. A reduced minimum wage would draw foreign investors’ attention to Turkey, and increased investment would help the Turkish economy. Although it seems like a positive result stemming from a lower minimum wage level, it involves selling labor at a lower price to foreign investors, and it may entail working with a lower minimum wage relative to the average worldwide worker’s wage.
Having reduced manufacturing costs as a result of a lower minimum wage means that employees bear the entire weight of economic development. Given Turkey’s high degree of income disparity, putting all of the responsibility on those who get the smallest portion of national income has been especially vexing for workers.
Erdogan’s management changes its economic policy orientation on a regular basis, introducing new economic projects virtually every month. The Turkish people are perplexed by this situation. Worse, despite Erdogan’s argument that high interest rates generate high inflation and that decreasing interest rates will reduce inflation, his theory has been debunked numerous times in the last five years. Furthermore, inflation is considerably higher today, and to make matters worse, the interest rate charged to those borrowing money from banks is nearly 40%. In Turkey, the minimum wage has fallen from $337 to $290, which is ironic given the country’s economic situation.
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