Turkey’s Erdogan Promises Minimum Wage Hikes to Outpace Inflation in 2025
Turkish President Recep Tayyip Erdogan has pledged continued minimum wage increases that will exceed inflation in 2025, aiming to safeguard workers’ purchasing power despite persistent price pressures, Bloomberg reports.
This announcement comes as the country grapples with high inflation and ahead of crucial negotiations on salary raises set to begin in December.
Erdogan’s commitment to substantial wage hikes will be a key factor influencing inflation next year. While the government aims to reduce inflation to single digits, a significant minimum wage increase could counter this goal. Investors are closely watching the negotiations, hoping for a measured increase aligned with the central bank’s projection of 21% inflation by the end of 2025. Deutsche Bank economists suggest an increase of around 25% would be acceptable, while increases exceeding 30% could spark alarm. Morgan Stanley, anticipating inflation at 44.5% this year and 26% in 2025 (based on a 30% minimum wage hike), underscores the sensitivity of this issue.
This year’s minimum wage increase of 49% – five percentage points above the central bank’s inflation projection – follows a staggering 107% rise in 2023. Erdogan has indicated a similar approach for 2025, prioritizing the protection of workers’ purchasing power. However, this approach has drawn criticism. A group of economists recently called for minimum wage increases to be directly linked to actual inflation data rather than projections, arguing that this would better reflect the needs of workers.
The minimum wage affects a significant portion of Turkey’s workforce; more than a third of employees earn the minimum salary, which also serves as a benchmark for broader salary agreements. Currently, the monthly net minimum wage stands at 17,002 liras ($493).
While inflation has eased from a peak of 75.5% earlier this year to 48.6% in October, the high cost of living remains a major concern for Turkish households.
