In economics classes, we teach that the fact that societies with low incomes have high spending rates does not mean they are “consumer societies” but the members of such societies spend too much because their earnings remain too low compared to the high costs of living.
With this fact in mind, I should say that this forced sizableness of consumption-income ratio increases the multiplier effect of government spending. Simply put, the marginal propensity to consume increases the impact of an autonomous (income-independent) spending in countries like ours. Of course, this situation enables governments to easily attain the economic growth rate they desire in countries with medium and low per capita income.
Considering that the per capita income in Turkey is around $10,000, naturally the country is placed among the countries with a high multiplier effect. Besides, the fact that living becomes more and more expensive every day leads to a growing demand for wage increases, which is confirmed monthly by the Confederation of Turkish Trade Unions (TÜRK-İŞ) through surveys.
The Hunger and Poverty Threshold Survey, conducted by TÜRK-İŞ in January, has revealed that the minimum amount of money that a four-person household (based in Ankara) spends on food increased by 9.02% compared to the previous month. According to the survey results, a family of four needs TRY 9000 to keep a healthy, balanced and adequate diet. TRY 9000 is the hunger threshold for a family of four and it is above the minimum wage.
“Removed Zeros Are Draining Our Pockets Dry…”
The total amount of money needed to cover monthly food, clothing, housing, utilities, gas, transportation, education, and healthcare expenditures is calculated as TRY 28,874, which is called the “poverty threshold”. It is observed that people have to spend double to pay for their costs of living compared to the previous year. The cost of living for an unmarried employee has risen to 11 thousand 556 liras per month.
In the light of this data, it is not difficult to predict that the expenditure/income ratios of the employed will always remain high, and that the income-independent earnings from the EYT (elimination of age requirement for retirement) and other sources will be spent without turning into savings. This does not help keep the demand alive, what’s worse, it increases the stickiness of inflation.
So, it is absolutely necessary to bring inflation down before raising wages. Sadly, two of the six zeros we got rid of years ago have come back into our lives. At this rate, the Central Bank will either have to issue larger bills after the election or try to delete zeros from our currency again.