The importance of minimum wage

Minimum wage debates marked yesterday’s agenda. “Minimum wage limit”, an undeniable fact of life, holds big significance for Turkey. Let me tell you why.

According to research conducted by a number of institutions, total number of minimum wage workers’ ratio to total employment is around 43%. An interesting percentage indeed… Whenever I speak to a sector representative, they always give me the same figure above. But why there are so many minimum wage workers? The answer is simple.

Employment in Turkey, whose economic growth is maintained almost only by construction and contracting industry, mostly consists of the informal economy, which means there are a large number of working people who are not on anyone’s payroll. As a matter of fact, until lately many organisations from many sectors, including sports clubs, employers who pay more than minimum wage were putting their employees on minimum put and paid the rest in cash. According to OECD statistics, this trend in Turkey has reached a peak level for the last 2-3 years.

I think the minimum wage, which was hiked as of yesterday to a gross TRY 3005 including the cost to the employer, will seem like it covers all informal salary while increasing wage raise expectations of employees that monthly earn the abovementioned amount. So far, no formula has been created to ensure each person receives the appropriate money for their work, however, this minimum wage hike by 26.5% did not change the fact that Turkey is sadly still home to the cheapest labour force (in foreign currency) in the world. I think any country should be ashamed to be remembered for this.

“Trump keeps firing salvos…”

Trump may be the main cause of the worst performance by two benchmark U.S. stock indexes probably since the Great Depression. The US President tries to stand his ground about the budget crisis. By the way, CEOs of six major US banks were pretty concerned about the individual calls they received from US Secretary of the Treasury, asking them if they are facing any difficulties when stock started to plummet. But that wasn’t the end of the story. On Monday, President Trump escalated his attacks on the Fed in a tweet, saying the Federal Reserve is the only problem with the US economy.

We can see there’s been a decline in Oil Prices lately. In the past, it was the OPEC that determined the oil prices. But now things are changing. Experts say that U.S. shale oil production has doubled the crude oil production in Iraq over the last 8 years. So, oil prices now seem more unlikely to go up as pressure is slowly decreased. However, prices are always subject to change depending on future developments will happen in Syria and the Middle East.

Accordingly, we can expect sharp oil price volatility in 2019, which would make very difficult for us to make accurate current account deficit as well as inflation forecasts.