Private firms concerned over minimum wage rise

ANKARA

The annual cost of a 30 percent increase in the minimum wage, an election promise by the Justice and Development Party (AKP), will cost the private sector 16 billion Turkish Liras, according to the head of the Istanbul Chamber of Commerce (İTO), as businesses raise concerns over the upcoming hike. 

The commission to decide on the minimum wage will convene on Dec. 1, said Former Labor Minister Faruk Çelik on Nov. 11, adding the new government to be founded after the Nov. 1 election that granted single-party rule to the AKP will submit its suggestion of 1,300 liras, or $450, to the commission.

“The minimum wage will be 1,300 liras as of Jan. 1, 2016,” said the former minister, who left the post in August when an interim government was founded. 

The business world was largely silent about all parties’ minimum wage pledges before the elections, as most parties offered even higher figures. However, when the promise took a more concrete shape, business organizations started raising concerns.

İTO head İbrahim Çağlar said the rise would bring in 16 billion liras of additional costs for private companies. 
Çağlar demanded a discount in the social security fees of then firms in exchange. 

The İTO suggestion refers to a 7-billion-lira annual cost for the state. 

Ankara Chamber of Industry (ASO) chairman Nurettin Özdebir said the additional burden should be compensated for one or one-and-a-half years.

There are around 12 million employees in Turkey and some 5 million of them are paid the minimum wage, at least on paper. However, some companies illegally tend to show wages lower to avoid higher fees.

The head of Turkey’s largest business organization, TOBB, said he supported a rise in minimum wage, but this should not bring in extra burdens for the companies.

 “The cost of the current minimum wage [1,000 liras] is 1,500 liras for the employers. It might be increased of course but we support an increase that would not exceed this cost,” Rifat Hisarcıklıoğlu said, backing a formula that the employees will get 1,300 liras and the state will get 200 liras. 

A hike would have a significant effect on inflation that, at 7.58 percent, is currently running well above the Central Bank’s target of 5 percent, Reuters said. 

“Do not underestimate the importance of [this],” Bank of America Merrill Lynch said in a note to clients.
“Given that service price inflation is already high and sticky, the sharp increase in the minimum wage would not only hurt companies’ competitiveness, but also push CPI inflation higher.”

Seyfettin Gürsel, the head of the Center for Economic and Social Research (BETAM) at Bahçeşehir University, said a rise in unregistered employment might be expected after a hike in minimum wage.  

The AKP swept back into power in national elections on Nov. 1 with nearly 50 percent of the vote after losing its majority in the previous ballot in June 7.

Prime Minister Ahmet Davutoğlu has yet to assign cabinet posts in the new government.