For the last 5 years, it has become a Datassist tradition to close the year with this question.
Why do We Keep Asking This Question?
Simply put, in order to emphasize the importance of minimum wage in Turkey.
Based on 2018 data, Turkey is the 5th lowest OECD country in regards to minimum wage. The lowest Mexico (US$1,194), Russia (US$2,030), Brazil (US$3,133) and Colombia (US$3,700) are followed by Turkey with an annual minimum wage of US$5,044. Due to the dramatic devaluation in Turkish Lira in 2019, the annual minimum wage dropped to US$4,170.
For the 7 million people who live by minimum wage, this very question of “what will minimum wage be in the next year” is crucial to their livelihood. Indirectly, minimum wage impacts all workforce and sectors in various ways. The minimum wage defines the purchasing power of these 7 million people. When there is a raise in minimum wage, people would like to believe there is an increase in their purchasing power. Unfortunately, it is not the case as the increase is closely tied to the inflation. On top of it, in a country such as Turkey where all wages are on the low side, employers are forced to increase all wages across in order to keep the sensitive balance in hierarchy and experience among the employees.
For example, when minimum wage is increased by 30%, wages closer to minimum wage remain under the minimum wage, so employers have no choice but increase those wages. This oftentimes results in an increase of 20-25% incremental payroll costs for the company. Then comes lay-offs since the company cannot afford retaining the same number of employees. Of course, this reflects in decline in productivity and production, directly impacting profitability.
All in all, 40% of the workforce in Turkey earns minimum wage. Therefore, minimum wage is translated into net income rather than the minimum amount to make a living. In practical terms, when the increase in minimum wage is declared, as the inflation follows, the purchasing power remains constant and we only see a higher number with no effect on the standard of living. Clearly, there is nothing to be happy about regarding the increase in the minimum wage for the employee and employers.
Who and How do They Guess the Minimum Wage Right?
So far approximately 20 Human Resources professionals made good guesses – good enough guesses which are very close to the minimum wage declared by the government – and won our annual mini competition. Their reward was to attend our payroll training for free.
This is how everything works in our competition: every year we open the question and record the answers. When the minimum wage is declared, we announce the 3 winners who got the closest numbers and invite them to our training.
Guesses are generally made based the guesses speculated in the media. For example, the inflation target in the New Economic Programme 2020 is 8.5%, if it is reflected to the raise, gross minimum wage will be 2,775 TL and net minimum wage 2,191 TL (without MLA – minimum living allowance (AGI). The inflation rate estimate indicated in the Central Bank’s Inflation report is 12%, if this number is reflected on the minimum wage, then next year’s gross minimum wage will be 2,814 TL and 2,222 TL net (without AGI). The DİSK (The Confederation of Progressive Trade Unions of Turkey) President Arzu Çerkezoğlu emphasizes that the minimum wage should be 3.200 TL net (without AGI) based on the national income calculations.
There is no systematic analysis based on the trends of the previous years. Most professionals coming from the sector hear certain numbers, they read the economic and political signs wisely and base their guesses on multiple factors, including their own gut feelings.
Let’s see who will guess the minimum wage rate for 2020 and which methods will be used for the correct guess… Keep on following us here…
Ela EROZAN GÜRSEL