Why is the minimum wage not being raised?

Minimum wage earners are in a difficult situation. It is likely that more than two-thirds of employees are minimum wage earners. With a bit of exaggeration, it is an undeniable reality that, except for white-collar workers, laborers work as minimum wage earners—or more accurately, are exploited as such. Our topic today is: while the vast majority of laborers are working at a subsistence level around the hunger threshold, while conditions that could lead to a major explosion among the laboring class persist, and while the AKP is losing ground, why and how is the government not lifting a finger on the issue of the minimum wage—or, to put it more realistically, why is it unable to? Yes, not only is the government unable to take a step in this regard, but as with all other issues, it cannot even make a forward-looking promise here. It seems a deep fear has gripped the government! So, what is this fear? We will briefly discuss these points today.

      Let us first establish this point. No matter how dictatorial a political power may be, it can control every area, or at least appear to control it, but there is one area that maintains its dominance with absolute freedom against any kind of government. That area is the capitalist system economy. The reason for this is that in the state-economy relationship, the economy, which is the infrastructure, is dominant over the state, which is the superstructure. For example, the politician tried to control interest rates according to their own logic despite the insistence on high interest rates, but the system responded with currency hikes and shook the politician's authority. Therefore, no government can move forward healthily without understanding the functioning of the economy well. Dictatorship does not apply to the management of a capitalist economy. The stumbling of the AKP, which has been doing something unknown for over 20 years, was likely the stumbling of a capitalist power and a wannabe dictatorial political structure! The issue should be broadened, and policy should be constructed by taking into account the agents through which the national economy is integrated into the global economy. Having laid this out, even if briefly, and cleared our path, let us turn to the question of why the minimum wage is kept suppressed. 

Wages, and naturally the minimum wage, are internal firm costs. In other words, wages and the minimum wage enter firm accounts as a production cost element. The sum of all cost elements constitutes the firm's production cost. Depending on market conditions, the firm determines its sales price by applying a certain 'mark-up'. In other words, the sales price for the firm's product is determined by a certain percentage applied over costs, depending on market conditions. Generally, since large firms dominate the market with their monopoly or oligopoly positions, they also keep their mark-up rates high. Thus, the first fact we must establish is that wages, as a cost element, are reflected in costs by being increased by a certain rate through mark-ups. For example, a wage cost of 1000 units is reflected in costs as 1100 with a 10% mark-up. In this case, rising wages can trigger not only demand-pull inflation as consumer demand but also cost-push inflation as firm costs, since they increase product costs. Therefore, there is not much logic in arguing that wage increases cannot cause inflation based on the erosion of the share of wages in national income. In the meantime, when a wage-hike frenzy is voiced, it is also highly probable that firms could lead to a price explosion. We must also take into account that the firm's only cost element is not wages; in addition, items such as electricity, natural gas, rent, raw materials, etc., must also be considered. It seems that among all the inputs that create costs, the government is most able to suppress the labor factor. This is an important point that is overlooked! 

Another aspect of the matter is that the laborer, who is under extraordinary exploitation, uses bank loans in addition to the firm's wage. This process can have an inflationary effect on two fronts. First, if the production cost as a commodity is accepted as firm profit and cost elements, the credit used by the laborer, who is pushed into financial hardship through extreme exploitation, means that purchasing power exceeding the commodity production cost enters the market, which can lead to inflation in its own right. Second, if we look at the first situation from the opposite perspective, if we consider the credit the laborer receives from the financial sector as non-production or low-productivity-countering income, the purchasing power that enters the market through credit can cause a result known as the Baumol effect, that is, a certain rate of inflation.

Although the phenomenon of inflation is a problem that the government focuses on and tries to suppress, the reason why the issue of the minimum wage comes to our agenda in this context as well concerns not only the internal economy but also relations with the external economy. In this regard, the trade balance and cash flows are important in the context of the balance of payments. The first issue we encounter is the inefficiency of our industrial structure. The inefficiency of our industrial structure is not at a level that can absorb input costs and allow for exports, nor does it appear to be at a level that can close the firm's 'open position'. It is the issue of the inefficiency of our industrial structure that opened the door to entering the 'opium' of hot money during the Özal era, and we are still proceeding on that path. 

It appears that the root of both inflation and the extreme exploitation caused by the severe suppression of the minimum wage lies in the generally backward and inefficient industrial structure. When we see the minimum wage, the systematic current account deficit, the insufficiency of the number of declared liabilities, and even the extreme exploitation formations and processes built upon Syrian refugees as transfer mechanisms, and when we get to the root of the event, it is the cumulative result of policies implemented in the past that were misguided (I cannot say wrong, because they were conscious, carried out under capital pressure and electoral anxiety!).