Real inflation says the minimum wage should be 57,660 liras

Discussions on the minimum wage for 2025 are once again being held based on false and misleading inflation calculations. Let alone compensating for the losses experienced in previous years, even the TURKSTAT inflation, which is expected to be at least 44 percent by the end of this year, is not being discussed. Instead of the 44 percent inflation level from TURKSTAT or the 90 percent level from ENAG, they want to start the bargaining from the government's 21 percent inflation target in the Medium-Term Program. The employer side, led by MÜSİAD representatives, states that they can make an increase at the level of 35 percent.

Mehmet Şimşek and the Central Bank have long been suggesting that, in order to break inflation expectations, wages and other pricing behaviors should be determined according to the targeted inflation for the coming period (21 percent) rather than past inflation. With President Recep Tayyip Erdoğan publishing the 43.98 percent Revaluation Rate in the Official Gazette, this proposal has no basis left. With a 44 percent Revaluation Rate on the table, no one will believe or trust the 21 percent inflation expectation from now on... Especially when none of the government's inflation expectations have held true for years...

The balances in the economy began to deteriorate significantly starting in 2016, the deterioration accelerated with the transition to the Presidential System in 2018, and it completely went off the rails in October 2021 with the "Nas" (religious decree) claim. A large segment of society no longer trusts TURKSTAT's inflation measurements. Since January 2020, we have had two separate sets of inflation data. One is from TURKSTAT, and the other is from ENAG, which consists of independent economists.

NUMBERS DO NOT LIE

Since ENAG's measurements began in 2020, I wanted to look at the minimum wage and pension discussions starting from January 2020. However, let me state this immediately: Were workers satisfied with their wages and retirees with their pensions in January 2020? Of course, they were not satisfied. But at the wage levels we have reached today, we are desperately missing the purchasing power of the 2,325 lira minimum wage and the 1,500 lira lowest pension of January 2020. If you are honest, numbers (statistics) do not lie.

Now, let us discuss the scenarios being talked about regarding the minimum wage and the lowest pension, the levels required to restore the purchasing power destroyed by inflation in past periods, and whether the business world and the state can afford them, accompanied by tables and graphs.

In our first table, we see minimum wage scenarios in a range starting at 25 percent and going up to the 85-90 percent ENAG inflation. Between 21 thousand liras and 33 thousand liras...

YET THERE ARE PAST YEARS WE NEED TO DISCUSS

If we remain within the scenarios above, we would be ignoring the real inflation that went wild with NAS policies in past years, especially in 2022 and 2023, but which TURKSTAT did not measure. We would be legitimizing the inflation that TURKSTAT measured incorrectly. Then let's take a look at the cumulative inflation of the last 5 years as of January 2020 and the end of 2024. The table below shows it very clearly.

Since January 2020, the cumulative inflation measured by ENAG has been 2383 percent. The general price level has increased exactly 24.8 times.

According to TURKSTAT, the increase is only 507 percent... That is 6 times... As the government front says, we did not let the minimum wage be crushed by inflation. They did not let it be crushed according to the TURKSTAT data that does not reflect the truth. If the minimum wage had increased according to TURKSTAT, let alone 21-25 thousand liras for 2025, the minimum wage would have been 14 thousand liras...

However, in the markets and bazaars, in real life, the 2025 minimum wage needs to be 57,660 liras to catch up with the purchasing power of the 2,325 lira minimum wage in January 2020.

AS FOR THE LOWEST PENSION...

In January 2020, the lowest pension was 1,500 liras. Again, according to ENAG inflation, the lowest pension today needs to be 37,200 liras to catch up with the purchasing power of that date. But there are objections to that as well. In 2004, the lowest pension was 40 percent higher than the minimum wage. It was equalized in 2016. Later, the lowest pension came to the level of 73 percent of the minimum wage.

Let's look at the table again.

A small definition for the index I created from ENAG's inflation measurements... In January 2020, the value you get when you add up all your expenses from food to housing, from clothing to education and health, from transportation to communication is 100... If there is 85 percent annual inflation at the end of 2024, the value for which you will buy all the same goods and services becomes 2483. In other words, it increases 28.2 times. In this case, the minimum wage, which was 2,325 liras in January 2020, needs to rise to 57,660 liras, and the lowest pension, which was 1,500 liras, needs to rise to 37,200 liras. If the lowest pension had continued to be 40 percent higher than the minimum wage, the lowest pension would have been 80,724 liras.

WOULD THE STATE AND EMPLOYERS GO BANKRUPT?

What I want to insistently emphasize is this: The figures I found here are the wage and pension levels of January 2020, when workers and retirees were not satisfied with their situation... Were employers and the state going bankrupt in 2020, so that they would go bankrupt today when the minimum wage and pensions return to the same level in real terms? Let's look at this with graphs as well.

The share of labor income in the national income (GDP). The blue line shows the world average, and the red line shows Turkey. A decline in wages, which started in 2016 and accelerated in 2018, is clearly visible. (The graph is taken from Dr. Orhan Karaca's X account.)

When we look at the wage and profit shares of the 500 largest firms, we see the development of Crocodile Capitalism more clearly.

While the dashed line showing the share of wages has fallen dramatically since 2016, the share of profits shown by the solid line is increasing at a great speed. Because the ends of the two lines resemble a crocodile opening its mouth, we call this crocodile capitalism. (The graph is taken from Prof. Dr. Aziz Çelik's X account.)

According to these graphs, there was no way the Turkish private sector was going to go bankrupt in 2020 or in previous years. It would not go bankrupt today either if it returned to the conditions of 2020, or even the conditions of 2007.

Some economists, especially Daron Acemoğlu, have a saying. "For worker wages to increase, labor productivity must increase. Let factor productivity in production increase so that wages increase..." A correct generalization. But come, let's look at labor productivity and the real wage level in Turkey together.

The period from 1982 to 2023. The red dotted line shows real worker wages, and the blue line shows labor productivity. While labor productivity has increased significantly, especially since 2001, real wages have not increased at all. Will Acemoğlu and capital economists explain this graph with technological development in capital? The share of high-tech industry in Turkey is at the level of 3 percent, 3.5 percent in total. Which technology are we talking about? A blatant exploitation of labor is seen... (The graph is taken from Duvan Berke's X account)

LET'S COME TO THE RETIREES... WOULD THE STATE GO BANKRUPT?

While the share of retirees in the national income was 7 percent in 2016, it fell to 5.4 percent in 2024. Moreover, the number of retirees increased by 40 percent during this period. While the total share fell by 1.6 points, the decline in the per capita share was much more dramatic at 4.4 points.

They have turned Turkey into a complete hell for retirees. The share of public spending on retirees within total spending is 4.3 percent... The world average is almost double that. When we say 7.9 percent world average, there are developed social states and Northern European countries, as well as countries like Senegal, Tanzania, Zimbabwe, and Sudan. The share of retirees in public spending is 11.3 percent in Europe...

The sum of pension expenditures, social assistance, and health expenditures also shows to what extent the public and the state think about their people and to what extent it is a social state. Let's look from there too.

We are among the world's top 20 largest economies. But this size is not reflected in society as prosperity. Only a small minority can benefit from the blessings of this size. According to the criteria of being a social state, we are half of the world average and one-third of the European average. The definition of "Social State" made for the Republic of Turkey in the Constitution remains empty, just like the definition of "Laicism". When you say social state, you should also include quality free education expenses for everyone. Children are hungry in schools, heaters are not working, children are freezing from the cold. What are we talking about?

Just as the state could not become a social state, it is getting worse every year. Let's take a look at the table over the years, not as the ratio of social spending to national income, but as the ratio to the budget. The share allocated from the budget for the requirements of being a social state (pensions, social assistance, health expenditures) falls from 18 percent in 2016 to 12.4 percent in 2025. Moreover, even though the number of retirees has increased by 40 percent. The amount to be paid for interest rises from 9 percent to 13 percent. Even more dire is the tax the state has given up on collecting. The tax is accrued. In other words, there is no evasion. There is no informality. But the state does not collect a large portion of this tax from employers under the name of various incentives. We are talking about a larger share than social spending. The amount of tax given up for 2025 is 3 trillion liras. Only about 800 billion of this is the tax that should have been collected from the minimum wage but was given up. The remaining 2.2 trillion liras is the tax given up from employers.

Did the state cut the money its retirees deserved, and did the state's budget improve? The biggest indicator of that is the ratio of the budget deficit to national income.

In 2020, while 1,500 liras were given as the lowest pension, the ratio of the budget deficit to national income was 3.5 percent. In 2023, they turned pensions into peanuts. The ratio of the budget deficit to national income rose to 5.4 percent despite the hidden KKM (FX-protected deposit) burden, and to 8.9 percent with the KKM losses loaded onto the back of the Central Bank. It was cut from the retirees' pensions and transferred to the ostentation of the palace and bureaucracy and to cronies and sects through inflated tender prices.

If the lowest pension were equalized with the minimum wage and both were 57,660 liras for 2025, neither the state nor the private sector would go bankrupt... Workers and retirees could only reach the purchasing power they had in January 2020.