Minimum wage assessment from Prof. Dr. Uğur Emek and Assoc. Prof. Dr. Oğuz Demir: Are stagnation and unemployment on the horizon for 2024?

Millions of citizens are awaiting the second meeting of the Minimum Wage Determination Commission, where the decision on the minimum wage will be made, scheduled for 1:30 PM today.

While Türk-İş is sitting at the table with 4 workers, no specific figure has been mentioned so far.

Speaking to 12punto before the meeting, Prof. Dr. Uğur Emek, Head of the Department of Economics at Başkent University, emphasized the uncertainty of the process by stating, "The President will determine that figure."

Prof. Dr. Uğur Emek

Emek stated the following:

"I DO NOT THINK THE PRESIDENT CAN AFFORD TO RISK IT"

"The minimum wage needs to be around 20 thousand liras. Treasury and Finance Minister Mehmet Şimşek had said it would be based on the inflation target and that it would happen once a year.

However, if it is done according to the inflation target in the current system, I cannot give the exact rates, but employees would be very aggrieved. The bill for the beating taken in the meantime would be entirely passed on to the employees. I do not think the President can afford to risk this before the elections."

"THEY ARE RELYING ON THE BASE EFFECT"

Citizens will receive it on February 1st. Even if inflation reaches 65 percent by January according to the Central Bank's forecast, with significant inflation of 3-4 percent occurring until February 1st, it will rise above 70 percent towards May. We will be back to square one in just a few months.

Inflation will fall after the second half of the year. They are relying on the base effect for this as well.

We experienced two 9% inflation rates in July-August. When those are removed from the trend, they will say inflation has fallen. Once, the fact that inflation is falling does not mean that prices are decreasing. Inflation is the rate of increase in prices. Inflation is not the price, it is the rate of increase.

"THERE IS NO ANSWER TO THE QUESTION OF WHETHER INFLATION WILL FALL"

Stating that there must be a disinflation program for inflation to be reduced in Turkey, Emek said that the government does not have a disinflation program.

Emek continued his words as follows:

Look, a stability program was created to get out of the 1994-2001 crisis, and structural reforms were made. This program lacks a fiscal policy leg.

Minister Şimşek said two things as the fiscal policy leg. First, he said we are telling you to go on fewer trips abroad, and second, he said, 'we are telling you to prefer TOGG for car purchases.' This is not an austerity policy. Both trips abroad will continue and car purchases will continue, but they will buy TOGG; this is not austerity.

People are now leaving big cities. There is no possibility for people to live in big cities anymore. They used to try to come to the big city, now they are trying to escape from the big cities.

Now, without a comprehensive program, without a stability program, this cannot be done just by raising interest rates. You are raising interest rates, you are going for monetary tightening, which you cannot even do properly.

You are giving loans to banks below the policy rate in the name of giving cheap credit. When you put these together, inflation does not fall. There is no answer to the question of what will happen for inflation to fall.

"TURKEY NEEDS A FEW HUNDRED BILLION DOLLARS"

Criticizing the method used by TÜİK in unemployment data, Emek drew attention to the unemployment problem by saying, "The root cause of unemployment is people giving up on looking for work. In the TÜİK survey, they ask if you have applied to a place through formal channels in the last two weeks."

Emek continued his words as follows:

Currently, no price in Turkey carries information because they have become meaningless. Rental prices, interest rates, prices in markets have become meaningless. You don't know if this is expensive or correct; they have broken that dynamic.

For that dynamic to improve, structural reforms must be made again, and those mistakes in the economy must be corrected; the public procurement law must be returned to its former state and made compatible with the EU. Transparency must be ensured. Transparency must be ensured in Central Bank accounts.

Look; a Central Bank Governor told the President, 'tell us three sectors and let's make them fly.' Based on what will the President choose those three sectors? What technological development is the President aware of to be able to name three sectors?

Also, is the Central Bank a Development Bank? All these balances need to be corrected again. Such actions do not give positive signals for fighting to increase this inflation. Foreigners are also watching this, and they are the ones who will give us the money! Turkey currently needs a few hundred billion dollars. The friends who will give that money are not being positively affected by these signals; they are being negatively affected.

Academic and Sözcü TV programmer Assoc. Prof. Dr. Oğuz Demir made important assessments, stating that economists are in agreement on an increase at the 50 percent level regarding the minimum wage.

Assoc. Prof. Dr. Oğuz Demir

EXPECTATION IS AT THE 50 PERCENT LEVEL

Demir stated the following regarding the minimum wage expectation:

"We estimate that a raise of close to 50 percent will come out of the Minimum Wage Determination Commission. Especially, the inflation in the second half of the year is around 35 percent. We are heading towards an election, and this also has an effect.

President Erdoğan said 'a single raise.' Therefore, when a raise above 35 percent is combined with the election and the single raise message, it is possible to expect an increase towards 50 percent.

Of course, the figure that should actually emerge is a figure that should be evaluated together with the poverty and hunger threshold. However, it is difficult to say let there be a standard minimum wage in Turkey.

The living conditions in a big city in Turkey and the living conditions in small cities do not have the same cost of living. If you base it on big cities, a 50 percent raise is not enough. If you base it on small cities, a 50 percent raise seems to satisfy the employee if you leave Istanbul, Ankara, Izmir, and Bursa aside."

"PURCHASING POWER WILL DECREASE"

Emphasizing the importance of the inflation effect on the minimum wage, Demir also drew attention to the importance of the "election" and "single raise" headlines.

Touching on the relationship between the newly determined minimum wage and purchasing power, Demir said, "In terms of purchasing power, the Central Bank thinks that inflation will remain high in the first 4 months of the year, and then, if there is no attack on the exchange rate, there will be a downward trend with the slowdown and base effect. We expect the raise received in the first half of the year to rapidly decrease purchasing power."

"STAGNATION, HIGH INFLATION, AND UNEMPLOYMENT"

Emphasizing that there is not a sufficient environment for the single raise decision, Demir stated the following:

"If we seem to expect a sharp drop in inflation when we reach July, if we think that inflation will come below 1 percent month by month, then yes, but the indicators we have still do not offer a sufficient environment for a single raise.

We will experience a period in 2024 where it is difficult and there is stagnation, and inflation remains high in the first 6 months of the year. Perhaps the Turkish economy, which has been going through a serious crisis for the last 3 years, had one important part: yes, purchasing power was eroding, inflation was high, but there was no loss of employment. In the first half of the year, there will also be a loss of employment.

It looks like we will be faced with stagnation, high inflation, and rising unemployment.

This is a point that will delay the recovery and delay the process of real wages entering the growth process as we expect. Turkey still has serious problems in the labor market."