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Minimum wage rise in Turkey may impact exports

With Turkey planning to increase the minimum wage by 30 per cent from January, the experts are of the opinion that it could negatively impact sourcing of big retailers such as Carrefour, who largely depend on lower-wage employees. The ruling AK Party (AKP) campaigned in the November election on a pledge to lift the monthly net minimum wage to 1,300 lira ($461), appealing to the roughly five million minimum-wage earners struggling to make ends meet.

With minimum wage workers making up around a fifth of Turkey's 26-million strong workforce, the increase is expected to cost the private sector around $9.2 billion, according to an estimate by Umit Ozlale, an economics professor at Istanbul's Ozyegin University. While retailers could announce job cuts to rise in wages, margins are expected decline by 50-100 basis points across the sector.

Experts are of the opinion that the rise in the minimum wage could lead to further stoke inflation, now at around 7.6 per cent. It could also undermine confidence in the AKP's promises to strengthen fiscal discipline, risking further pressure on the lira, which has lost nearly a quarter of its value against the dollar this year.

 
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