Erdogan promises draconian hikes to pensions

Some 13.5 million retirees in Turkey will receive at least 40 percent raise to their pensions, pro-government newspaper Sabah announced on Saturday.  Last Thursday, Erdogan heralded a 50% hike to minimum wage,  which affects 6 mn private sector blue-collar workers, and is reported to cost the budget at least $4 bn through 2022 due to tax forbearance.


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Turkish press is also mentioning salary adjustments to health care workers, teachers and police.


President Recep Tayyip Erdogan personally ordered an “extraordinary” increase to pensions, Sabah said.


Pensions will be raised either based on the annual minimum wage, or a rate of inflation plus 25 percent, according to Sabah.


The government raised the minimum wage by 50 percent on Thursday, while Turkey’s official inflation rate for November was 21.3 percent.


Some retired persons have pensions that are less than half of minimum wage, and they may receive a separate raise before the overall change, the newspaper said.


By the beginning of 2022, the lowest non-public worker pension will be 2,724 liras ($165) and the lowest public worker pension will be 3,030 liras ($185) at minimum, based on inflation rates, it said.



While few civil servants receive wages at or around the minimum wage, the state has 6 mn pensioners, the payment hikes for which have to come from budget transfers.


The generous incomes policy is interpreted as pre-election pork-barreling by the opposition, though raging inflation will probably erode a significant portion of the increased labor incomes within six months, according to former Central Bank research chief, now academic Dr Hakan Kara.


AKP sources had told the press that the administration may tolerate budget deficits up to 5% of GDP to protect labor against the inflation menace. However with government bond yields  currently ranging in 21-23% for 2, 5 and 10 year maturities, the generosity is certain to bloat financial expenditures, as well as saddle the budget with the burden of increased transfer payments.


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Published By: Atilla Yeşilada

GlobalSource Partners’ Turkey Country Analyst Atilla Yesilada is the country’s leading political analyst and commentator. He is known throughout the finance and political science world for his thorough and outspoken coverage of Turkey’s political and financial developments. In addition to his extensive writing schedule, he is often called upon to provide his political expertise on major radio and television channels. Based in Istanbul, Atilla is co-founder of the information platform Istanbul Analytics and is one of GlobalSource’s local partners in Turkey. In addition to his consulting work and speaking engagements throughout the US, Europe and the Middle East, he writes regular columns for Turkey’s leading financial websites VATAN and and has contributed to the financial daily Referans and the liberal daily Radikal.