Minimum Wage Relationship Between Inflation and The Wage-Price Spiral in Turkey
Osman Akgül, Abdullah Miraç BükeyWorking for wage has started to accelerate with the industrial revolution and reached its highest rates with the neo-liberal period. The wage earners now constitute the majority of the society in employment in many countries. Therefore, any policy regarding wage earners concerns the general public. In this study, it was aimed to examine the direction of the relationship between wages & inflation and to determine the point of real wages. For this purpose, annual CPI and Minimum Wage data between 1987-2018 were used. The relationship between inflation and minimum wage was determined by applying ARDL Boundary Test Approach and the existence of wage-price spiral by applying Toda-Yamamoto Causality tests. According to the results of the econometric analysis, a long-term relationship was found between inflation and minimum wage, while the relationship was found meaningless in the short term. Accordingly, a 1% increase in inflation in the long run increases the minimum wage by approximately 2.59%. The fact that the increase in the minimum wage is higher than the increase in the inflation rate that’s so the elasticity coefficient greater than 1 means the real increase in the minimum wage. According to the results of Toda-Yamamoto Causality analysis, a bidirectional causality relationship was determined both from minimum wages to inflation and from inflation to minimum wages. This relationship suggests the existence of the 1987-2018 reference period in the range of wage-price spiral in Turkey. It was observed that the minimum wage increased by 3.65 units in the years following the crisis periods.
Türkiye’de Enflasyon ile Asgari Ücretler Arasındaki İlişki ve Ücret-Fiyat Sarmalı
Osman Akgül, Abdullah Miraç BükeyÜcret karşılığı çalışma, sanayi devrimi ile ivmelenmeye başlamış, neo-liberal dönemle en yüksek oranlarına ulaşmıştır. Ücretlilerin artık birçok ülkede toplumun çoğunluğunu oluşturuyor olmaları onlara dair yapılacak herhangi bir çalışmanın da toplumun genelini ilgilendirmesi açısından hayatiyet arz etmektedir. Yapılan bu çalışmada ücretler ile enflasyon arasındaki ilişkinin yönünü incelemek ve reel olarak ücretlerin geldiği noktayı tespit etmek amaçlanmıştır. Bu minvalde Türkiye’nin 1987-2018 yılları arası yıllık TÜFE ve Asgari Ücret verileri kullanılmıştır. Enflasyon ve Asgari Ücret arasındaki ilişki ARDL Sınır Testi Yaklaşımı ve ücret-fiyat sarmalının varlığı ise Toda-Yamamoto Nedensellik testleri uygulanarak tespit edilmiştir. Ekonometrik analizin sonuçlarına göre enflasyon ve asgari ücret arasında uzun dönemli ilişki tespit edilmiş, kısa dönemde ise ilişki anlamsız bulunmuştur. Buna göre uzun dönemde enflasyonda meydana gelen %1’lik bir artış asgari ücreti yaklaşık olarak %2.59 oranında artırmaktadır. Asgari ücretteki artışın enflasyon oranındaki artıştan yüksek olması, yani esneklik katsayısının 1’den büyük olması asgari ücretin reel olarak artışını ifade etmektedir. TodaYamamoto Nedensellik analizi sonuçlarına göre ise hem asgari ücretlerden enflasyona hem de enflasyondan asgari ücretlere doğru çift yönlü bir nedensellik ilişkisi tespit edilmiştir. Bu ilişki ise Türkiye’de 1987-2018 dönemi referans aralığında ücret-fiyat sarmalının varlığına işaret etmektedir. Kriz dönemlerini takip eden yıllarda ise asgari ücretin 3.65 birim arttığı görülmüştür.
Throughout history, people have tried to earn their lives by evaluating their labor. In every period, the evaluation of labor has been done with different methods depending on production. Particularly in the production structure formed after the industrial revolution, the majority of the people sold/rented their labor with increasing acceleration and the name of their income is wage. Since most of the developed societies constitute wage earners, the policies to be put forward about them will have both economic and social effects.
When we look at Turkey’s private wages and nature of the relationship between inflation and minimum wage, which has an important place in the income distribution and to determine the quantity, should inflation better understanding of the dynamics in the era of increasing both the minimum wage has the potential importance for progress and communication of monetary policy. This is because it has the structure to shed light on the course of labor costs in terms of being a reference to wages in the economy as well as the minimum wage prevalence.
According to the wage-price spiral, which influences macroeconomic dynamics on the basis of any expanding aggregate demand policy, businesses would like to maintain the prices of their products and prefer to increase prices. When faced with the same situation, workers will try to increase their real wages in addition to maintaining their real wages.
There are some studies in the literature examining the relationship between wage inflation. Most of the studies have tried to reveal the causal relationship between the general level of the economy, the general level of prices and wages and the direction of this relationship. Also, in the majority of studies, the effect of productivity and wages on inflation is examined.
According to the literature review, the relationship between wages and inflation is generally positive and nominal wages are determined by taking into account the inflation rate realized in previous years. In Turkey, most of the studies performed to examine the relationship between inflation and wages together as a very strong relationship, where there is bidirectional causality is present in many works and pay the price spiral.
Most of the studies conducted in other countries indicate that there is a relationship between wages and inflation. Inflation has a two-way effect on wages, both positive and negative. Thus, the findings obtained in the direction and severity of the impact vary. Another notable result was obtained from causality analyzes, and one-way or two-way relationships were determined.
In this context, annual CPI and Minimum Wage data between 1987- 2018 were used. The relationship between inflation and Minimum Wage was determined by applying the ARDL Boundary Test Approach and the existence of the wage-price spiral by applying the Toda-Yamamoto Causality tests. According to the results of the econometric analysis, the long-term relationship between inflation and the minimum wage was found and in the short term, the relationship was found to be meaningless. Accordingly, a 1% increase in long-term inflation increases the minimum wage by approximately 2.59%. The increase in the minimum wage is higher than the increase in the inflation rate, that is, the coefficient of elasticity greater than 1 indicates the real increase in the minimum wage. According to the results of the Toda-Yamamoto Causality Analysis, a two-way causality relationship was determined from minimum wages to inflation and from inflation to minimum wages. This relationship suggests the existence of the 1987-2018 reference period in the range of wage-price spiral in Turkey. In the years following the crisis periods, the minimum wage increased by 3.65 units.
As a result of causality analysis, the emergence of a two-way relationship and the fact that the average increases are close to each other reveals that minimum wages are determined by considering the inflation criterion. In determining the rate of increase in minimum wages, considering the inflation rates in previous years, that is, economic actors took decisions in 1956 within the framework of Adaptive Expectations Theory developed by American economist Phillip D. Cagan, and real wages increased as a result of the differences between expected inflation and actual inflation. It is seen that the real minimum wages, which are in a downward trend following the crisis periods, have been increased to compensate. In particular, since the inflation rates decreased to single households after 2004, the inflation expectation was predictable, leading to an increasing trend in the 8-9% band of monetary minimum wages after 2004.
