The Minimum Wage Determination Commission will meet again this week to answer the question: how much will the minimum wage be in 2021? The third meeting is expected to result in a final wage decision. Any increase in the minimum wage benefits not only workers but also the state: of every 3 TL rise, approximately 2 TL goes to the employee and 1 TL goes to the government.
Minimum Wage Determination Commission Meets
The Minimum Wage Determination Commission is reconvening to decide next year’s minimum wage. At the meeting that begins tomorrow, the Turkish Statistical Institute (TÜİK) is expected to present the calculated subsistence amount for a single worker. Last year TÜİK reported the subsistence costs for a single worker as 2,331 TL for heavy work, 2,086 TL for medium work and 1,940 TL for light work. While the public awaits the new minimum wage, neither workers, employers nor the government have yet presented a concrete proposal for an increase. The first two meetings so far have been recorded as sessions without concrete figures being offered. The workers’ union Türk-İş has stated that, unlike in previous years, it will not announce a specific demand at the outset. The union intends first to hear proposals from employer representatives and the government, evaluate those offers and then present its own proposal. Negotiations scheduled through the end of the week are expected to determine the new minimum wage figure.
Minimum Wage Increases Also Benefit the State
Although a minimum wage increase primarily affects employees, the state also receives substantial benefits from any rise. An increase in the minimum wage raises state revenues as well. For example, of a 100 TL increase in the minimum wage, only about 67 TL reaches the worker while the remaining 33 TL goes to the state. Put another way, of every 3 TL added to the minimum wage, roughly 2 TL goes to the worker and 1 TL to the government. Many minimum-wage earners are unaware of the significant deductions between gross and net pay. For example, with a gross salary of 3,000 TL, deductions by the state can reduce the take-home pay to around 2,400 TL.
The primary reason for this gap is taxes. Turkey’s tax system collects a large portion of taxes directly from wages compared with many other countries. While other countries may calculate and collect some taxes separately, in Turkey the system is built around deductions made directly from the employee’s monthly salary. Employees in 4A and 4C status therefore pay their taxes out of each paycheck, while 4B contributors pay taxes externally but still remain part of the taxpayer group. High tax and contribution rates on minimum-wage incomes mean that increases often deliver limited immediate benefit to workers for that year.
The Largest Share Goes to Income Tax
Looking at typical deductions from the gross minimum wage: a 14% social security contribution, a 1% unemployment insurance contribution, a 15% income tax and a 0.75% stamp tax are applied. Under these rates, if the minimum wage rises by 12%, the gross wage would reach 2,603 TL and the state’s revenue per worker would increase by 136 TL. A 15% increase would raise the wage to 2,673 TL and increase the state’s revenue per worker by 170 TL. While rises of 17% or 20% are also possible, a raise between 12% and 15% is currently considered most likely.