Reinforcing inequalities with regional minimum wage

The suggestion of a regional minimum wage is back in the spotlight. Traditionally, when the minimum wage drops to an even worse level than usual due to inflation, the idea of regional minimum wage comes to the mind of an employers’ organization. During such periods, it is difficult for the government to resist in the face of deepening poverty, especially when election concerns loom over them. At the very least, suggesting a regional minimum wage is put forward as the only solution to keep costs low in some workplaces. It is not explicitly asked to keep the minimum wage low, but flexibility is sought through regional differentiation.

Turkey had already implemented a regional minimum wage between 1967 and 1974, dividing the country into six regions. It was later reduced to four. The wage in the region with the lowest minimum was approximately 80% of the wage in the region with the highest. However, the country eventually transitioned to a national minimum wage.

In Turkey, no topic is ever fully discussed, concluded, and set aside. Century-old issues can still resurface. If you're wondering if this matter had been settled, the answer is no, it hasn't. Everything is up for debate once again. This time, we've reopened a topic from about half a century ago.

There are multiple reasons for not transitioning to a regional minimum wage. These reasons need to be briefly listed.

Upsetting the balance

The International Labour Organization (ILO) adopted the 26th convention regarding the minimum wage in 1928. The concept of the minimum wage emerged globally based on the idea that a working person deserves a decent standard of living simply because they are human.

Within democratic relations, it is expected that the necessary wage level for workers to live under humane conditions would be ensured through union struggles. However, for groups such as newcomers to the workforce, those working in small enterprises, and industries where unionization is challenging, the minimum wage has been considered as a solution.

Yet, in a country like Turkey, where the rate of unionization has fallen below 15%, the minimum wage essentially represents the average wage. In an environment where unions are disregarded, the average wage is determined by the joint decision of the state and employer organizations.

The proposal for a regional minimum wage suggests that the average wages in impoverished regions should be lower than those in non-impoverished regions. The rationale is that, since the cost of living is lower in impoverished regions, a lower wage would be sufficient. While it is true that there are significant disparities between regions in Turkey, the proposed solution risks exacerbating these disparities even further.

Throughout the world, there is a positive correlation between the average wage and per capita income. The income of any country, region, or city is composed of the total income generated there. If wages in a low-income region are kept lower than wages in a high-income region, balance between regions can never be achieved. The differentiation of regional wages indicates a lack of concern about regional imbalances. It implies a desire for income distribution disparities to persist.

The proposal itself carries an internal contradiction. Advocating for regional disparities based on the reasoning that prices are lower in poor regions suggests a willingness to reinforce existing inequalities. Reducing the minimum wage will decrease the overall income in the region. The decrease in total income might lead to a reduction in local demand, potentially putting local businesses in a difficult position. Consequently, there is a high risk of further intensifying the imbalance.

The continuation of imbalances in both class and regional income distribution will inevitably intensify existing social problems. We should first talk about migration from regions with low wages to regions with high wages. Implementing different wage policies clearly encourages migration to major cities.

Contrary to this, some argue that due to low wages, employers may relocate their investments to impoverished regions. However, unprecedented incentives have been provided for more than half a century to encourage investment in poor regions, and none of them has worked. In a country where even direct cash injections to entrepreneurs prove ineffective for investment, no one would relocate their investments solely due to low wages. Furthermore, the employment generated by lower wages would not be sufficient to compensate for the reduction in regional income.

The idea of a regional minimum wage essentially means further lowering average wages in practice. This insistence reveals Turkey's commitment to an economic understanding that has been based on cheap goods exports relying on low wages for over two decades. It indicates a reluctance to prioritize technological development, focus on science, and improve the quality of the workforce. It is understood that there is a belief that a growth model based on inferior technology can continue.

High wages for whom, low wages for whom?

There are also problems associated with determining regional minimum wage levels. When setting regional minimum wages, a relationship is established between the average per capita incomes of regions and the minimum wages to be applied in those regions. It is expected that the difference between regional minimum wages would be determined based on the difference in regional per capita incomes.

The first problem is related to statistics. TurkStat’s problematic statistics are not limited to unemployment and inflation figures. Regional income figures do not reflect the actual situation, either. Since most companies in Turkey are headquartered in İstanbul, regardless of where the company's factory is located, the profit is considered to have been obtained from İstanbul. İstanbul's income is actually reflected more than it should be.

The second problem is political. No matter what kind of regional classification is made, we all know that the regions with the lowest income will be the Eastern and Southeastern regions. Workers in Kurdish cities, maybe along with one or two oter cities like Yozgar or Gümüşhane, will officially receive lower wages than those working in other regions of the country.

Will those in power take such a risk? Before making a decision, it would be beneficial for them to think about why this model was abandoned in the early 1970s. During those years, the approach of Priority Regions in Development was implemented with regional investment incentives. It was not very successful, but it did not evoke a sense of humiliation like regional minimum wage does. (BD/TY/VK)