Turkey looks to fight inflation by raising minimum wage third time

Turkey on Thursday (December 22) announced third major minimum wage hike in a matter of a year in order to try and cushion against inflation. The move has been taken ahead of crunch elections.

Turkish President Recep Tayyip Erdogan said on Thursday that the minimum wage would be raised to 8500 liras (USD 455). In December 2021, the minimum wage was 2826 liras.

More than 40 per cent of Turkey's working citizens earn minimum wage. When he rose to power two decades ago, working classes were the main support base of Erdogan.

But Turkey's poor have been hit the hardest by an economic crisis that has seen the official annual inflation rate reach 85 percent.

It was raised to 4,253 liras last January and then to 5,500 in July.

But an accompanying plunge in the lira's value means that the wage has been raised only fractionally in dollar terms in the past year.

Turkey's latest economic crisis started when Erdogan -- a lifelong opponent of high interest rates -- pressured the central bank to bring down chronically high consumer prices by lowering borrowing costs.

Conventional economic theory urges policymakers to fight inflation by curbing demand and raising the price of doing business through higher interest rates.

Erdogan's approach set off a currency crisis that saw the lira lose nearly half its value in a matter of weeks late last year.

The government has responded by spending its reserves on currency support measures and imposing complex economic rules aimed at bringing inflation under control.

(With inputs from agencies)

WATCH WION LIVE HERE