EYT and wage hike brake on split shock
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Election regulations curbed the distribution shock. The hikes in wages and the EYT regulation increased the share of labor in national income, which decreased from year to year, in the first quarter of 2023. Looking at the data, it was seen that EYT may have been effective in the election results.
It was observed that the share of labor in national income increased in the first quarter of 2023 with the announcement of the Gross Domestic Product (GDP) data of the Turkish Statistical Institute (TUIK).
Those who have reached the age of retirement before the election (EYT) and due to wage hikes, the share of labor payments in national income increased. The severance pay of those retiring with EYT and the increase in wages at the beginning of the year increased the share of labor payments in national income, while decreasing the share of capital.
Speaking to Sozcu.com.tr, economist Cem Oyvat stated that the effect of the EYT process on the elections may have been overlooked in the analyses.
THE SHARE OF LABOR INCREASED TO 38 PERCENT
According to TURKSTAT, labor payments increased by 126.1 percent in the first quarter of this year compared to the same quarter of the previous year. Net operating surplus/mixed income, which represents the share of capital in national income, increased by 48.7 percent in the same period.
The share of labor payments, which is the share of labor in national income, in Gross Value Added at current prices, which was 31.1 percent in the first quarter of last year, increased to 38 percent in 2023.
SHARE OF LABOR HAS FALLED STRONG IN 2022
The share of labor in national income fell sharply in 2022, becoming 25.3 in the second quarter, 26.3 in the third quarter, and 25.2 in the fourth quarter. Thus, in the first quarter of the year, the share of labor in national income increased by 12.8 points on a periodic basis.
While the share of net operating surplus/mixed income, which represents the share of the capital, was 47.6 percent in the first quarter of last year, it became 38.2 percent in the first quarter of 2023. Again in 2022, this figure had increased due to reasons such as inflation and high operating profits. However, in the first quarter of 2023, there was a decrease of 16.7 points on a periodic basis.
According to the compilation made by Sozcu.com.tr based on the GDP data calculated with the seasonally adjusted current prices using the income method, it was observed that the share of labor in national income increased in the first quarter of the year.
In calculations made according to seasonally adjusted data, it was seen that the share of labor payments, which was 25 percent in 2021, decreased to 24.3 in 2022. According to the data, this rate increased to 30.1 percent in 2023.
According to the same data, the share of capital in national income, which was 48.3 percent in 2022, decreased to 40.2 percent in the first quarter of this year.
EYT EFFECT
According to the information provided by TURKSTAT, labor payments increased faster than GDP in the first quarter. In addition, with the entry into force of the Retirement Aged (EYT) regulation, severance pay payments also increased significantly. This situation increased the share of labor payments in value added.
According to the calculations made by TURKSTAT, excluding the effect of the EYT regulation, the share of 38 percent labor payments in Gross Value Added was estimated to be approximately 33.5 percent.
EYT EFFECT MISSED
Commenting on the subject to Sozcu.com.tr, Greenwich University Faculty Member Dr. Cem Oyvat stated that the effect of the EYT regulation was overlooked in the election analysis.
Oyvat said, “According to the national income data of TURKSTAT announced today, the significant increase in severance pay payments by the EYT regulation has increased the total workforce payments by an additional 13.4% in the first quarter of 2023. In addition, new positions opened by early retirees may have reduced the unemployment rate before the election a little bit. We will see the effects of the EYT regulation on employment more clearly in April and May labor force statistics. But the EYT arrangement may be an important factor in Erdogan’s election victory,” he said.
Oyvat also stated that the slowdown in the increase in prices compared to the last year with the last minimum wage hike slightly improved the long-deteriorating situation of the minimum wage, adding:
“We see this when we compare the minimum wage with the hunger limit set by Türk-İş for a family of four. The minimum wage hunger limit rate, which was in the 0.9-1 band in May 2018-2021, decreased to 0.71 in May 2022 with increasing inflation. This rate has increased back to 0.82 in May 2023. The developments we have mentioned above are also compatible with the recent recovery in the consumer confidence index of TURKSTAT.”
‘EYT EFFECT IS TEMPORARY’
Stating that the effect of severance pay made to those who retire with EYT on the distribution will continue for a while, Oyvat stated that this effect is temporary and will fade after a while.
Pointing out that Turkey has had a very serious foreign trade deficit recently, Oyvat said: dollar In order to keep the exchange rate below 20, it has consumed approximately 30 billion dollars of foreign exchange reserves in the last two months. Keeping the exchange rate down helped reduce inflation. However, the current situation is not sustainable,” he said.
JULY HIGH CRITICAL
Oyvat said, “As a matter of fact, the dollar rate is gradually increasing after the election. The effects of the exchange rate on inflation will have a negative impact on income distribution,” he said.
Oyvat said, “However, the policy choices of the government here, such as how much the minimum wage will increase in July, are critical in terms of determining which direction the labor-capital gap will go.”
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