Falling profits pressuring salaries in Turkey

Signs are strengthening that falling profits in the industrial sector, particularly acute over the past two years, will drag Turkey into a significant bottleneck in 2016. 

This decline in real profits in large industry, which constitutes the backbone of the economy, is expected to pressure companies to take shortcuts, increase prices, and cut back on workers, thus increasing tensions in many workplaces.

End of honeymoon

Most industrial companies grew significantly from 2003 to 2007 by focusing on the domestic market, which was stimulated with low interest rates and low exchange rates. There was also a particular emphasis on construction as a growth locomotive. 

This period also saw an extraordinary inflow of foreign resources compared to pre-2002. However, after 2008 - especially in the years 2014 and 2015 - this climate changed, and many companies' profits fell. While domestic demand has struggled, the most important factor behind the drop is that exports have not risen despite the foreign exchange rate being good for exporters. In fact, those exports have declined by more than 10 percent. 

Employers are therefore looking at cost-cutting measures such as lowering salary expenses and cutting employment. There is systematic opposition, for example, to the government's current plans to raise the minimum wage. 

Forex hike 

The growth paradigm of the past 13 years was built upon foreign capital inflows and the domestic market, but this no longer functions the same anymore. With the fall in foreign inflows and the hike in foreign exchange rates associated with this fall, company balance sheets have been badly affected. Import inputs increase costs and create pressure for price increases domestically, which...