Abstract
This study analyzes the budgetary, inflationary, and labor market impacts of the public sector union's post-2025 wage proposal through 2028. Using current data (GDP, public wage budget, inflation, public employment), three scenarios were modeled: moderate (+30%), medium (+60%), and high (+120%) average wage increases. Findings indicate that under the high-increase scenario, the additional fiscal burden would reach 8.64% of GDP, creating unsustainable pressure on public finances.
Introduction
Public sector wages in Turkey are determined through collective bargaining and government policies. The proposal submitted by the public employees’ union in early 2025 includes substantial base salary increments, welfare bonuses, and periodic raises. It projects the lowest civil servant salary to reach 132,702 TL by 2028 (170,727 TL for an employee with a spouse and three children). Chain effects are expected to drive significant increases in wages for private-sector workers, pensions, and minimum wage levels.
Methodology
Data Sources: World Bank, IMF Article IV reports, Turkish Statistical Institute (TÜİK), Presidency of Strategy and Budget (SBB), Central Bank, press releases.
Assumptions:
2024 GDP = 1.32 trillion USD
Public wage budget/GDP = 7.2%
USD/TRY exchange rate scenarios: 38 and 40.7
Average wage increase scenarios: +30%, +60%, +120%
Increases apply to all public wages through cascading effects.
Calculation: Additional fiscal burden = current wage bill × increase rate. Sustainability was analyzed by comparing this burden to GDP.
Supplementary Models: Inflation impact estimated using a simple monetary expansion multiplier.
Findings
Impact of the Proposal on Wage Levels
| Year/Period | Base Increase + Adjustments | Lowest Civil Servant (TL) | With Spouse + 3 Children (TL) |
|---|---|---|---|
| Jan 2025 | — | 43,733.89 | Current system |
| First Half 2026 | +10,000 TL welfare + 25% raise | 73,884.10 | — |
| Second Half 2026 | +20% raise | 88,660.92 | — |
| First Half 2027 | +7,500 TL + 20% raise | 115,393.10 | — |
| Second Half 2027 | +15% raise | 132,702.07 | 170,727.07 |
Fiscal Burden Analysis
| Scenario | Avg. Wage Increase | Additional Cost (% GDP) | Cost (TRY @38) | Cost (TRY @40.7) |
|---|---|---|---|---|
| Moderate | +30% | 2.16% | 1.08 trillion | 1.16 trillion |
| Medium | +60% | 4.32% | 2.17 trillion | 2.32 trillion |
| High | +120% | 8.64% | 4.34 trillion | 4.64 trillion |
Estimated Inflation Impact
Moderate scenario: +5–10 pp additional inflation
Medium scenario: +15–20 pp additional inflation
High scenario: +25–30 pp additional inflation
Discussion
The high-increase scenario would nearly double the public wage bill. Financing this via tax hikes or borrowing would constrain growth, while monetary financing would exacerbate inflation and currency crisis risks. Private-sector wage inflexibility could trigger layoffs and informal employment. Pension systems cannot sustain such increases without matching revenue growth.
Ecopolitical Implications
Consumption Shifts: Increased purchasing power may alter consumption patterns and sectoral demand, restructuring supply chains.
Fiscal Credibility: Pressure on fiscal discipline could impact credit ratings and borrowing costs via international lender/investor perceptions.
Trade Deficit Risk: Import-driven consumption growth may widen the current account deficit, pressuring exchange rates.
Demographic/Social Effects: Higher child benefits could raise living standards for large families but intensify fiscal strains.
Political Dynamics: Expansionary wage policies may boost public-sector voter sentiment and elevate social policy debates.
Conclusion
Full implementation of the proposal is unsustainable given current fiscal constraints. Lower increases, phased adjustments, and targeted social benefits offer more viable paths for fiscal health and macroeconomic stability. Failure to recalibrate risks a trilemma of high inflation, budget deficits, and external debt pressure by 2028.
References
IMF Article IV Consultation Reports, Türkiye (2024–2025).
World Bank, World Development Indicators (2024).
Turkish Statistical Institute (TÜİK), Consumer Price Index (2025).
Presidency of Strategy and Budget, Public Personnel Statistics (2024–2025).
Central Bank of Türkiye, Exchange Rate Statistics.
