Winter of Labor Unrest Tests Erdogan’s Bid to Reshape the Turkish Economy

(Bloomberg) -- President Recep Tayyip Erdogan's gamble on turning Turkey into a manufacturing power propelled by a cheap lira is being buffeted by a wave of industrial action as runaway prices consume wages.

Thousands of workers at more than 60 companies ranging from textiles to transportation, mining and construction have joined mostly short-lived strikes in recent months. They are protesting a cost-of-living crisis that poses the biggest threat to the president's policy tilt, and perhaps even to his two decades in power with elections due next year.

Arzu Cerkezoglu, president of Turkey's Confederation of Progressive Trade Unions, says workers have had enough. “An increase in the minimum wage was promoted as a strong raise, but it was washed away before people were paid,” she said.

In the eyes of Erdogan, the lira's weakness is the cost of turning Turkey into an industrial powerhouse and freeing the country from a dependence on short-term foreign cash, which flows into the economy when interest rates are high.

But this grand vision isn't playing out so neatly in the life of Sezer Aymelek. He works 12 hours a day delivering meals across Istanbul's Besiktas district but can't afford to properly heat the apartment he shares with his wife and two young children. So in February, the 29-year-old was on a chilly street striking for higher wages.

“My gas bill more than doubled to over 1,000 liras last month even though I keep the temperature at a minimum,” Aymelek said, describing the impact of the government's increase in power tariffs in January, when annual consumer inflation soared to nearly 50%. “I have a baby, I have to keep the gas on.”

Aymelek's employer Yemeksepeti, Turkey's biggest online food delivery company, has offered its couriers just over the new minimum wage of 4,250 liras ($315) per month, but they wanted 5,500 liras and better working conditions. Yemeksepeti declined to comment when contacted.

The riders protested outside the firm's headquarters on their pink-liveried motorcycles, chanting, blaring horns and hammering out a protest beat on the bike boxes that transport meals across the city.

Labor-union confederation Turk-Is calculates a family of four needs 4,249 liras per month to keep itself fed, and 13,843 liras to stay above the poverty line.

Price gains accelerated after the central bank, urged on by Erdogan who unorthodoxly blames high interest rates for fanning inflation, lowered borrowing costs four times starting in September, weakening the currency.

Support for Erdogan's AK Party has fallen, though many loyalists say they continue to have confidence in the president. A Metropoll study in February showed 72% of people unhappy with living conditions. Backing for the ruling party has fallen to 25%, its core level of support, said Ozer Sencar, head of the pollster, though that rises to 33% once undecided voters are distributed.

Turkey's Flagship Weapon in Lira's Defense Gets Record Flows

The lira stabilized at just below 14 to the dollar after officials rolled out a savings protection program to halt a rush toward the relative safety of dollar deposits, and the central bank -- again seemingly with the president's consent -- stopped the rate cuts. February inflation data will be released March 3. Istanbul city annual retail inflation accelerated to 55.3% in February from 50.9% the month before.

The president now needs his growth- and investment-led agenda, boosted by an improvement in regional relations, to create jobs, lower inflation and keep a lid on the lira.

If it doesn't, anger could spiral. About 13,500 workers at 61 companies have gone on strike, according to independent researcher Labor Studies Group. More would have joined them without the successes racked up by unions.

Turkish cement-industry workers secured a 43% raise with collective bargaining, while lender Turkiye Is Bankasi AS agreed to increase salaries an average 51% and boosted wages of its lowest paid employees by 68%. Internet retailer Trendyol pushed its initial 11% offer to 39%.

“Only 10% of employees are unionized and 7% benefit from collective bargaining,” said Cerkezoglu, the unions chief. “As long as economic policy remains on its current path of a devalued lira and cheap labor, workers have no choice but to protest.”

Turkey's Erdogan Shifts Tone to Signal Slower, Gradual Rate Cuts

Metropoll's Sencar said monthly research showed support for the president rising after the lira halted its precipitous fall. “A lot of voters are still ready to return to Erdogan if they see a sign of economic recovery,” he said.

Atilla Yesilada, an Istanbul-based economist at emerging-market analysis firm GlobalSource Partners, predicted a tough battle.

“You can try to attract investments with cheap labor as a developing nation, but you can't convince people to live with conditions worse than they are used to,” he said.