ABSTRACT

In Turkey, the minimum wage has become one of the most debated public policy instruments in recent years due to its potential effects on employment. The discussions have been mainly based on the mainstream neoclassical paradigm that can be summarized as “raising minimum wage increases unemployment and informal employment”. However, the dominance of the neoclassical paradigm that minimum wages have negative employment effects and this consensus view began to unravel in the 1990s. First, in this study, we investigate how the neoclassical paradigm on the minimum wage dominated the economics literature, developed and ended over time. On the other hand, there are also socioeconomic factors that influenced the change in the paradigm on the minimum wage. During the last four decades, the collective mechanisms such as unionism and collective bargaining have weakened, the wage inequality and the number of working poor have increased due to the neoliberal policies implemented in several developed and developing countries. These developments have led the minimum wage to gain importance and to be used more actively in almost all countries. In this context, we also discuss the changes in economic, political and social processes that contributed to the steadily increasing interest on the minimum wage and the use of the minimum wage more actively in both developed and developing countries. Finally, the findings are ontologically and institutionally compared with the minimum wage in Turkey and it is revealed that the neoclassical paradigm is still dominant. Furthermore, it is concluded that the need for the minimum wage in the labor market has increased due to the change in industrial relations system, the minimum wage is highly important as an economic and social policy tool, but the minimum wage policy is not implemented effectively