The Causality Relationship Between Real GDP and Real Minimum Wages in Turkey: An Inflation Indexed Nominal Minimum Wage Policy

Wages are important both because of their impacts on basic macroeconomic variables and their effects on other social indicators as they represent the primary income sources of working class individuals. In theory it is assumed that there are some important relationships which are present between variables such as employment, minimum wages, growth rates and price-wage inflation rates. This study investigates the relationships between real GDP growth rates, real minimum wage growth rates, nominal minimum wage growth rates, and inflation rates by using causality analysis. The results reveal that there is a one-way Granger causality from real GDP to real wages, and a two-way mutual causality from nominal wages to price inflation.